Jerusalem (CNN) -- Israel's interior minister plans to approve the construction of 2,700 housing units in Jerusalem, including 700 that will be built in a neighborhood annexed during the 1967 Six Day War, an official told CNN Thursday.
The move by the ministry is seen as provocative ahead of efforts to block a planned Palestinian bid to achieve statehood before the United Nations in September.
Interior Minister Eli Yishai will approve two housing projects next week, which will allow for the construction of 2,000 housing units in Givat Hamatos and 700 units in the annexed East Jerusalem neighborhood of Pisgat Zeev, Yishai's adviser, Roi Lachmanovich, told CNN.
Israel annexed East Jerusalem in 1967 and does not view the neighborhoods there as settlements, though the international community does not recognize the annexation and regards the eastern part of the city to be occupied territory. Palestinians consider East Jerusalem to one day be the capital of a future Palestinian state.
There has been growing pressure on the Israeli government to lower the price of housing in Israel and thousands of Israelis have been demonstrating in the last month in tent cities all over the country against the high cost of living.
Lachmanovich told CNN the approval of the housing units is connected with the country's economic situation and people's need to find housing in Jerusalem.
Chief Palestinian negotiator Saeb Erakat criticized the moves Thursday.
"It is now abundantly clear that with the continued illegal settlement expansion, Israel aims to turn its occupation of Palestine into a permanent annexation. Without effective and proactive measures from the international community, Israel will be further encouraged to stay on the path of colonization and further entrench its enterprise of occupation, land grab, and impunity," Erakat said in a statement.
Recognizing a Palestinian state "on the 1967 border and supporting our admission to the U.N. is the appropriate response to Israel's rejectionist and expansionist agenda. We call on all countries who have yet to take this positive measure to join the overwhelming world majority in protecting the two-state solution and inalienable Palestinian right to self-determination and recognize Palestine," Erakat said.
World leaders voiced dissatisfaction when Israel last week approved the construction of 2,500 housing units to be built in neighborhoods beyond the Green Line, which marks the area captured by Israel in the 1967 Six Day War.
EU representative Catherine Ashton last week denounced the approval of the construction of 930 units in Har Homa, echoing the international community's position that settlement construction harms the peace process between Israel and the Palestinians.
"The continued settlement activity undermines trust between the parties and efforts to resume negotiations. This is especially true in regard to Jerusalem," she said in a statement.
The U.S. State Department also expressed its dissatisfaction with the Israeli decision, saying "unilateral actions work against efforts to resume direct negotiations and contradict the logic of a reasonable and necessary agreement between the parties."
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