Young Jewish families and immigrants cannot afford housing. The proper answer is not bringing Arab workers but implementing the two basic free market approaches. One, an owner of land – including agricultural land – can build on it without restrictions. Two, liability insurance must replace all permits; insurance companies, not government agencies should check safety of buildings. These two measures would decrease housing cost at least in half, probably closer to four times. But who cares to implement them? The bureaucracy wants regulatory power and bribes from contractors. The government wants the higher taxes from high-priced real estate. Contractors similarly receive higher profits on the higher prices. House owners are happy about inflationary rise of their property value.
Israeli contractors scream that ending the flow of Arab labor would increase the cost of construction. That’s nonsense. The labor costs account for less than $100 per square meter of the total price of $800-6,000. Using the more expensive Jewish labor won’t noticeably increase the real estate prices. If Arab labor is so cheap now, how come the apartments are so expensive? Zoning laws, especially the almost-impossible conversion of agricultural land keep land prices rising. A tremendous amount of regulations makes compliance increasingly expensive. The labor part of the overall cost doesn’t matter. The government can single-handedly offset the cost increase because of switching from the Palestinian labor with measures ranging from wider access for Thai workers to easing regulatory burden which will increase the amount of construction and drive prices down.
A major advantage of Arab workers for Israeli contractors is that Arabs fit into the black market economy. Many Arab workers take cash wages without the contractors’ paying taxes or benefits. The contractors prefer Arab employees also for the old adage, “Whoever buys himself a Jewish slave, buys a master for himself.” Arab workers are more amenable.
The low quality of Arab work has long become proverbial, but since rare customers have resources to sue negligent contractors, the latter do not care to hire diligent Jewish workers.
Israeli law demands that migrant workers from Palestine return home at night instead of staying in Israel to engage in terrorist acts. Many Arabs neglect that rule to avoid the long lines at checkpoints, and sleep at factories, warehouses, and in unfinished buildings. Small groups of concerned citizens can search out such illegal migrants and insistently report them to police, making sure that police act upon the information. Most Arabs will chose to remain in Fatah-land of the West Bank rather than spend hours every day traveling to work in Israel.
Arabs stay in Israel only because they can economically parasitize on Jews. Stop hiring them, stop buying from them, stop patronizing the establishments that hire them. They will move.
For every house the arabs build in Israel, they steal enough construction material for two houses in the territories. All the houses there are built with stolen materials/time/money. They end up more expensive than Jewish workers.
1) Badly built homes are the sort of market failure that just keeps on hurting. I note you raise on issue yourself in regard to how "but since rare customers have resources to sue negligent contractors".
Also what you do with your land does affect your neighbor - most home owners value a certain level of predictability regarding their neighbors.
Of course how one weights such competing objectives is debatable.
Also note that if you have less construction workers and those construction workers are more expensive then you should in a free market get less construction.
The biggest benefit from not having immigrant Arab workers would be that there would be less flash-points between people like Benjamin and the Arabs that apparently keep stealing his construction equipment. That’s the sort of straws that one makes hay mountains out of.
Jewish construction workers are more efficient than Arabs and use less manual labor. Here, less could be more. Besides, there's an option of bringing Thai workers on temporary visas. Besides, as Obadiah shows, higher construction wages would have negligible effect on real estate prices.
Few countries (and few cities in the US) have zoning prediction rules. In most places, building owners have no guarantee against someone erecting a higher building in front of them. That sort of unpredictable construction takes place in Israel now despite the socialist regulation.
But those same Jewish construction workers are probably more efficient at more or less everything, including their other job.