



Real estate bubble in the West Bank makes Palestinian cities unlivable for the poor, deepening wealth inequality and eroding social unity



September 18, 2014



Halfway down a small hill by Ramallah�s bustling city centre, sandwiched between shops and three-story apartments, is an open plot of land. Thick grass grows over crumbling terraces, and small heaps of garbage nestle against the walls of the adjacent buildings. Real estate broker, Hamza Alaa Akel said that the empty plot, like much of Ramallah, is owned by Palestinian-Americans living in the United States, and it doesn�t surprise him that they haven�t built there. The disused half-acre is worth $15 million, he said; "why build on it? Just sell it." Wealthy investors - mainly commercial firms and rich expatriate Palestinians - are buying up land in Ramallah and throughout the urban centres of the West Bank, driving a massive real estate bubble that threatens to price the poor out of Palestine�s cities and into its rural zones and East Jerusalem, where building permits are almost impossible to obtain, and home demolitions are commonplace. Some people trace the explosion of land prices back to the Oslo Accords of the 1990s, when the administrative division of the West Bank effectively confined Palestinian development to Area A, the non-contiguous 17 percent of the territory overseen by the Palestinian Authority. Others say that the prices started rising when Salam Fayyad took over as prime minister in 2007 and instituted a slate of free-market policies, ostensibly to kick-start the Palestinian economy and pave the way to statehood. Others say the biggest rise came still more recently. Ziad Nabali, a broker with An-Nabali wa Fares, a real estate development company in Ramallah founded by his family in 2001, said he bought an apartment in downtown Ramallah this year for $1.5 million. Even five years ago, Nabali said, it would have cost $300,000. The current prices, he said, are "outrageous." Like the rest of the West Bank, Ramallah is not a wealthy city by global standards. Unemployment lingers at nearly 18 percent, labour force participation is only 47 percent, and the average daily wage is about $33. The city�s not on the way up, either; the IMF reports that real wages in the West Bank declined by 8 percent from 2008-2011. Yet in 2008, with Fayyadism still in its fledgling stages and before the worst growth of the real estate bubble hit, land in parts of Ramallah had already reached $4,000 per square meter, a third the price of prime real estate in New York City and Paris, and just shy of Berlin, Brussels, and Madrid. Akel said that the price of land in Ramallah grows 10-30 percent every year now. "People here think buy land, keep it 1-2 years, then sell it," he said. "Don�t build on it." Shutting out the poor Rising prices and speculation make Ramallah increasingly unlivable for poor residents of the West Bank, many of whom try to move to the city for job opportunities that can�t be found in the nearby villages. A study by the Palestine Economic Policy Research Institute found "substantial movement" into the cities of the Ramallah governorate between 1997-2007, especially rural-urban migration from towns and villages within the governorate. More than half of the movement was related to labour migration, but only 63 percent of male migrants and 17 percent of female migrants were employed. Nabali said that many of the people who come to Ramallah looking for a job end up returning to wherever they came from, because life in the city is unsustainably expensive. "They move to Ramallah to try to do something, and couldn�t or there wasn�t an opportunity, so they go back," he said. "There�s a lot of people who come out here and think it�s easy. And it�s not." For labour migrants into Ramallah, buying land is generally out of the question. Osama Hamdeh, director of the urban planning department at the Ramallah municipality, said the cheapest piece of land he�s seen for sale in Ramallah recently was around $150,000 - he said the plot "was a little bit far in a valley... and it�s 850 [square] metres." Such prices are out of reach for most residents of the Palestinian Territories, where average annual income sat just above $1,600 in 2012. Odeh Awwad, head of sales and marketing for Amaar, the real estate arm of the Palestine Investment Fund, estimates the typical family income in Ramallah at about $700 per month, well above the country�s average but not high enough to make buying land in the city a realistic option. So migrants and other low-income residents of Ramallah rent their homes. However, between climbing land prices and laws forbidding landlords from severing rental contracts or raising rates on tenants, most owners prefer to sell rather than rent their properties, said Thaer Al-Shayeb, a landlord in Ramallah. Those landlords who do offer rentals set the initial price high to avoid a loss from the rent controls, Shayeb added. As a result, the prices are increasingly out of range for new residents, especially younger workers who dominate the overall population of labour migrants. "The income for the young people is not suitable for the prices of the houses here," said Shayeb. "They can�t afford it." Those who can�t pay the prices generally move out of town, either to the outskirts of Ramallah or places like Kufr Aqab, a former neighbourhood of East Jerusalem cut off from the city by the Separation Barrier. Neighbourhoods like Kufr Aqab and nearby Shu�fat have seen a development boom in recent years, as the pressure from people searching for cheaper housing has met an absence of government regulation - Israel claims the territories are part of the West Bank and under the Palestinian Authority�s responsibility, the PA insists that the reverse is true. Without urban planning or government oversight, all of the buildings going up in these parts of East Jerusalem are by necessity unlicensed; there�s no licensing organisation that could authorise them. As such, they�re under constant threat of demolition as illegal structures. Late last year, Israel