The recent decision by the Jerusalem District Planning and Building Committee to authorise the largest Palestinian housing project in East Jerusalem since 1967 is an important step towards alleviating the shortage of new homes in the city. On its own, however, it will not alter the glaring disparity between the two halves of Israel's capital.

While politicians have paid tribute the "indivisibility" of Jerusalem ever since the government formally established Israeli sovereignty over the parts of the city captured in the 1967 Six-Day War, 48 years later there are still major differences between the Jewish and Palestinian neighbourhoods.

All the Israeli mayors since 1967 have spoken of how their administrations have invested hundreds of millions of shekels in the east, but the fact remains that once you cross an invisible line between west and east, the pavements, parks and public spaces dwindle and then disappear. Instead, there are overflowing bins and potholes.

It was an uphill battle for Mayor Nir Barkat to get the planning authorities to green-light the construction of 2,500 new housing units on the outskirts of the sprawling Jabel Mukaber neighbourhood. Behind the scenes, far-right settlers' organisations mobilised opposition within the planning committee, citing a range of security and environmental issues. It took four years of political wrangling in the corridors of City Hall and the Interior Ministry to finally push it through.

The first relatively large-scale plan to build new homes for the 300,000 Palestinian residents of Jerusalem will only have a minor effect on the wider problems if it remains an isolated case. Mr Barkat, who has more regularly been an ally of the right-wingers trying to expand the Jewish presence in the east - often within Palestinian neighbourhoods - has insisted, however, that he is leading a strategic change.

Drawing any conclusions regarding the political and diplomatic situation in the city from the project's authorisation would be very premature. There is no greater willingness among the Palestinians of East Jerusalem to accept Israeli sovereignty and they still shun the Israeli elections - polling stations there remained empty last month (all are eligible to vote for mayor and City Hall; some have full citizenship and can vote for the Knesset). But since a political solution is becoming ever-more distant, Arab East Jerusalemites are increasingly demanding their rights under occupation.

More are seeking work in West Jerusalem and further afield within the Green Line, and the demand for Hebrew lessons and Israeli passports is growing rapidly.

Some Israeli politicians hope that the increasing "Israelization" that is taking place will lead also to an acceptance of Israel's rule of the entire city. That still seems far-fetched. Probably the most they can hope for is that the Palestinians become stakeholders in a united city, and that as a result they will eventually start believing they have more to lose than gain from violence.

At the same time, greater involvement will mean also greater demands for equality in resources and municipal services. If these are not met, there will be further reasons for resentment. For that to be avoided, planning permission for 2,500 new homes can only be a start.