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As the Google Bus Sparks Class War in San Francisco, Tel Aviv Has a Plan: Vacate and Build

Residents in gentrifying areas will get units in luxury buildings. Activists say that won’t stop the cost of living from pushing them out.

Yoav Fisher
March 06, 2014
The view from Google’s Tel Aviv offices.(Maria Gustafsson/Flickr)
The view from Google’s Tel Aviv offices.(Maria Gustafsson/Flickr)

Tel Aviv, the de facto capital of the Start-Up Nation, has been actively wooing technology companies to pitch their tents over the past few years, with noticeable success. In the past year, Google leased eight floors in one of the poshest commercial buildings in the city, Facebook put its name on the space already occupied by a company it acquired, and Amazon announced plans to open an office to support its cloud computing services in Israel.

The city also recently approved expansion of the Kiryat Atidim high-tech park, which is part of the larger Ramat Hahayal industrial zone—already home to local technology leaders like Radware, Mellanox, and Kenshoo, as well as established companies like Comverse and IBM. In their wake are the cafés and restaurants that trail venture capital in San Francisco and New York—and now luxury apartment developments spilling over into Neve Sharett, a working-class neighborhood just across the southern border of Ramat Hahayal.

Call it the inevitability of $4 toast: Just as in San Francisco, where open class warfare has broken out in West Oakland and in the once-edgy Mission district over the arrival of Google employees who are pricing out artists and other longtime residents, Tel Aviv is facing the problem of accommodating the newly rich, avowedly urban, and mostly young tech entrepreneurs who have no intention of decamping to established upscale areas like Herzliya, just to the north of Ramat Hahayal, or Ramat Aviv.

Neve Sharett is Tel Aviv’s ground zero of dot-com gentrification. Founded in the 1950s as a way station for new immigrants from North Africa, it stands in stark contrast to surrounding neighborhoods in north Tel Aviv. Today, 40 percent of its residents are immigrants, and fewer than 25 percent have bachelor’s degrees; restaurants like Sushi Samba and Mesa, ubiquitous elsewhere in town, are absent. But that is exactly why young techies have “discovered” the area in the past five years: Housing is still relatively cheap, a disappearing commodity in the city. Since 2010, housing prices have jumped 81 percent in Neve Sharett, according to the Israeli Tax Authority, while prices citywide rose 25 percent.

“The area is central, we are in Tel Aviv, and the surrounding neighborhoods are great,” said Dave Myers, a 33-year-old who works for a software company with offices in Israel and Silicon Valley. With his wife, who works for a start-up, he looked at more than 50 apartments in other neighborhoods before putting down money on a unit in a proposed project in Neve Sharett. But with all of the benefits, Myers is also conscious of his impact on his future neighbors. “I am concerned that if there is not a fair deal,” he said, “there will be animosity. Almost a rich-versus-poor battle.”

Unlike San Francisco, Tel Aviv has taken steps to mitigate the effects of the new arrivals on existing residents, chiefly through a program known as Pinui Binui—Vacate and Build. What it means, in practice, is that private real-estate developers are invited to raze old and decrepit housing in places like Neve Sharett—where the average apartment size in the three-story housing blocks is just 540 cramped square feet—and erect luxury high-rises. The original owners are given new apartments, and the rest of the units are sold off at market price.

Right now, six apartment blocks—450 apartments—have been vacated to make way for nearly 1,200 new ones. But Tel Aviv has already approved Pinui Binui plans for the entire neighborhood of Neve Sharett—all 3,000 apartments, which house about 7,500 people. The city has also announced that it is eyeing the neighborhood of south Florentin—another impoverished and neglected area—for the next major Pinui Binui push.

On its face, Pinui Binui seems like a win-win for everyone involved: Older owners receive new apartments in exchange for dealing with an influx of new residents. But Ami Sofer, head of the Neve Sharett Community Board—whose own childhood home was recently razed as part of the program—points out that the trade doesn’t account for the increase in living costs beyond simply the price of real estate. Residential municipal taxes, which are collected according to type of residence and square footage, will be higher in the new luxury buildings, and moving into a newly constructed building resets the clock on utility rates, which are anchored to dates of initial occupancy. All in all, Sofer estimates, living expenses for longtime residents will be about six times higher in the new buildings than they are in the ones being knocked down.

According to statistics published in 2008 by the Tel Aviv Center for Economic and Social Research, median monthly income in Neve Sharett is less than 60 percent of the citywide median. Sofer worries that some original residents will be forced to rent out their new apartments to compensate for the increased expenses. (Bylaws of the Pinui Binui projects include a stipulation whereby those who receive an apartment are barred from selling for a period of four years.) “You get a Mercedes as a present,” Sofer said, “but you don’t have money for insurance.”

The future seems most ominous for renters in Neve Sharett, who account for 40 percent of the residents. Mara Sheffer arrived from Russia in 1969 and has been a resident ever since. She currently rents a cramped flat in a crumbling 60-year-old building of plaster and concrete for 3,500 shekels and worries that her monthly income from her day job as a phone operator, which she supplements with housecleaning work and a government subsidy, will leave her about 1,500 shekels short of the expected monthly rate of 8,500 shekels—about $2,400—for apartments in the new buildings. “Nobody thought about single mothers or the elderly or the poor,” she said, “Everything was done for high tech.” In her view, whatever the benefits of Pinui Binui for existing homeowners in gentrifying neighborhoods, it does nothing to address the larger issue of affordable housing. “Why does the city care where I live?” Sheffer went on. “If I don’t live here someone in high tech will live here and pay more taxes.”

The municipality itself is aware of these issues and has been for years, but officials argue that remaking neighborhoods like Neve Sharett on the back of the high-tech boom will improve the economy by keeping young, wealthy people in Tel Aviv—a benefit that theoretically would trickle down to people like Sheffer. “To meet employment needs, we needed to strengthen Neve Sharett,” said Francine Davidi, the director of planning for northern Tel Aviv, whose office approved the original Pinui Binui plans. According to Davidi, the city intervened as much as it could to maintain the lifestyle of original residents, brokering dialogue between the developers and the community, and helping with initial negotiations on behalf of the locals. “We need to give them every opportunity to remain,” she added.

Activists like Sofer have extracted promises for community-development funding from real-estate developers to help keep existing residents in the area. But ultimately the fate of Neve Sharett is in the hands of the private developers and depends on the contracts they sign with private homeowners. When asked about the possibility of an abrupt demographic shift once Pinui Binui construction is complete, Davidi’s response was frank: “I just don’t know.”

In the meantime, local business are suffering as their customers move out during construction. The owner of a small clothing store in the neighborhood’s commercial street—a dilapidated strip of concrete store fronts selling cheap sundries—said her sales have noticeably dropped in the past months from the simple fact that her usual patrons no longer live in the area and won’t return until construction is complete, if they return at all. She said she was optimistic, but she worries about her colleagues at nearby shops who will be forced to close—making room, as the shopkeeper put it, for “some place that serves brunch.”


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Yoav Fisher is a writer and economic consultant living in Tel Aviv.

Yoav Fisher is a writer and economic consultant living in Tel Aviv.