Abstract:

Secure property rights are essential for efficient resource allocation and investment.
Yet, the economic effects of insecure property rights—especially among affluent pop
ulations in high-income urban areas—remain understudied. This paper examines a
natural experiment in Jerusalem, where 99-year leases on church-owned land in some
of the city’s most expensive neighborhoods are approaching expiration. The looming
lease terminations create substantial legal ambiguity: while some contracts allow for
potential extension, the terms are vague, and recent government statements suggest
possible intervention via eminent domain or regulatory imposition on private investors
who recently acquired the land. Using a comprehensive dataset of real estate transac
tions from 2004 to 2024, we compare the price and transaction likelihood of properties
with secure and insecure property rights within the same neighborhood blocks, control
ling for location and time effects. Our identification strategy also allows us to explore
heterogeneity by remaining lease duration. We find that property-rights insecurity re
duces transaction likelihood by approximately 20% and depresses property values by
10-15%. These results highlight the significant economic costs associated with insecure
proprty rights even in a wealthy, developed-market settings.