This One-of-a-Kind Redevelopment Program is an Experiment in How Cities Can Grow
A TAMA 38 Project. Image source.
What if adding stories to existing buildings—rather than brand new construction—were a significant source of new housing in cities? Sounds crazy, right? Maybe not if you're in, say, Tel Aviv, Jerusalem or Haifa. Over 15 years, an unusual Israeli program, TAMA 38, has resulted in just that.
Established in 2005 but still little known outside Israel, National Outline Plan No. 38 (TAMA 38 is its Hebrew acronym) provides incentives for urban building owners to renovate their properties—specifically, to improve earthquake readiness—by allowing them to add extra apartments, amenities, and generally one or more additional stories to the building when they do so. TAMA 38 has become a huge factor in Israeli urban planning—but also a huge source of controversy. It is now slated to end in 2022 amid widespread perceptions of mission creep: that is, that it never came close to achieving its original public safety goal.
The story of TAMA 38 is an interesting object lesson for multiple reasons. One, it's a study in unintended consequences both good and bad. What began as an earthquake safety program became viewed instead as an incentive, optimistically, for housing production in expensive areas—and, more cynically, for haphazard planning that poses major challenges for local governments.
Two, the TAMA 38 model is likely to be fairly alien to North American readers. Yet the program has helped foster a pattern of urban growth that produces the next increment of development—additional stories in mid-rise, medium-density areas—across many neighborhoods. You're hard pressed to find that happening in any American city, where the more common rule is that infill development involves razing whole blocks at a time, and requires a huge leap in intensity from what used to be there. (There is lots of historical precedent around the world, however, for growing cities through repeated additions to existing structures, or "barnacling," to borrow a term from Patrick Condon.)
Three, TAMA 38's financing mechanism—a form of value capture—is something American cities tend to make relatively little use of, and is worth contemplating.
In fact, a good rule for anyone looking for creative solutions to building and designing better places is to question your assumptions about what's "normal" or universal by looking outside the borders you're used to, including international ones. Every country's planning and development approach arises from a particular legal and regulatory tradition, and—while there are some basic rules of placemaking that transcend these local traditions—the solutions on the table to urban problems tend to be constrained by those traditions.
With that in mind, let's take a look at TAMA 38. If you want a deep dive into this policy, a 2020 Lincoln Institute of Land Policy working paper by three Israeli scholars—Nir Mualam, Eyal Salinger, and Sarah Goldberg—was my principal source for this post. You can get the full text here.
A (Failed?) Earthquake Safety Program
Israel lies in a seismically active zone (part of the Great Rift Valley) and its cities contain hundreds of thousands of apartments in buildings not up to modern earthquake standards. National and local governments cannot remotely afford to pay outright for all of the necessary upgrades. What they can do is pay in the form of a resource that is under their control and sitting idle: potential development rights.
A TAMA 38 project in progress in northern Tel Aviv in 2015.
TAMA 38 was approved by the Israeli Ministry of the Interior in 2005. (Israel is a very small and heavily urbanized country, and thus some planning occurs at a national level that would be local or at most statewide in America.) TAMA 38 grants the owners of qualifying buildings built before 1980 the right to expand and add new apartments to the existing structure, in exchange for seismic retrofitting. If the sale of the new units more than pays for the renovations, owners can retrofit their buildings at no net cost to them. A 66% vote of the apartment owners is required for a renovation, and 80% for demolition and rebuilding. Most TAMA 38 proposals meet with resident support, because residents end up with a nicer (and safer!) apartment in a nicer building. Many projects involve adding such features as balconies, elevators, storage and parking space to buildings that lacked them.
Essentially, TAMA 38 upzones the entire country—with conditions. It is a form of incentive zoning, and also an incomplete form of value capture. The premise of value capture is that government does something that creates value for private land owners (either allows more intense development, as in the TAMA 38 case, or constructs new infrastructure or amenities) and then "recaptures" that value through taxes or regulation, requiring a public benefit in exchange for the windfall. In TAMA 38, the "public" benefit is improved earthquake safety. However, critics are quick to point out that seismic retrofitting also increases the value of the property itself, and thus much of the benefit of the additional development rights actually goes to the private developer and land owner(s).
This profit-driven mechanism leads directly to one of the major criticisms of TAMA 38: it has only been effective in relatively well-to-do places, where the demand for housing and the cost of land are high. Mualam et al. estimate a developer profit margin of about 20% or more is required to justify a TAMA 38 project. In wealthy areas, the program thus funds itself. In poorer and more rural parts of Israel, there has been little interest—and seismic risk still abounds in these places.
In practice, TAMA 38 never really ended up being much about earthquakes at all, according to Mualam et al.:
Correlation between seismic risk and TAMA 38 planning permissions was actually negative—in other words, fewer TAMA 38 projects went forward in parts of the country with greater risk of earthquakes. The program has seen its greatest impact in cities with high land values, where profit margin is greatest.
For this reason, public perception has shifted: it's more of a redevelopment project whose greatest public benefit might be helping alleviate Israel's housing crisis, by creating significant new market-rate housing in high-demand cities.
