A study by LAGUR indicates that leasers of apartments for short periods can earn more than 7 times the income of a similar property over the long term. The Tax Authority and Ministry of Tourism are already thinking about the cash influx to State coffers anticipated as a result of pending legislation to tax rental income.
Photo Credit: LAGUR
In recent months, the Tax Authority has increased its enforcement of tax liabilities on property owners who rent out apartments for short-term leases. A special examination by LAGUR indicates that rental income for short-term rentals can be as high as seven times that of a similar property for long-term leases.
What is the gap in rent revenue between short-term and long-term leases?
Here are a number of examples:
A 6-room, 420m² house on a 500m² lot in Hertzeliyya-Pituach carries a short-term rent (sublet) of NIS 146,000 per month. In contrast, a similar house on the same street, featuring 6 rooms and measuring 300m² on a 800m² lot, is offered for long-term lease at NIS 57,000 per month. This represents an extraordinary gap of 150%.
Photo Credit: LAGUR
A two-room apartment measuring 100m² in central Tel Aviv, near the beach and leisure sites, goes for a short-term rental of NIS 38,000 per month. Compare that to a four-room 110m² renovated apartment 200m from the beach and entertainment, carrying a rental price tag of NIS 15,000 per month – also a 150% discrepancy.
Another example: a 3-room, 90m² apartment on HaRav Kuk St. in Jerusalem, available as a short-term rental for NIS 16,000 per month. Contrast that with a similar apartment in the same complex for a long-term lease of only NIS 8,000 per month – a 135% gap.
In Netanya, a short-term lease for a 75-m² apartment with three rooms on Bialik St. goes for NIS 19,000 per month (equivalent to EUR 150 per day). By contrast, a 3-room, 90m² apartment on the same street asks for NIS 8,000/month for a long-term rental – a 140% discrepancy.
Hundreds of thousands of shekels per month in luxury complexes
The rent jumps even higher for luxury apartments, notably those attached to hotels. Thus, for example, rental income for short-term leases in the Waldorf-Astoria Residences in Jerusalem can reach hundreds of thousands of shekels per month.
The Waldorf-Astoria complex contains 30 apartments. A number of those are available at present for short-term rental at a price of between $400 and $900 per day for an apartment measuring 100m²-200m², respectively. Contrast that with a 250m² apartment with a monthly rent of $20,000.
The Rav Kuk project of Africa-Israel Investments at HaRav Kuk 7 in Jerusalem features a number of short-term rentals for NIS 500-2,000 per day, for apartments ranging from 60-160m², respectively. Monthly income from such rentals could reach NIS 60,000 per month.
The Tel Aviv luxury complex Sea and Sun also offers a short-term lease on a penthouse for $15,000.
Does It Pay?
Israeli Minister of Tourism Yariv Levin recently decided to put forth new legislation that would obligate all short-term lessors to pay hundreds of thousands of shekels per month in income tax. Similarly, anyone seeking to rent out an apartment for a short-term arrangement would have to pay a set monthly fee of NIS 300-400. Anyone who pays the fee would receive monthly license to rent out that apartment for short-term leases. The tax would apply only to owners of up to 2 residences; those who own more will have to pay as if he were a rental business.
The Tax Authority has yet to endorse Minister Levin’s proposal; it comes after a proposal of theirs and the Budget Office was rejected – one that would have levied a 35% tax on short-term apartment-rental businesses such as AirBnB.
Either way, it is certain that the Ministry of Tourism and Tax Authority are taking aim at short-term leasers (among other targets).