Beyond Miracles and Divine Intervention: Unraveling the Practical Strategies of Apartment Ownership Among Israeli Chareidim

Exploring the unique factors and strategies behind Chareidi homeownership: historical foundations; role of roshei yeshiva; mortgages and loans; government programs, and more

Intro

The common reaction among Israeli ultra-Orthodox (Chareidim) and their supporters is to brush off inquiries into how young chareidi newly-weds afford apartments by attributing it to miracles or divine intervention. Nonetheless, from a neutral perspective, such explanations are uninteresting and tedious. This blogpost will explore more mundane explanations.¹

Introduction

In the world of Israeli real estate, the purchasing patterns and strategies of the ultra-Orthodox (Chareidi) community have long fascinated observers. How do young Chareidi newly-weds afford apartments despite their modest incomes? What are the factors that contribute to their ability to secure housing in a competitive market? In this blog post, we delve into the intriguing dynamics of apartment-buying within the Chareidi community, shedding light on the unique norms, financial practices, and cultural influences that shape this phenomenon.

Historical Foundations and Financial Support

The origins of Chareidi apartment-buying norms can be traced back to the aftermath of World War II and the founding of the State of Israel. Parents, often Holocaust survivors, were able to support their children through work and reparations payments from the German government. This financial stability laid the groundwork for future generations to establish their own homes.

The Role of Roshei Yeshiva

One key factor in the continuation of these norms is the influence of roshei yeshiva (heads of religious yeshivot). The prestige of a yeshiva is often measured by the extent of full arrangements (סידור מלא) its graduates receive. Encouraging their students to demand apartments enables yeshiva leaders to emphasize the importance of uninterrupted study without the burden of livelihood and housing concerns.

Mortgages and Loans

Unlike the average Israeli apartment buyer, Chareidim rely significantly more on mortgages and loans from banks to finance their home purchases.

According to Hadas Chanani’s research, around 30%-40% of one bank's customers in the ultra-Orthodox sector take out mortgages, compared to 20% in the general sector.

Banks are understanding of circumstances, knowing that even if Chareidi couples themselves cannot meet repayments, someone close within the community will assist in paying back the mortgage and loan. Therefore, despite low incomes, banks typically approve mortgages for the ultra-Orthodox sector.

Zero-interest loans (gemachs)

Within the Chareidi community, there are various financial resources and practices that contribute to apartment purchases. Zero-interest gemachs (charitable funds) provide loans, sometimes in substantial amounts, while donations from abroad also play a role.

The practice of "rolling over" loans is common, where borrowers pay off one loan with another from a different bank or relative.

Collecting Donations from Abroad

Donations from abroad are sometimes collected by family members traveling to communities in the USA, Europe, or South America, often gathering around $25,000. This source is seen as a last resort for severe economic hardship and is more prevalent among specific ultra-Orthodox groups reliant on community support, such as followers of Eidah Chareidis in Meah-Shearim and followers of Breslav.

Government Programs and Housing Lotteries

The government Ministry of Construction and Housing (משרד הבינוי והשיכון) offers subsidized loans and lotteries for subsidized housing through programs such as "Price for the Tenant" (מחיר למשתכן). Eligible married or soon-to-be-married couples can benefit from highly subsidized loans, easing the financial burden of purchasing a home. Additionally, government housing lotteries provide opportunities for Chareidim to acquire land at competitive prices.

Influence of Rabbis on Contractors

Rabbis play a significant role in determining apartment prices within the Chareidi community. Contractors often adhere to their instructions to avoid potential mass boycotts. This dynamic showcases the influence and power that religious leaders have in shaping the housing market.

Willing to live far from economic centers

Chareidim on average are far more willing than average to live in projects that are far from economic centers. Of course, a major reason for this is the fact that a very high percentage of them either don’t work, or teach in local institutions.

They are also more willing than average to take a cookie-cutter apartment without much customization, thus lowering construction costs.²

Strategy of parents dividing inheritance while still alive

Some parents choose to divide their inheritance while still alive, selling their family home in high-value areas and purchasing smaller apartments elsewhere. This enables them to use the surplus funds for marriage expenses or debt repayment, albeit at the cost of leaving behind their familiar surroundings. This is common among parents living in major cities like Bnei Brak or Jerusalem, where apartments hold high value. They may sell their long-term family home and purchase a smaller apartment in a different neighborhood or project. The surplus funds from the sale are then used to marry off their children or pay off debts. This means that instead of peacefully growing old in their familiar home, the elderly couple is forced to move to a smaller and less comfortable apartment in an unfamiliar location.

Idiosyncratic challenge - daughters!

Lastly, I’d like to point to an interesting idiosyncratic challenge: In the so-called “Lithuanian” community (=non-Hasidic/misnagdim), the norm is for the family of the bride to shoulder a greater portion of the apartment price. So a Chareidi family who is “unlucky” enough to have many daughters will often face the financial burden of financing apartments for multiple daughters, leading to delayed marriages.

Conclusion

To sum up: The world of Chareidi apartment-buying is influenced by historical circumstances, cultural practices, religious leaders, and financial strategies. Through various means such as government programs, unique financial resources, and careful planning, the Chareidi community manages to navigate the real estate market despite their modest incomes.

Bibliography

The blogpost is based on the following academic field research:

1. הדס חנני, "דפוסי קניית דירה באוכלוסיה החרדית בישראל", התפרסם באתר 'פורטל אנשים ישראל - המדריך לחברה הישראלית' (נוצר ב-7/24/2008  |  עודכן לאחרונה ב-9/11/2009)

2. חנן אלפר ועוז אלמוג, "הפן הכלכלי של הנישואין באוכלוסיה החרדית", התפרסם באתר 'פורטל אנשים ישראל - המדריך לחברה הישראלית' (נוצר ב-8/18/2008  |  עודכן לאחרונה ב-11/6/2010). מבוסס על תרבות הדיור והמגורים בחברה החרדית האשכנזית בישראל, דיסרטציה--אוניברסיטת חיפה (2008)

3. גבריאל גורדון ואיתן רגב, "פרק .2 חידת הדיור החרדי, פערי המחירים ומקורות המימון", בתוך שוק הדיור החרדי ופרישתה הגאוגרפית של האוכלוסייה החרדית בישראל (2020), עמ' 42 ואילך

1. See the bibliography at the end, for the academic research that this blogpost is based on.

2. Thanks to R. Shirazi for pointing this out.