Ok, so the story linked below is getting a lot of play. I am not an expert, but some basic things should be known and are never reported.
The change referred to involves the issuing of permits to build homes and apartments on land near Jerusalem. Jerusalem is a fast growing metroplex. There is a shortage of housing for people who want to live there. Right now Jerusalem in under Israeli sovereignty. The political backdrop is that the vision of the Palestinian leadership, the Palestinian Authority, which is the current incarnation of the Palestinian Liberation Organization (PLO) sees Jerusalem as part of any interim or final settlement with Israel (like a two-state solution). Israel and most Jews dispute this vigorously. If this Palestinian demand is a precondition for a settlement then the whole thing is a non-starter. So to say that Netanyahu's action in allowing the issuing of housing permits kills the two-state solution is not accurate. It is equally the unrealistic Palestinian demand that kills it.
What are the relative merits on each side of this issue of Jerusalem? If one wants to play the ethnicity game then it should be known that Jerusalem was a Jewish city long before it was a Muslim city and that it is doubtful whether Muslims ever had a majority in the city before the 1949 war (when the Jewish and many Christian inhabitants fled). The Jewish quarter was taken over by Muslims.
“The Jordanian commander is reported to have told his superiors: "For the first time in 1,000 years not a single Jew remains in the Jewish Quarter. Not a single building remains intact. This makes the Jews' return here impossible." The Hurva Synagogue, originally built in 1701, was blown up by the Jordanian Arab Legion. During the nineteen years of Jordanian rule, a third of the Jewish Quarter's buildings were demolished. According to a complaint Israel made to the United Nations, all but one of the thirty-five Jewish houses of worship in the Old City were destroyed. The synagogues were razed or pillaged and stripped and their interiors used as hen-houses or stables.” (https://en.wikipedia.org/wiki/Jewish_Quarter_(Jerusalem).
So the notion that Jerusalem is an historically Muslim city is without basis in fact. It is more accurately historically an ethnically mixed city – which is what it is now under Israeli sovereignty. The two biggest ethnic groups are Jews and Arabs (there is an increasing number of Christians living there, but they are a small minority). Jewish and Arab neighborhoods are intricately intertwined and there is no way in any future settlement that they can be unraveled without considerable upheaval. The Arabs living in east Jerusalem work in Israel and have a standard of living a magnitude above those living in the West Bank in an economy segregated from the Israeli economy by the policies of the PA and the reaction to those policies by the Israeli government. So it is extremely doubtful that Jerusalem Arabs would want to live under the PA in any future settlement.
Having said this, there is ample ground for a critical assessment of Israeli housing policy. In general, the Israeli government’s position on land ownership is problematic. Too much of it is owned by the government (I would prefer it all to be private, but this is the age of nation-states). However, for government owned land, access to lease is officially open to all residents, Jewish or Arab (or anyone) and the same is true of privately owned land (http://www.meforum.org/370/can-arabs-buy-land-in-israel). It is probably true, that, in practice, Arabs are discriminated against when it comes to leasing government land.
So, a legitimate cause of concern about the newly available housing permits in Jerusalem is whether or not these permits will be politically granted in the service of the agenda of the religious and nationalist vision of the right-wing political parties. Those concerned for the well-being of the Palestinians should focus of the details of urban development in Jerusalem. Will Arabs have equal access to lease and buy land pursuant to the issue of these new permits? A very valid concern. An open market militates in favor of good relations among the residents.
In terms of the bigger picture, the robust development of Jerusalem, fast becoming Israel’s second largest high-tech sector, is an opportunity for entire West Bank should a way be found to peacefully integrate it into the Israeli economy. A one-economy solution is compatible with a variety of political arrangements.