How to Navigate the Turbulent Waters of the Construction Industry?
Raul Serrugo Reflects on a Turbulent Term and Highlights Future Challenges

Raul Serugo, the outgoing president of the Contractors and Builders Association of Israel, speaks in his first interview since stepping down about six years of upheaval in the construction industry, the enormous challenges he faced, and the systemic failures preventing a solution to Israel’s housing crisis. Watch the premiere episode of the radio program “Seeing Far,” which will cover real estate investments, finance, thereal estate marketin Greece, and how to build an economic future for Israel in 2025.

The premiere episode of the radio show “Building Far,” hosted by media personality Merav Miller and Palm’s founder and CEO Aviv Cohen, featured Raul Serugo, the outgoing president of the Contractors’ Association of Israel, who shed light on a complex and crisis-ridden period in the Israeli construction industry. He describes his six-year tenure as “a massive aircraft carrier sailing through extremely rough waters,” during which he experienced everything from multiple election campaigns, through the COVID-19 pandemic, dysfunctional interim governments, political instability, and social protests, to the Iron Swords war. Now, as he steps down and before his successor, Roni Brik, takes office, Sarugo says that “a leader must know when to leave, so that the organization can continue to be alive, breathing, and kicking.”

Between the Pandemic and the War: The Major Events That Have Impacted the Construction Industry

Serugo notes that the COVID-19 crisis and Operation Iron Swords were defining events that profoundly impacted the construction industry. However, he observes a different government response to the two crises. While during the COVID-19 pandemic, the government allowed the construction sector to continue operating as an essential sector, maintaining operational continuity and even vaccinating Palestinian workers who constituted a significant portion of the workforce, the sector has been struggling during the Iron Swords war. According to him, the absence of approximately 100,000 Palestinian workers and the slow entry of only about 25,000 foreign workers over the course of a year and a half constitute a severe blow to the available workforce.

According to Serugo, the immediate consequence of the labor shortage is that construction is being delayed and developers are not launching new projects. As a result, despite a decline in demand for apartments during wartime, apartment prices continue to rise, with rising rents in many cities across the country serving as further evidence of the supply shortage. He notes that even land auctions in central Israel, such as at Sde Dov in Tel Aviv, have seen a drop of about 40% in the offered price, due in part to high financing costs, the war, prolonged regulation, a shortage of workers, and rising construction costs.

Serugo also addresses the challenges faced by developers, both small and large, as a result of the current situation. He explains that rising construction costs—due, among other things, to disruptions in the global supply chain and conflicts such as the one in Ukraine—as well as rising interest rates, are undermining the viability of projects. He hopes that interest rates will fall soon in order to ease the barriers to growth.

"The Contractors Association takes a broad view of the construction industry, taking apartment buyers into account."

Regarding the relationship between the Contractors’ Association and the government, Serugo emphasizes that the Association is a professional, state-level body that takes a broad view of the construction industry, while also taking apartment buyers into account. According to him, the Association serves as an advisor to the government with the aim of promoting sound decisions, and both the government and the Knesset appreciate this. As an example of achievements during his tenure, he cites the inclusion of an Association representative on the National Council for Planning and Construction. However, he notes that the government does not always heed their position, as is the case with the continuation of the “Target Price” program, which the Association believes is not a real solution to the housing crisis.

The key to solving the housing crisis: "Just build more"

Serugo emphasizes that the key to solving the housing crisis is, in his words, “simply to build more.” He points to several reasons why not enough is being built, including a shortage of workers and regulatory issues. According to Serugo, the labor shortage will be resolved soon, but he expresses concern that the current pace of foreign worker entry (about 2,000 per month) is too slow and will not allow for a rapid response to the need, especially in the reconstruction of the north. He calls for prioritizing the allocation of workers to the reconstruction of the north over construction in the center.

Obstacles Along the Way – Lack of Coordination Among Government Agencies and Challenges in Bringing in Foreign Workers

Serugo points to a lack of coordination among various government agencies as another factor hindering construction. He highlights the need for a single central body with clear authority to promote the reconstruction of the south and north, similar to the “Housing Headquarters” that existed in the past. He notes that every Israeli government since 2007 has failed to address the housing market due to a shortage of supply, with annual demand standing at approximately 70,000 to 90,000 new households, while in practice only about 50,000 apartments are being built. He emphasizes that the solution depends primarily on the regulator and the government, but a lack of coordination between the ministers of housing, the interior, and finance, as well as other parties, makes it difficult to advance solutions.

Serugo also refers to the association’s efforts to bring in foreign workers through a “business-to-business” (B2B) model, in which Israeli staffing agencies would contract directly with overseas staffing providers. He notes that the government opposes this due to concerns from the Ministry of Justice regarding corruption and human trafficking, although in his view, the solution to corruption is enforcement, not changing the system. He adds that the bureaucracy and complicated regulations surrounding security checks and work permits make it difficult to bring in skilled workers, such as those who worked in the Gulf states. He calls for streamlining regulations during the current emergency in order to bring in the necessary workers.

Serugo describes the association’s efforts to influence decision-makers by fostering consensus among members of the Knesset and government ministries. He proposes various solutions, including providing tax incentives to companies that undertake demolition-and-reconstruction projects in the periphery, in order to make such projects economically viable. He notes that this model has been successfully implemented in the United States in the field of affordable housing.

"I consider my time in this role a great privilege, and I find great satisfaction in working for the benefit of the industry."

At the end of the interview, Serugo shares his thoughts on stepping down from his position. He says, “I consider my time in this role a great privilege and feel a deep sense of satisfaction from my work on behalf of the industry. I will miss the job, but I feel more at peace now.”

Serugo’s remarks paint a complex picture of the construction industry in Israel, an industry that has undergone many upheavals and faces enormous challenges. He points to systemic failures and a lack of coordination among various stakeholders as significant obstacles to resolving the housing crisis, and emphasizes the need for decisive and focused government action to increase supply and stabilize the market.