Israel yesterday announced new homes in East Jerusalem to ease a housing shortage. But critics argue that the cost of building in contested territory is partially to blame for Israel's economic woes.

The Israeli government, facing unprecedented public protests over the soaring cost of housing, yesterday announced it is advancing plans for thousands of new homes in contested East Jerusalem.

The new homes will be constructed in Har Homa and Ramat Shlomo as part of a rapid expansion of Jewish communities in East Jerusalem, which Israel annexed after the war – a move that has cost Israel both international goodwill and hundreds of millions of dollars.

In traditional Arab neighborhoods near the Old City where tensions run particularly high, the Housing Ministry has an annual budget of $22 million to provide security for roughly 2,000 Israelis – or $11,000 per resident, according to Peace Now, an Israeli group opposed to the occupation.

The group also says that Israel’s government invested four times more per capita in public building in the West Bank than the national average in 2009, and twice as much per capita in West Bank municipal governments, according to data from Israel’s Central Bureau of Statistics.

The chairman of Israel's Settlers Council, Danny Dayan, acknowledges that public spending per capita on settlements is more than Israel’s metropolitan spending, but insists that it is roughly the same as rural towns inside the 1967 line.

He says that the focus on settlements is "demagoguery" by politicians and Israeli journalists who are unconnected to the protesters.

Why protester leaders have avoided settlement issue
Leaders of the socioeconomic protests that began last month on Tel Aviv's tony Rothschild Boulevard have largely avoided debates over the Israeli-Palestinian conflict in an effort to appeal to a broad range of Israelis and thus maximize pressure on Prime Minister Benjamin's Netanyahu's government.

The protests are at root a criticism of Israel’s shift to a free-market economy over the past 20 years, and a call for the government to reassert itself on behalf of the middle and working classes. But because protesters are also calling for a reprioritizing of Israeli spending, many argue that settlements and the absence of peace have a sizable impact on the economy and thus should be part of the debate.