Iceland

Iceland's housing market is characterized by strong price growth, with house prices increasing by nearly 8% year-on-year as of early 2025. The median price to buy an apartment in the capital area is approximately 575,000 Euros. The rental sector is growing, but it faces challenges due to high demand and limited supply, exacerbated by the tourism industry's impact on short-term rentals. About 20% of apartments in downtown Reykjavík are used for short-term rentals, further straining the supply for long-term residents. Lower-income individuals and renters are disproportionately affected, as the cost of housing has outpaced wage growth over the past decade. Iceland has unusually weak protections against rising housing costs, with rent regulation being among the weakest in the OECD. This has led to unsustainable housing costs for many, eroding purchasing power and impacting lower-income households the most.

Iceland’s national government has recently intensified efforts to address affordable and sustainable housing due to a deepening housing crisis marked by escalating prices and a shortage of rental properties. In 2025, a government-appointed task force was established to propose emergency actions and long-term reforms, focusing on stabilizing the market and ensuring housing security and equality. The task force’s mandate includes increasing the supply of affordable homes, strengthening regulations on short-term rentals, and proposing structural changes to promote stability and access. Specific government programs and activities include: - Amending regulations on short-term rentals to increase the availability of long-term housing for residents. - Launching a nationwide initiative to expand new housing construction, with particular emphasis on affordable and sustainable units. - Providing financial support and incentives to municipalities, companies, and NGOs for building or purchasing affordable rental housing. - Supporting tenants through direct housing benefits and special municipal support for low-income or vulnerable groups. - Encouraging the development of green buildings and eco-friendly housing design as part of the country's sustainability goals. Recent targets communicated by the government include stabilizing prices, increasing the pace of housing completions, and aligning new public policy with broader environmental objectives such as carbon neutrality by 2040 and a 55% reduction in greenhouse gas emissions by 2030. Despite increased new construction in recent years, the government recognizes the need for ongoing intervention, particularly in regulating the rental market and boosting social housing supply.

Housing cooperatives in Iceland play a very marginal role in the national housing sector. Homeownership dominates, and cooperative housing has historically had little presence or influence compared to other European countries or the Nordic region. There are no recent official statistics indicating any significant share of cooperative housing among all housing units in Iceland; estimates from European housing reports consistently characterize the sector as negligible, without major nationwide initiatives or a sizeable stock. Recent dynamics show limited momentum: while some European countries have witnessed renewed interest in cooperative housing as part of wider affordable housing strategies, Iceland’s approach has remained focused on direct public and municipal social housing provision for vulnerable groups and on stimulating private market supply. Cooperatives have not developed into a notable alternative or supplement. Iceland's national policies and programs to promote affordable housing emphasize direct measures—such as tightening regulations on short-term rentals, supporting new construction, offering subsidies and housing benefits, and encouraging sustainable building—but do not feature specific strategies to expand or promote cooperative housing models. The government’s current priorities are stabilizing prices, increasing completions, and strengthening social housing through public or municipal channels, not the cooperative sector. There is no evidence of targeted government activity to develop housing cooperatives at scale or as a separate policy pillar.

The housing market in Iceland remains tight, with strong price growth—house prices increased by nearly 8% year-on-year as of early 2025. Home ownership remains high: about 74% of households own their homes, while between 16% and 29% of adults rent, with estimates varying due to data limitations. The rental sector is growing, and foreigners account for a notable share of renters. The median price to buy an apartment nationwide is around ISK 87 million in the capital area, which is approximately 575,000 Euros. The average price per square meter to buy in Reykjavík is about 7,500 Euros, while the national average is closer to 5,500 Euros. Median monthly rents vary, but typically range from 25 to 30 Euros per square meter in the capital. Publicly owned housing represents a small portion of the market. Just 3.8% of housing is classified as public or social rental housing, and this sector is strictly needs-tested—reserved for low-income or vulnerable groups. In Reykjavík, the municipal social housing company owns about 4.7% of all city apartments, aiming for 5%. Public housing and social housing are essentially synonymous in Iceland: both terms refer to needs-based, municipally operated homes for those unable to secure housing on the private market. Social and cooperative housing remains a marginal solution compared to other Nordic countries. All figures have been converted to Euros for clarity.