Arab neighbourhoods in east Jerusalem will, for the first time, be subject to Israeli building regulations if a plan by the Jerusalem municipality gets government approval.
The proposal has been opposed by Arab representatives as it would extend Israeli authority over the area, and is considered particularly sensitive as American President Barack Obama does not want a change to the status quo in the city at the moment.
After Israel captured and annexed east Jerusalem in 1967, local Arabs, as well as most of the international community, refused to accept Jewish sovereignty over the area.
Instead of imposing Israeli planning regulations in Arab neighbourhoods of east Jerusalem, Israel left most of them unzoned, meaning that there was no blueprint for building.
On one hand, the Arab population welcomed this, taking the view that the less Israeli authority in their neighbourhoods the better. On the other hand, it has meant that the majority of their building is classed by Israel as illegal, and that while Israel largely takes a laissez faire approach, in a significant number of cases it demolishes homes on grounds of illegality.
This has generated a great deal of international opposition in the past, and the building arrangements in east Jerusalem are expected to be on the agenda when Prime Minister Binyamin Netanyahu meets Mr Obama on Tuesday. US State Department spokesman PJ Crowley last week criticised the Jerusalem Municipality's recently-announced and highly controversial plan to demolish 22 illegally built Palestinian homes just outside the Old City to make way for an archeological park and tourist centre.
The Jerusalem Municipality is now advocating a building "master plan" that will cover the whole of Jerusalem, including the currently-unzoned Arab neighbourhoods, and says that it will soon enter the final stages of the process for approval at the Interior Ministry. According to the plan, Arabs will be able to build legally and have illegally built structures legalised.
"It is a good plan which gives a solution for housing for all residents of Jerusalem," said municipality spokesman Yossi Gotesman, arguing that it will help local Arabs.
But the PLO, which represents the Palestinians in negotiations with Israel, hit out at the plan, saying that it is unacceptable for Israel to strengthen its hold on east Jerusalem.
A PLO official said that it "only aims to consolidate the colonisation process turning occupied east Jerusalem into an exclusive Jewish city, disregarding the will, beliefs, heritage and rights of the Palestinian Jerusalemites, both Christians and Muslims".
The plan would increase Jewish residences in east Jerusalem, which the official condemned as an impediment to negotiations for a two-state solution.
Israeli analysts are divided on the plan. Efraim Inbar, director of the right-leaning Begin-Sadat Centre for Strategic Studies at Bar Ilan University, said that the demands of Palestinians on the Jerusalem municipality are unreasonable because they conflict. On the one hand, Palestinians complain that they have no building rights but on the other, they object to a plan that would provide these.
He claimed that the plan had economic benefits for the Arab residents and said that the critics were against it because they knew the plan showed the Israelis to be "for equality and for doing business in Jerusalem".
Gershon Baskin, founder and director of an Israeli-Palestinian think tank, the Israel/Palestine Centre for Research and Information, views the plan as undemocratic. Since Palestinians boycott Jerusalem's municipal elections en masse, "the municipality will be planning for a third of the population that isn't represented".
Dr Baskin views the plan as part of an attempt by Jerusalem mayor Nir Barkat to undermine Prime Minister Netanyahu's ability to advance negotiations.
"Barkat is asserting himself as the king of Jerusalem so to speak - Netanyahu didn't have control over this."
The Interior Ministry, which has the final say, is controlled by Shas, the Charedi party that shares Mr Barkat's strong opposition to dividing Jerusalem.