A (Successful?) Housing Program in Disguise
Where TAMA 38 has arguably been more impactful is in producing housing in Israel's highest-cost cities as rents skyrocketed during the 2010s. The program is estimated to have resulted in 20,874 new housing units between 2005 and 2017 (in addition to seismic retrofits to an additional 23,558 existing units, for a total estimated value of about US $918 million).
In the context of Israel's severe housing crisis, what was a weakness of the program—the fact that most projects occur in wealthy, high-cost areas—may become a strength. TAMA 38 incentivizes the construction of homes exactly where demand is greatest.
Californians might take note. Interestingly, back in 2014, then-San Francisco Supervisor Scott Wiener (now well known for being the biggest YIMBY champion in the California legislature and the bête noire of many an anti-development homeowner) proposed a program in San Francisco that would have worked much like TAMA 38. San Francisco, of course, is famously earthquake-prone.
TAMA 38 is no small factor in the Israeli housing market. According to Haaretz, "urban renewal programs" (a term which, unlike in the U.S., appears here to simply mean "redevelopment") accounted for 14% of new-home sales, and 80% of those were through TAMA 38, mostly in Greater Tel Aviv. During 2019 debate over ending the program, the Urban Renewal Authority warned that "Without the program, Israel’s housing supply will grow tighter and price increases will accelerate."
“You can’t stop everything in one day,” said Einat Ganon, deputy head of the Urban Renewal Authority. "Everyone agrees that Tama 38 was designed to save lives. Even if it hasn’t met that goal, you can’t paralyze urban planning. Tama 38 has been one of the main tools for creating new housing units on densely populated and expensive land in the center of the country.”
Criticism of TAMA 38
Haifa, Israel. Photo by Rade Šaptović on Unsplash.
In the housing context, some of the same debates about equity and gentrification that occur in America might apply in Israel: although apartment owners are not driven out by a TAMA 38 renovation, renters can actually be displaced. And TAMA 38 might itself be helping to fuel the housing crisis by increasing the attractiveness of real estate as an investment.
Another criticism of TAMA 38 that will be familiar to veterans of U.S. housing politics is the claim that it leads to haphazard development at odds with local planning objectives, and that this has costly consequences for local governments. According to an article in US News and World Report:
But Jerusalem has also put some caps on Tama 38, limiting developers to adding only one and a half floors in many neighborhoods so that infrastructure such as parking, schools and public parks won't become overwhelmed.... The move was a response to a common complaint about the program: that it increases population density without taking into account the accompanied needs for more parking, green spaces, schools and infrastructure like sewage and drainage systems. Ramat Gan, a city bordering Tel Aviv, was so concerned about insufficient infrastructure that it banned the program in May.
Exacerbating this concern is a series of changes made to TAMA 38 to bolster its appeal to developers after minimal interest in its first few years. One of those changes was that local governments must forfeit part of the "betterment levy" —comparable to an impact fee in the U.S.—that they would ordinarily impose on a new development when dealing with a TAMA 38 project. This contributes to the disincentive for local governments to want a lot of TAMA 38 construction within their boundaries: the program, while it can revitalize neighborhoods and add to the tax base, may impose costly obligations on cities to expand roads and sewers while depriving them of revenue that (non-TAMA 38) new construction would produce.
In this, although Israeli cities do not look much like U.S. ones, the same problem as everywhere bedevils the effort to grow cities in a way that meets residents' needs and is financially solvent over the long run. Namely, the interests of local government, higher levels of government, developers, and residents are not always aligned. And where they're not, even the best-conceived policy experiment is going to hit roadblocks and need adjustment.
Never Finished
The biggest lesson from TAMA 38 for North Americans is not that the exact concept could be replicated in the U.S. or Canada, with our very different governing structures, or that it should be. It's a reminder of two things:
1. A place is never finished. Even an individual building isn't finished. Our cities should be living, evolving creations. One of our biggest planning mistakes in North America was to begin building to a finished state—and then putting up roadblocks to modifying neighborhoods once they're "built out." There's something to be said for urban redevelopment that isn't a huge-scale, costly endeavor, and that doesn't only occur after a long period of decline or abandonment.
2. Local governments (in areas where there is unmet demand for real estate) are sitting on a valuable resource, even if they are cash-strapped. This resource is development rights. Setting aside theoretical arguments about whether zoning capacity should be limited at all or whether there should be strict height or density limits, the status quo is that these limits exist, almost everywhere.
These ungranted development rights have real monetary value, and that's value that belongs to the public. Mualam et al. argue that it's precisely tight financial constraints on Israeli government at all levels that have increased the appeal of programs like TAMA 38, which enlist the resources of the private sector in solving problems:
As a result, local governments must come up with innovative land policy and planning instruments in order to save money, create revenue, and secure public amenities and infrastructure (Lasri and Shwartz 2012). For example, Israeli cities experiment with market- driven policies for urban renewal that do not entail significant public investment.
As we've seen, this approach poses significant fairness concerns—poorer parts of Israel are still waiting for earthquake retrofits. It's no panacea, but value capture is an underutilized tool in North America for such things as funding transit. It's worth another look.
(TAMA 38 projects in multiple stages in Raanana. Via Wikimedia Commons.)
The U.S. is in a massive housing bubble fueled by widespread fraud. With banks incentivized to look away and Wall Street and Washington incentivized to keep housing prices artificially high, a bottom-up approach is the only hope for bringing sanity back to the housing market.