Dozens of Israeli rabbis today backed a call to forbid Jews to rent or sell property to Arabs in a move likely to further stoke tensions in some cities.

More than 40 municipal chief rabbis, whose salaries are paid from public funds, signed a letter in support of a ruling by Rabbi Shmuel Eliyahu of Safed in Upper Gallilee instructing his followers not to offer accommodation to non-Jews.

Anyone doing so, the letter said, "causes his neighbour a great loss, and his iniquity is greater than can be borne". It went on: "It is incumbent upon the seller's neighbours and acquaintances to warn and caution, first in private and then they are entitled to publish him in public, to distance themselves from him, to prevent trade from being done with him, not to have him read from the Torah and so forth until he reverses his decision that causes harm to so many people."

Following Eliyahu's earlier ruling, an 89-year-old Holocaust survivor who rents out rooms to three Arab students in Safed was threatened with having his house burned down and was denounced as a traitor to Judaism.

Safed, which has a large conservative ultra-orthodox population, has become a focus of anti-Arab sentiment although rabbis in other cities have also warned Jewish residents against renting or selling to non-Jews.

Avishay Braverman, the Israeli minister for minority affairs, last month called for Eliyahu to be suspended from his post and investigated for incitement.

Ahmed Tibi, an Israeli-Arab member of parliament, today said the signatories to the letter should also be prosecuted for racial incitement. "Muslim clerics were recently prosecuted or fired from their jobs over far smaller things but the rabbis continue to run amok without any fear of being prosecuted," he told Walla News.

The Association for Civil Rights in Israel demanded that the prime minister, Binyamin Netanyahu, condemn the rabbis' letter and take disciplinary action against those employed by the state.

"Rabbis who are civil servants have an obligation to the entire public, including Israel's Arab citizens. It is unthinkable that they would use their public status to promote racism and incitement," ACRI said in a statement.

Israeli-Arabs, who make up about 20% of the population of Israel, say they are facing increasing racism and discrimination. Avigdor Lieberman, Israel's rightwing foreign minister, has argued that they should be compulsorily "transferred" to a future Palestinian state. The Israeli parliament has passed a law that will force non-Jewish citizens of Israel to pledge loyalty to the Jewish state.