An Israeli reads a newspaper last week in a Tel Aviv tent camp set up to protest… (Uriel Sinai, Getty Images )
Reporting from Tel Aviv — The burgeoning tent encampment along this city's elegant Rothschild Boulevard may not be the start of a Tahrir Square-style revolution, but Israeli student protests over rising rents have exposed a deep middle-class frustration over the economy and are presenting Prime Minister Benjamin Netanyahu with his biggest domestic challenge yet.
The protests began small in central Tel Aviv two weeks ago, but has expanded to half a dozen other cities, including Jerusalem, where activists have camped out near the Knesset, the parliament, and spawned traffic jams around Netanyahu's house.
The spirit of discontent seems to be contagious. Thousands of parents with baby strollers hit the Tel Aviv streets Thursday to complain about the rising cost of diapers and childcare. Doctors, who were already observing an on-again, off-again strike over salaries and hospital overcrowding, have joined the students' rallies.
A top union official, Histadrut Chairman Ofer Eini, is raising the specter of general worker strikes unless the government convenes top leaders this weekend to address the rental rate issue. A mass rally is set for Saturday in several cities.
This all comes on the heels of smaller consumer revolts in recent months over the soaring price of cottage cheese and gasoline. But unfortunately for Netanyahu, the housing crisis won't be as easy to fix.
It's a basic supply-and-demand imbalance that has been widening for years. The problem is exacerbated by the fact that 93% of Israel's land is controlled by the government, and bureaucratic procedures to permit new construction are cumbersome. The number of new housing units has sorely lagged behind population growth. Foreign investment in Israel's overheated market has also helped drive up prices.
From 2008 to 2010, housing prices rose nearly 50%, according to government figures. Nationwide, rents last year increased by 20%, and in Tel Aviv rents surged 30% during the first three months of 2010 alone.
But incomes are not keeping pace. Average income has risen just 17% over the last five years, to about $30,000 a year, government statistics show. In Tel Aviv and other high-cost cities, many residents are spending half their salary or more on rent.
So even though Israel's economy is growing at an enviable clip and the unemployment rate is at an all-time low of 5.7%, middle-class families complain of being squeezed by the rising cost of living.
In a sign of how worried the government is, Netanyahu canceled a trip to Poland and some legislators are calling for the Knesset to postpone its summer break, scheduled to begin next week. A few lawmakers have tried to visit the camps to express sympathy or listen to complaints, but most were shouted down or hit with eggs or water by protesters fearing politicians will attempt to hijack their demonstration.
Last week, Netanyahu unveiled a plan to release government-controlled land, accelerate construction and provide incentives for the building of low-income apartments and student dormitories. But protesters, some of whom are calling for Netanyahu to resign or fire his finance minister, immediately rejected the proposal as inadequate.
"There's no quick, populist solution," said government spokesman Mark Regev. "The challenge of the government is to create a larger supply in a short period of time."
Netanyahu's solution to the crisis, Regev said, is to free up more land for private development and foster competition. "The prime minister believes competition will drive down prices," Regev said.
But protesters blame Israel's shift toward privatization and capitalism during the last two decades for spurring the housing crisis in the first place. Many want Israel to move back toward socialism and social democratic policies ensuring that citizens' basic needs, such as housing, are met.
"We want to see this country go back to a welfare state in which workers' rights are protected," said Noga Cohen, 25, a Hebrew University of Jerusalem student who says she can't afford rent and school fees, despite working five hours a day as a secretary in addition to her studies.
"This isn't about the poor," she said. "The middle class feels it can't survive anymore."
She said the government's shift toward privatization has only benefited a few wealthy business owners, who are manipulating land prices. She wants the government to step in with more regulation and financial assistance.
"There was this perception that Israel should copy the U.S. and adopt a free market and capitalism, but in Israel it's not working. Israel should be a social democratic society."