If UNRWA were absorbed into UNHCR, it would make no difference to the refugee status of Palestinians or result in settled status in host foreign countries. The UNHCR has also had refugees with intergenerational protracted refugee status in various countries. The UN regulations are clear that voluntary repatriation back to the country of origin is the preference in all refugee cases and it is up to the states involved to create safe conditions to and allow refugees to return. This explainer is from 2011, but the regulations it is based on have not changed so it is still relevant:
https://www.unrwa.org/newsroom/features/exploding-myths-unrwa-unhcr-and-palestine-refugees
“It is argued that if UNRWA was disbanded and responsibility for Palestinian refugees handed over to UNHCR they would be resettled out of Israel and give up the right of return. Is this the case and if not, what would UNHCR’s role be?
Gunness: This is not the case. Palestine refugees are entitled to a just and lasting solution to their plight.”
”It is often said that UNRWA perpetuates the Palestinian refugee problem by granting refugee status through the generations and that handing the refugees over to UNHCR would not allow this. Is this the case?
This is not the case. As I have already noted, Palestine refugees are entitled to a just and lasting solution to their plight. In the absence of and pending the realisation of such a solution, it stands to reason that their status as refugees will remain. Questions raised about the passing of refugee status through generations stem from a lack of understanding of the international protection regime. These questions serve only to distract from the need to address the real reasons for the protracted Palestinian refugee situation, namely the absence of negotiated solution to the underlying political issues.”
It points out that “2008 UNHCR document, Protracted Refugee Situations: A discussion paper prepared for the High Commissioner’s dialogue on Protection Challenges. Paragraph 7 of the document observes that "Protracted refugee situations are usually created and sustained by the failure to resolve … differences in a peaceful manner and in a way that respects human rights."
“Can you give real historical examples of where this is the case with UNHCR refugees?
As made clear in the criteria for derivative status above, in all cases, refugees and their descendants retain the status of refugees until that status lapses through the achievement of a just and lasting solution….
During a meeting of its Standing Committee in March 2008, UNHCR informed that "at the end of 2006, over half of the 9.9 million refugees worldwide were living in exile in protracted situations." It noted that "The 10 largest populations living in protracted situations were: 1. Over 1 million Afghan refugees in Pakistan, 2. Nearly 1 million Afghan refugees in the Islamic Republic of Iran, 3. 350,000 Burundians in the United Republic of Tanzania, 4. 215,000 Sudanese in Uganda, 5. 174,000 Somalis in Kenya, 6. 157,000 Eritreans in Sudan, 7. 132,000 Angolans in the Democratic Republic of Congo, 8. 132,000 refugees from Myanmar in Thailand, 9. 128,000 Congolese (DRC) in the United Republic of Tanzania, 10. 107,000 Bhutanese in Nepal."
In my opinion, the primary reason UNRWA is administratively separated is because Israel is highly involved in the day to day operations of UNRWA. They security check every employee, they control and audit all the aid money UNRWA receives to ensure Hamas and other terrorist groups cannot benefit. No other country demands this kind of finger in the pie with how the UN manages refugees they have created. If they did, then UNHCR would likely spin off another UNRWA type mini agency for other large refugee populations. It’s like a seperate profit centre in a business- you split it out to keep the accounting clean and transparent.