Everything you wanted to know about the termination of N.O.P. 38 and the beginning of the “Shaked Alternative”

Synopsis:

On October 1, 2023, the National Outline Plan for reinforcing buildings against earthquakes, N.O.P. 38, will be terminated.

Depending on the local authority where a given real estate property is located, there are two possibilities under which the issue of urban renewal will continue to be promoted: the first – under a specific alternative plan adopted by the local authority (as long as it is one of the local authorities listed as having adopted a specific plan on this issue); and the second – under the new outline approved by the Knesset, which received the moniker the “Shaked Alternative”.

In this article, we will briefly address the main points arising from the repeal of N.O.P. 38.

Background:

As far as the urban renewal of buildings is concerned, the two main frameworks that existed for a long time were: the framework of N.O.P. 38, which includes the enhancing and strengthening of the building only, while adding several storeys to the building (N.O.P. 38/1) or demolishing a (single) building and building a new building in its place (N.O.P. 38/2); and the framework of “Vacate and Build” (“Pinuy Binuy”) which covers several buildings together and includes their demolition and the construction of one or more buildings in their place.

While the “Vacate and Build” framework still remains in effect (and is expected to continue so in the near future), N.O.P. 38 as a whole will come to an end in October 2023, subject to the caveats specified below.

As will be detailed in this article, after the expiration of N.O.P. 38, there will actually be two alternatives that will regulate the entire issue of urban renewal in Israel. The first is a replacement urban plan that is proactively and independently promoted by the local authority, and the second is the Shaked Alternative, which is in fact Amendment 139 to the Planning and Construction Law, on which we will focus first.

The Shaked Alternative – what is it?

As stated above, the Shaked Alternative is in fact Amendment 139 to the Planning and Construction Law, which was approved by the National Planning and Construction Council in January 2023. Its main innovation is the possibility of obtaining a building permit at the same time as the submission and promotion of a specific urban building plan. This is in contrast to the common practice until then, which was in a gradated manner where first it was necessary for a city building plan to be issued before an application for a building permit could be submitted.

This important move will (or at least is expected to) significantly shorten the time frames for promoting an urban renewal project, since things can be done in tandem rather than one after the other.

Another important mechanism established by Amendment 139 to the Planning and Construction Law is that N.O.P. 38/2 projects (demolition and construction) will receive additional construction rights of up to 400%, and even more (if possible), as well as providing the possibility to mobilize construction rights that cannot be used in a specific project to another project. Regarding the N.O.P. 38/1 (enhancing and strengthening) route, the amendment to the law establishes that these will benefit from an addition of residential units at a rate of up to 200%.

For the sake of comparison, the addition of rights that was set under N.O.P. 38 stipulated a graduated addition of storeys in N.O.P. 38/2 projects, depending on the number of storeys in the building in its existing condition (up to 3.5 storeys at the most), as well as an addition of only up to 2.5 storeys in N.O.P. 38/1 projects.

It is important to note that the Shaked Alternative made exceptions for a number of authorities that are promoting a replacement urban plan for N.O.P. 38 (which will be detailed below) and which is based on the Shaked Alternative. Thus, in the municipalities where such a replacement urban plan is being promoted, the validity of N.O.P. 38 was extended until February 2024, by which time the local authority must complete the submission of the aforementioned plan. Any such local authority that succeeds in doing so will have the validity of N.O.P. 38 extended in its area  until May 2026, or until the approval of the replacement plan, whichever the earlier.

As an aside, we note that Amendment 139 to the Planning and Construction Law even addressed tax benefits that were established under N.O.P. 38, setting revised dates for their expiration. Furthermore, and specifically regarding the betterment levy, while under the framework of N.O.P. 38 an exemption of between 90% – 100% of the betterment levy was granted, the Shaked Alternative establishes a betterment levy at a rate of 25% or as otherwise set by the local authority, with this in order to incentivise local authorities to promote urban renewal in their area.

The promotion of an alternative plan to N.O.P. 38 by the local authority

It should be first noted that as part of the N.O.P. 38 provisions themselves, it is established in section 23 that a local authority can independently initiate a plan that will regulate the issue of urban renewal within its boundaries. There are quite a few local authorities that have initiated such a plan pursuant to section 23, such as the Tel Aviv Municipality as part of the Districts Plan. Any local authority that has indeed initiated such a plan will continue to act pursuant to it, without having to rely on N.O.P. 38 (which is about to expire anyway) or on the Shaked Alternative.

In addition, as part of the National Planning and Construction Council’s decision not to extend the validity of N.O.P. 38, a list of approximately 17 local authorities that are currently promoting urban plans as a replacement for N.O.P. 38, based on the Shaked Alternative, may continue to do so (see above, regarding the extension of the validity N.O.P. 38 in these local authorities).

A partial list of these local authorities, which are independently promoting an alternative to N.O.P. 38, are Ramleh, Rishon LeZion, Yavneh, Kiryat Bialik, Kfar Saba, Ra’anana and Petah Tikva. There are also local authorities where the alternative plans are promoted by the Governmental Authority for Urban Renewal (and not by the local authorities themselves), and this list includes, among others, Ashdod, Haifa, Lod, Bat Yam, Ashkelon, Be’er Sheva, Ramat Gan, Beit Shemesh, Yavneh, Nahariya and Bnei Brak.

That is to say, those local authorities that have adopted a plan pursuant to section 23 of the N.O.P., as too the authorities that promote (either by themselves or through the Governmental Authority for Urban Renewal) an alternative plan to N.O.P. 38, will act independently according to the outline that is relevant to them, which as mentioned is based to a certain extent on the Shaked Alternative and the mechanisms set in it.

Summary

The objective of the adoption of the Shaked Alternative and Amendment 139 to the Planning and Construction Law was to find a suitable and more effective alternative to N.O.P. 38, which apparently exhausted its original purpose and led to quite a few distortions and problems with its promotion and/or actual implementation.

On the face of it, it seems that this goal may be achieved through the Shaked Alternative (or through the specific plans promoted by the various local authorities), but the real test will have to be the field test, which will begin only after the validity of N.O.P. 38 finally expires in October 2023.

It seems that perhaps it would have been better to create a greater overlapping period between N.O.P. 38 and the Shaked Alternative before the final expiration of the N.O.P., but time will tell how all parties involved will react to the new alternative.

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