issued demolition orders covering 15,000 residents of Shu�fat. People who move to Ramallah�s outskirts to find affordable housing are somewhat better off. Nabali himself lives in an outskirt town called Bir Nabala, located between Ramallah and Jerusalem, where he said his rent is only $150 per month. But Bir Nabala, like many other towns and villages outside the West Bank�s major urban centers, is largely in Area C, the 60 percent or so of the West Bank under full Israeli civil and security control where only 176 building permits were issued to Palestinians from 2002-2010. Just as in Shu�fat and Kufr Aqab, structures without permits are subject to demolition. Nabali said that Bir Nabala was added to the Palestinian Land Registry three years ago, giving the town official acknowledgment by the PA if not the government of Israel. When asked if the land registration made property in the area more secure, he shrugged. "Supposedly. You never know," said Nabali. "These Palestinian investors are real devils..." Right now, Nabali said, there are still a few places in Areas A and B where it�s possible to buy or rent at affordable prices. But those areas are quickly disappearing, as speculators and private developers take advantage of the real estate bubble to make money off the untouched land. The partition of Area A around Ramallah extends well beyond the current city limits to the north and northwest. That area is where most of Ramallah�s development is happening now. There�s Rawabi - the largest of the projects - a new city whose $1 billion price tag amounts to one tenth of Palestine�s GDP. There�s also al-Reehan, a neighbourhood for northern Ramallah being built for $250 million by the Palestine Investment Fund, and various smaller development projects and buildings. PIF estimates that the Palestinian Territories will need 470,000 new housing units by 2020. However, none of the new housing projects, the largest of which are being built with considerable government support, intends to develop homes accessible to the poor who are forced out of downtown Ramallah by rising prices. Bashar Masri, a Palestinian-American entrepreneur whose company Massar International is developing Rawabi in partnership with Qatari Diar, a Qatari government-owned investment firm, said that the apartments he�s building in Rawabi are targeted toward middle-income families. "Young professionals, college-educated... families or families to be," he said. Masri said that Rawabi may launch low-income housing later in the development process, but "right now we can�t afford it." He said the profits from low-income housing aren�t high enough to offset the cost of building the homes, and that commercial banks wouldn�t guarantee loans to prospective low-income buyers. Furthermore, Masri added, low-income housing wouldn�t fit with Rawabi�s image. "No one will move to the city," he said. "It�s an ego issue, no one likes to be associated with low-income housing." The situation in Reehan is much the same. While the website of the Palestine Investment Fund lists Reehan as "part of PIF�s affordable housing national program," Odeh Awwad said that language may be inexact. "It is more like attainable, more than affordable," Awwad explains. He describes the main purpose of Reehan as "provid(ing) quality living for the common middle-class family outside of the physical boundaries of the cities." Rents will be about on par with mortgage payments in Rawabi - both Awwad and Masri describe prices in their respective developments at about 30-35 percent cheaper than Ramallah. "Price-wise, it�s middle income," said Masri. Both Reehan and Rawabi are being built on Area A land, northwest of Ramallah, in one of the few parts of Area A where prices haven�t yet reached the highs of the city. Reehan�s land was owned by residents of Abu Qash village - Area B territory prior to the sale, where a remaining luxury villa on less than a quarter of an acre of land is currently listed on a Jordanian real estate website for 532,000 JOD, or about $750,000. Much of the land that Rawabi is built on, however, belonged formerly to three nearby villages - Ajjul, Atara, and Abwin - where residents say they were compelled to sell their land by a November 2009 eminent domain order requested by Bayti, the joint Qatari-Palestinian development company building the new city. One resident of Ajjul - who asked to be identified as Sami Ali - said that his family lost 70,000 square metres of land to Rawabi. The majority of the confiscated land for Rawabi came from Ajjul - about 1.5 million square meters out of the overall 1.8 million taken through the eminent domain order. "These Palestinian investors are real devils," said Ali. To make housing in the new developments attainable for potential buyers, the Palestinian Authority and US Government launched the Affordable Mortgage and Loan Program (AMAL) in 2010, a $485 million joint venture "to support mortgages for low and medium income borrowers in the West Bank." AMAL was designed to generate loans accessible through partner banks and specifically targeted toward Rawabi and Reehan, but Masri said that the program has been ineffective so far. He estimates that the project has given out 30 loans at this point, and calls that number "optimistic." The US Government Accountability Office noted that as of April 2013, the project�s major backers "had not yet dispersed any funds." Ziad Nabali, whose company An-Nabali wa Fares bought part of Reehan for residential development, had never heard of the AMAL program. He estimates that his company draws 60-70 percent of its customers, specifically because they offer a funding option directly through the development company, rather than using banks as intermediaries like AMAL does. "Riba," a Quranic term often translated as interest or usury, is forbidden in Islam, and Nabali said that many of his customers prefer not to go through the banking system as a result. By PIF�s own calculations, most or all of the homes in Rawabi and Reehan will be unaffordable to the overwhelming majority of Palestinians without