More Housing Needed for Unhoused People with Addictions: ‘Living in a Tent in Öskjuhlíð Isn’t a Desirable Situation for Anyone’

Encampments of unhoused people in Öskjuhlíð, a wooded recreation area in Reykjavík, have sparked conversations about shelter and services for at-risk communities in the capital. Vísir reports.

Unhoused individuals, many of whom are dealing with addiction issues, have long resorted to camping in Öskjuhlíð when they cannot find room within one of the city’s shelters. This creates considerable community tension as Öskjuhlíð is also home to Perlan, a local attraction popular with tourists, as well as being a much-used outdoor recreation area. There are also a number of businesses and services in the area, such as a kindergarten.

The Red Cross’s harm reduction unit, known as Frú Ragnheiður, serves the unhoused community in Reykjavík, as well as people with drug addictions.

“Something we always see in the summer is people coming in to get tents and camping equipment from us,” explains Frú Ragnheiður team leader Kristín Davíðsdóttir. “And this is first and foremost because they’re looking for some peace and quiet. These are generally people who are staying in emergency shelters and naturally, there are many people per room in emergency shelters, a lot of stimuli and activity, and people just don’t have any privacy.”

‘We want people to know that there are emergency shelters and other resources available’

Sigþrúður Erla Arnadóttir, manager of the City of Reykjavík’s Westside Welfare Office says that their on-site consulting team was dispatched to Öskjuhlíð as soon as they got word that people were camping there.

“Of course we’re concerned because there are tents there and winter is coming,” says Sigþrúður Erla. “We want to be sure that people know that there are emergency shelters and other resources available.”

As for providing more housing, Sigþrúður Erla notes that there is a housing crisis all over Iceland and that this crisis has an outsized effect on marginalized populations. She says every effort is made to help unhoused individuals find suitable accommodations.

“We’re reviewing the City of Reykjavík’s strategic plan, evaluating the projects that are currently underway, and looking at trouble spots and how we can improve the services that we’re providing to this group,” says Sigþrúður Erla.

‘An emergency shelter should always be a last resort’

Many locals who Vísir spoke to expressed concern about the situation, particularly drug users’ proximity to areas where children like to play. Frú Ragnheiður’s Kristín says there’s a straightforward solution to the problem: more housing.

“If people had housing, they wouldn’t be in this situation, they wouldn’t have to be camping somewhere outside. It’s obvious that living in a tent in Öskjuhlíð isn’t a desirable situation for anyone—if “living” we can call it.”

Frú Ragnheiður is therefore calling on local authorities to put more effort into addressing the situation and providing safe housing for people with addictions. This group has gotten larger in recent years.

“There’s not enough housing,” says Kristín. “An emergency shelter should always be a last resort…But this goes to show that there is a large number of people who don’t have housing and need a place to live. And this is something that’s badly needed. Not just in Reykjavík, but all the surrounding municipalities as well.”

Municipalities Struggle to Provide Housing, Employment for Refugees

Three municipalities are struggling to provide adequate services, housing, and job opportunities to recently arrived refugees as the number of individuals far exceeds initial agreements. RÚV reports that only three municipalities—Reykjavík, Hafnarfjörður, and Reykjanesbær—currently have arrangements with the government to receive and provide for refugees, although it’s hoped that more municipalities will soon participate in resettling schemes.

Reykjanesbær and Hafnarfjörður are particularly struggling to provide for the number of refugees now living in their municipalities. There are currently 243 refugees living in Reykjanesbær, where the original agreement was for 70. Meanwhile, 270 refugees currently live in in Hafnarfjörður, which only expected to receive 100. Reykjavík agreed to receive and provide for 220 refugees but is currently home to 356.

The Directorate of Labour took over service provisions for refugees on July 1. It now provides housing, a weekly allowance, necessary healthcare, and transportation for recently arrived refugees. Gísli Davíð Karlsson, the Directorate’s Manager of the Department of General Services, says the transfer of refugee services went off without any major problems. But even so, once these individuals have had their applications for asylum approved, they may face waits of up to eight weeks to complete the resettlement process with the Directorate of Labour. And Gísli Davíð says the general lack of housing is causing considerable delays and problems.

“The housing situation is difficult, and we’ve really felt it,” said Gísli Davíð. “Yes, we managed to sort out housing this spring when there was an increase, but the housing market has become a lot more difficult in terms of possible housing for these groups of people because not all accommodations are suitable. Now the challenge—for local municipalities, too—is what housing is available? Where can we accommodate people through the winter? I wouldn’t say we’re bursting at the seams yet, but there’s a decent strain on the system.”

The Directorate of Labour has a ‘Support for Refugees’ page on its website (in English), where it provides information both for refugees themselves regarding recruitment grants, job counselling, and education, as well as for local employers who are looking to hire refugees. Those with available work opportunities are encouraged to email the Directorate at flottamenn[at]vmst.is.

Mortgage Payments to Continue Rising in Iceland

Garðabær construction housing architecture

Steep interest rate hikes from Iceland’s Central Bank mean that many Icelandic families face much higher mortgage payments than they did one year ago. Doctor of Economics Ólafur Margeirsson, however, does not recommend those with non-indexed loans to refinance to indexed loans. Ólafur says ensuring more housing supply will be key in regulating the housing market.

