What do you do if you have an apartment that you don’t want to live in, or rent out for residential purposes? You go to the local municipality and ask for permission to change the use of the apartment to something other than residential use.
In the past, municipalities were lenient and allowed this. However, with a current shortage of residential housing, many municipalities feel that apartments should be for living in and nothing else.
Not only are they not allowing change-of-use requests, but they are refusing to extend previously issued permits for a change of use.
In the past, an apartment owner who rented out his apartment for the use of a business rather than for residential purposes was not entitled to the exemption from capital gains tax when the apartment was sold. However, in an effort to encourage more apartment owners to sell their apartments (bringing more apartments onto the market and lowering prices) the tax law has been changed.
Now anyone selling an apartment, whether or not it was used for residential purposes, is entitled to an exemption from capital gains tax provided the criteria for the exemption are met.
It seems that in the absence of any real solution to the housing problems that face Israel, the government is really scraping the bottom of the barrel in its effort to bring more apartments out into the market.