The recent Israeli elections were followed by a number of pronouncements by US officials praising democracy in Israel. However democracy is much more than elections, and many freedoms that Americans take for granted are not available in Israel. For example, Israel's Arab citizens suffer from discriminatory real estate and housing practices of the sort that were outlawed in the US almost 40 years ago.

Redlining, or restricting home purchasing by African Americans and other minorities in “white” neighbourhoods was once a common practice by realtors in the US. Due to the 1968 Fair Housing Act, they are now required by law to treat all home buyers equally. However in Israel the practice of redlining has been entrenched since the founding of the state.

The Israeli real estate industry, housing developers and the government, restrict Arab citizens of Israel, 20 per cent of the population, in their housing choices. Contributing factors include marketing strategies by realtors and housing developers, segregated planned communities by non-profit developers and government control of most of the country's property. As a result, virtually all new houses and pre-owned houses are sold exclusively to the Jewish population. Arabs mostly “make do” with owner built houses in tightly zoned towns and villages, often having their houses demolished as a result of lack of appropriate zoning and building permits.

The largest real estate development company in Israel, Industrial Buildings Corporation (IBC), is part of the Fishman Group with a market value exceeding $1.5 billion. IBC develops and manages 230 infrastructure projects for tens of thousands of housing units in 80 locations throughout the country for the Israel Lands Authority (ILA), the ministry of housing and local authorities. All the company's projects are marketed to Jewish-Israelis and foreign buyers only.

The leading real estate brokerage firm is Anglo-Saxon, part of Africa-Israel Investments Ltd. with a 2004 net profit of over $92 million. Their network of 55 offices, none in an Arab locality, have marketed tens of thousands of houses exclusively to Jewish and foreign buyers. Other realtors, including Century 21 and ReMax, follow the same pattern of selective sales, effectively excluding Arab buyers from the real estate market.

For example, no houses have been sold to Arabs in the fast-growing new city of Modiin, with a population of over 60,000. When Arabs try and gain access to segregated communities they are met with organised resistance and legal restraints. This happened in the northern Israeli town of Karmiel when the ILA cancelled an offer in October 2004 for leasing 26 lots. The cancellation was in response to a petition submitted to the Haifa District Court against the ILA, the Jewish National Fund (JNF), and the Karmiel Municipality by the Association for Civil Rights in Israel and the Arab Centre for Alternative Planning. Rather than extend the tender so that Arabs could lease land, the court allowed the ILA and JNF to withdraw the offer.

Government tactics to restrict housing choices include offering grants, low-interest mortgages and tax incentives to Jews only, and requiring army service for residents. However, the most blatant form of discrimination is exercised through the government's control, through the ILA, of most of the land in Israel.

The ILA manages a total of about 78 million acres, or 93 per cent, of all the land in the state. The 1961 agreements between the JNF and the Israeli government stipulate that the ILA would administer all JNF-owned lands. A primary objective of these documents is to prohibit land allocation to non-Jews. These agreements also redefined the JNF as a public authority in Israel, yet their charity organisations operate in numerous countries and have 501c3 non-profit tax-exempt status in the US, possibly in violation of the US tax code. Their international activities are closely linked with the real estate industry in Israel and hundreds of segregated Jewish communities have been built on JNF land.

Thus today there are over 4.5 million Jewish-Israelis with free choice to live anywhere in the country while the 1.2 million Christian and Muslim Arab citizens are mostly relegated to a mere 3.5 per cent of the land that they still own. Africa Israel Investments, The Fishman Group or the Industrial Buildings Corporation could not practise such blatant redlining and segregation in their projects in Europe and the US. Housing and land reform in Israel is long overdue, and perhaps it's time for investors to prod these companies, and the Israeli government into the 21st century.

Fred Schlomka is a board member of the Israeli Committee Against House Demolitions.