The debt load of non-indexed loans in Iceland has risen by over ISK 100,000 [$709; €708] per month, in the case of an ISK 50 million loan with a variable interest rate of 3.4% taken in early 2021. “There are quite a few families who can’t afford an additional ISK 100,000 a month,” Ólafur told RÚV, saying there were two ways out of the housing market’s difficulties. “Firstly, we must encourage more supply of that which is lacking. And there is a lack of real estate in Iceland. There is a housing shortage so we must build more and continue building more. The other thing is limiting access to indexed loans in order for interest rate hikes to work.”

Central Bank will continue to raise rates to tackle inflation

Inflation has risen to 9.9% in Iceland, and the Central Bank Governor has stated that the bank will continue raising interest rates as much as necessary to tackle inflation. Ólafur did not recommend borrowers with non-indexed loans refinance over to indexed loans. “Remember that the principal on indexed loans increases. Try to pay off debts as quickly as you can, because then the impact will be less when the interest rate changes in the future.”

Ólafur added that housing would be a big issue in the coming wage negotiations this fall, suggesting that one solution is for “Icelandic pension funds, like pension funds in Europe, to invest in building new apartments in order to rent them out. With that, we are systematically increasing the supply of real estate, we are reducing pressure on rental prices, reducing the pressure on real estate prices, and with that, we are reducing inflationary pressure and interest rate pressure as well. This is a key point that must be discussed in wage negotiations.”

At Least 35,000 New Apartments Needed in the Next Ten Years

Iceland needs to build 3,500 to 4,000 apartments a year in order to stabilize the housing market, RÚV reports. The last few years have seen a boom in housing construction, but this has recently slowed, possibly due to pandemic-related factors. Even if construction picks up again, however, market observers believe more aggressive action is needed to stabilize the market in the short-term.

See Also: Iceland’s Real Estate Prices See Highest Increase in Nordic Region

The local housing market gradually recovered after the 2008 financial crash, and the last three years in particular have seen considerable development. In 2021, a record 3,800 apartments were built. Even so, housing prices in Iceland have risen faster than anywhere else in Europe, driven up by the dwindling supply, as well as increased purchasing power and low interest rates.

New population projections from Statistics Iceland have thrown the housing shortage into stark relief; the country is growing at a faster rate than previously projected, which means that it’s imperative that Iceland have more housing as soon as soon as possible. “In our opinion, and the opinion of local municipalities, roughly 35,000 apartments will be needed in the next ten years,” said deputy director of Iceland’s Housing and Construction Authority (HCA) Anna Guðmunda Ingvarsdóttir. But instead of construction picking up to meet this demand, it’s actually slowed.

“Instead of around 3,000 apartments being built this year and next,” explains Anna Guðmunda, “we’ll have around 2,800-3,000. When what we really need is to be building 3,500 apartments—or better yet, 4,000.”

Reason for stall is uncertain, but could be pandemic-related

The exact reason for the housing construction slow-down at a time when demand and prices are at their highest is a bit of a mystery. Many have suggested that there are simply not enough plots available for new builds, but according to the HCA’s data, this doesn’t seem to be the reality.

“The land issue […] is not as big a problem as has been suggested,” said Anna Guðmunda. “As an example, [the HCA] compared capital-area municipal associations’ development plans. We found that it would actually be possible to build 14,001 apartments now, provided that the plots are actually fit for construction and that those who own the plots are ready to get started. So what’s really holding things up—that’s something we need to take a closer look at.”

This analysis is in line with editor and Kjarninn journalist Jónas Atli Gunnarsson’s findings. “If you look at the statistics, there’s not really a shortage of plots,” he explained. “A lot of construction permits have been issued over the last three years, but hundreds of them are still unused. If that was the real estate market’s main bottleneck, all these permits would be new.”

“It could be the pandemic,” he continued. “We’ve had various economic downturns over the last two years and uncertainty about the economy reduces investors’ willingness to put money into developing residential properties. Then there is the supply chain breakdown, which reduces the number of construction supplies we get, and then lockdown protocols have reduced construction activity because people haven’t been able to come to work. So there are a lot of reasons why people aren’t building.”

No quick fixes

Even if there is a boom in construction, it will still take years for the market to fully recover, Jónas Atli continues.

“We’ve had this hiccup in the construction market—it takes so long to build apartments. So even though construction is booming now, it will take two years for new builds to go on the market. If demand remains this high in the meantime, we’ll continue to have this tension.”

Jónas Atli believes that in order to stabilize the market, municipalities should focus their attentions on construction, while the government and the Central Bank should work on slowing demand.

“This is done by lowering the maximum loan-to-value ratio, it’s also done by raising interest and maybe by setting limits where people can only buy maybe two or three apartments as investments. But these aren’t popular measures.”

And no matter what, there are no quick fixes to this situation, Jónas Atli continues.

“Unfortunately, any quick fixes wouldn’t work in the long-term. There is only one good solution, and that’s the long-term solution: building more.”

In Focus: Iceland’s Housing Market

For many years, Iceland’s housing market has been characterised by sharply rising prices. Many may have expected the COVID-19 pandemic and associated recession to change that trend, but throughout 2020, real estate prices continued to rise. Perhaps even more unexpected, considering those rising prices and a worse economic outlook, a record number of sales took […]

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