assistance from AMAL. In both of the developments, the lowest price for property is about $65,000, ranging up to $120,000 in Reehan and $180,000 in Rawabi. A chart from PIF�s promotional materials for AMAL, which shows affordability of housing prior to AMAL�s implementation, indicates that homes costing $65,000 are affordable to about 15 percent of the Palestinian population. All prices above $80,000, affordable to about 10 percent of the population and comprising the bulk of what Rawabi and Reehan will offer, are shaded on the chart. The legend for the shading reads "oversupply in current market." "Until now, we don�t have any policy for affordable housing," said Osama Hamdeh at the Ramallah municipality. "It�s the market law." Wealth inequality and social unity As the real estate bubble has priced more and more people out of the market, Palestinian land - and with it Palestinian wealth - has become increasingly concentrated in the hands of a few families and individuals, many of them dual-citizenship Palestinians living abroad. According to Hamdeh, the cost of real estate jumped after the Oslo Accords in part because members of Ramallah�s original families could suddenly join the market when Area A was created under PA control. Most of the families had emigrated to the US, retaining ownership of properties in the city that they were until then ineligible to buy or sell under the Israeli administration of the territory. "Some of them start[ed] to sell, some of them start[ed] to invest," Hamdeh said. "The millionaires here in the past were the builders," agreed Hamza Alaa Akel. He said that four families own half the land in al-Bireh, Ramallah�s adjoining sister city, and that land ownership in Ramallah is similarly concentrated. "They live in the US," he added, "none of them live here." Sabah Sabah, a Palestinian real estate lawyer, noted in an April 2013 discussion organised by the Palestine Economic Policy Research Institute that an astonishing 80 percent of current Palestinian landowners are expatriates. Ali Abunimah, a prominent Palestinian-American journalist and analyst who co-founded Electronic Intifada in 2001, said that a lack of government investment in manufacturing or other productive sectors under Prime Minister Fayyad combined with a high cultural evaluation of real estate made land the primary site for wealthy Palestinians to spend their money. "These people who have tons of money and want to park it somewhere perceived as safe put it into land and real estate," said Abunimah. "Whoever has the most money can take the land, and of course this has devastating impact on communities and life." "The poor don�t count. They just don�t have any say, they don�t have any value to these people. And the vast profits to be made from these kinds of real estate deals just... [overwhelm] any other kinds of considerations," he continued. Thus far, the Palestinian Authority has shown little interest in regulating the land speculation and middle- to high-end development that have driven the bubble. "For the banks, they have regulations now. But for the develop[ment] sector, not at all," said Hamdeh. "If you have a little amount of money that you can start your project, then no one can control you." "They have to put policies in order to control the market. It�s their duty to control this market," he added. "The prices are going up and up and the people can�t afford this." In fact, government money propels much of the larger-scale development. The Palestine Investment Fund, which is behind Reehan and AMAL along with several luxury hotels and commercial centres scattered across the cities of the West Bank, is government-funded, and its board of directors is appointed by the President Mahmoud Abbas and chaired by Mohammad Mustafa, the Palestinian Minister of National Economy. Nabali counts himself lucky that his family got into the real estate business before the bubble began; while An-Nabali wa Fares was only founded in 2001, his family�s involvement in real estate goes back to the 1970s. "Things just get harder and harder, and you need more cash," Nabali said. Buildings that used to cost $200,000 now cost $2 million, he added, "and who�s got $2 million?" "We�ve been in this business for a long time. Not everybody�s got that kind of money... so that cuts out a lot of people. That�s a big problem," said Nabali. Hand in hand with rising profits of real estate investment and housing prices that drive poorer residents away from Palestine�s urban commercial centers, wealth inequality is growing in the West Bank. As real wages fell for Palestinians from 2008-2011, Palestinian GDP increased at an annual average rate of 9 percent. Adam Hanieh, a lecturer at the School of Oriental and African Studies, University of London, notes in his 2013 book, "Lineages of Revolt," that the richest 10 percent of Palestinian households were responsible for more than a quarter of consumption in 2007, up from 21.6 percent in 2006. After the initiation of Fayyad�s economic agenda and the 2008 Palestinian Reform and Development Plan, per capita GDP shot from $1,400 to $1,900 by 2010, while unemployment and poverty remained essentially unchanged and inequality as measured by the international-standard GINI index jumped from 36 percent in 2009 to more than 40 percent by 2011. Nabali believes it�s only a matter of time before Palestinian society becomes entirely split between haves and have-nots. "We�re gonna get to that point... where there is gonna be no more middle class out here," he said. "It�s gonna be either you�ve got money or you�re broke." Abunimah added that Palestinian economic inequality is "eroding the basis for social solidarity." "People always say that what gave people resilience in the face of occupation... was a sense that we�re all in it together," said Abunimah. "And the wealth inequality is one of the things that has totally destroyed that sense of we�re all in it together." "It�s one of the things that makes me most worried for the future of Palestine," he said.



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