The Israeli government has put the final stamp of approval on the building of 1,600 new settler homes in East Jerusalem, reports Reuters. Palestinians refuse to resume peace talks while Israel continues new building. "The official announcement on Thursday of the go-ahead from Interior Minister Eli Yishai could weigh on U.S.-led efforts to dissuade the Palestinians from seeking United Nations endorsement of statehood in the absence of peace talks they suspended over Israeli settlement construction," Reuters reports. The units will be located in the Ramat Shlomo area of the West Bank that is already home to religious Jews. As Reuters explains, "Palestinians want East Jerusalem as capital of the state they hope to found in the West Bank and Gaza Strip, which Israel occupied in the 1967 Middle East war. Israel deems all of Jerusalem its capital -- a status not recognized abroad. Israel quit Gaza in 2005 but disputes Palestinian claim on all of the West Bank." Israel cited economic reasons for the new housing development, as the country is experiencing a housing crisis. Construction is not scheduled to begin for another few years, but escalating real-estate costs could speed up the process.