New Law Limits Airbnb Rentals Skip to content
Minister Lilja Alfreðsdóttir
Photo: Golli. Minister Lilja Alfreðsdóttir.

New Law Limits Airbnb Rentals

Businesses are no longer allowed to rent out units classified as residential housing on short-term rental sites such as Airbnb. This is the result of a new law, spearheaded by Minster of Culture and Business Affairs Lilja Alfreðsdóttir, that was passed last week in Alþingi, Iceland’s Parliament, Mbl.is reports.

The law is a response to rising housing prices in Iceland and the Airbnb boom in downtown Reykjavík.

Exception for homeowners

Despite this change, owners of apartments can still rent out their units for up to 90 days a year for up to 2 million ISK [$14,300, €13,300]. “After they hit that mark, the owner can not apply for a lodging license, which has been common practice until now,” a press release from the ministry reads. “Lodging licenses will only be issued for commercial housing or units in the countryside, i.e. farm accommodation. We reiterated that homestays are always subject to registration and a license that must be renewed yearly.”

Aim to increase housing supply

The new law has the aim to boost the supply side of residential housing in and around the Capital Region, to meet increased demand for housing. “With this change, the difference between residential and commercial housing will be clearer when it comes to accommodation and we’re looking at the actual use of the units,” said Lilja. “It’s no longer possible to buy urban residential housing and rent it out for more than 90 days, like we’ve seen in downtown Reykjavík where even entire apartment buildings have been turned into hotels.”

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