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Government Could Act to Cap Rent Increases

Iceland’s society and housing minister says her government is actively investigating implementing new rules to limit rent increases on homes. She says authorities need to react to the problems faced by renters and says she wants to cap rents.

One-third of Icelandic homes are rented, with residents wrestling with extremely high monthly rents—especially in Reykjavík. Vísir mentions one example of a small (65 square meter) apartment in central Reykjavík which costs ISK 200,000 (EUR 1,356/USD 1,512) a month. Such prices are common.

The minister is responding to a call from Left-Green Movement leader Katrín Jakobsdóttir to cap rents in order to help tackle the problem.

She wrote in Fréttablaðið newspaper that it is becoming clear that the authorities need to intervene to decide how high rents will be allowed to rise. She says that everyone in national politics is acutely aware that rental issues are one of the hottest topics in Iceland today: not only the cost of renting, but also the number and selection of properties available.

Katrín says that rent caps have been successfully introduced overseas, including in Berlin and Sweden—but adds that such caps are not without downsides; as they can reduce the market’s natural incentive to provide a good selection of rental housing for prospective renters. But it has the advantage that the position of renters will be more assured, and the future more predictable; especially in terms of costs, Katrín writes.

Minister for Social Affairs Eygló Harðardóttir has responded, saying she celebrates all good ideas and that Katrín’s specific proposal is not directly under consideration yet, but that the government has been studying other countries’ rules on rental costs over the summer.

“We have found that we have the least restrictions on rent increases in the Nordic countries. There are clear rules in Norway, Denmark and Sweden about how increases are handled, Eygló told Vísir.

“We see that although we have the fewest restrictions on rental increases, it has not led to the offering of rental properties being more than in other countries. That is why I think there is reason to go over whether it is possible to make changes to the law in this regard,” Eygló adds.

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