OCCUPIED JERUSALEM (Reuters) - Facing a cascade of popular protests over the cost of living in Israel, Prime Minister Benjamin Netanyahu said on Sunday his government would solve a housing crisis caused by a sky-rocketing real estate market.

What began with a handful of protesters pitching tents on a main Tel Aviv boulevard two weeks ago has spread to several cities, culminating on Saturday when 15,000 Israelis, many of them students and young couples, rallied against the government.

Dozens of people were arrested for blocking streets and clashing with police, a police spokesman said.

"We are currently witnessing a housing crisis that has been given a public voice," Netanyahu said at the start of a weekly Cabinet meeting in which his government was expected to finalise two large market reforms.

Though several nationwide protests, including a doctors' wage strike and consumer boycotts over high prices, have gathered pace this month, analysts see no immediate threat to Netanyahu's broad-based, conservative coalition government.

With housing prices up by about 40 per cent the past two years, the government has already unveiled a number of steps, including offering tax incentives to free up new apartments.

The Bank of Israel, wary of a housing bubble that could rattle the economy, has tightened mortgage regulations for banks and raised its key rate 10 times to 3.25 per cent in a bid to increase the cost of housing credit.

"The government has acted ... and is effecting a huge change, the first signs of which we are already seeing in economic indicators," Netanyahu said.

He said the government holds more than 90 per cent of the land in Israel and a stubborn bureaucracy is preventing it from being freed up fast enough for sale.

"We need to make a fundamental change - to break the government monopoly," he said, outlining two major reforms in the works.