Iceland

In Iceland, home ownership remains high, with about 73–74% of the population owning their home, and an estimated 16–29% renting, with the higher figure reflecting undercounted groups such as immigrants. The median monthly rent in February 2025 was around 3,639 ISK per sqm nationwide (about 24.10 EUR/sqm), and 3,937 ISK per sqm (26.10 EUR/sqm) in the Capital Region. The median price to buy an apartment is roughly 4,700 EUR per sqm nationwide, with substantial variation by location.

Publicly owned housing forms a small share of the market, comprising around 3.8–4% of the total housing stock. This sector is targeted: public housing is means-tested and reserved for low-income or otherwise disadvantaged residents. In Reykjavík, Félagsbústaðir, the main municipal non-profit provider, owns about 5% of the city’s apartments.

In Iceland, public housing and social housing are largely synonymous—they refer to means-tested, non-profit, municipally managed apartments for groups qualifying by need, often including the elderly, disabled, or low-income families. The sector is notably smaller than in other Nordic countries and exists primarily in urban centers.

While private landlords, including private rental companies and individuals, dominate the rental sector, municipalities and non-profits provide a vital but limited safety net for those unable to access the mainstream housing market.

All currency conversions are based on early 2025 rates (1 EUR ≈ 151 ISK).

Iceland is currently experiencing a severe housing crisis marked by rapidly rising home prices and rents, which have outpaced wage growth more than in any other European country in the past decade. This has intensified the cost burden on both renters and buyers, particularly in urban areas and Reykjavik. While overall home ownership in Iceland remains high, access to adequate and affordable housing is increasingly strained.

The crisis is driven by a marked imbalance between supply and demand. Although the number of new dwellings increased in 2024, future construction is projected to slow down, risking further shortages. At the same time, a significant proportion of apartments—approximately 20% in central Reykjavik and 9,000 nationally—are used as short-term rentals for tourists, further reducing available housing for residents.

Groups most affected include low-income households, young people, immigrants, and marginalized populations such as unhoused individuals and those with addictions. Many workers, particularly foreign and temporary staff, live in unsafe, non-residential buildings or face homelessness if they lose their jobs. There has also been a sharp drop in homebuyers under 30, with young people increasingly unable to afford property due to high interest rates and reduced borrowing capacity.

The lack of affordable housing, limited publicly owned options, and weak tenant protections particularly disadvantage renters and vulnerable groups, leading to increased rates of homelessness and reliance on emergency shelters. The crisis is described as a serious threat to health and quality of life, especially for those excluded from the mainstream housing market.

The Icelandic government recognizes the acute shortage of affordable and sustainable housing and has recently upgraded its national response. In 2025, a special task force was established by the Minister for Social Affairs and Housing to develop both emergency and long-term solutions. Core priorities include boosting the supply of affordable dwellings, strengthening tenant security, and stabilizing the rental market.

Key new government actions are: amending regulations to restrict short-term tourist rentals that take homes off the housing market, simplifying and speeding up construction permits, and supporting investment in new residential areas through partnerships with municipalities and housing associations. National planning reforms aim to densify urban areas and expand buildable land. The government also plans to better target housing subsidies for vulnerable low-income groups and consider mechanisms for rent control.

Recent policy statements set the target to substantially increase affordable housing, but exact long-term numerical targets have not been publicly specified. Iceland’s Rental Market Roadmap calls for a realignment with Nordic and European standards, including stricter short-term rental regulation, potential rent controls, and increased public support for cost-burdened renters.

Overall, the approach combines immediate legislative and regulatory responses, direct public and non-profit investment, and reforms to land-use and building procedures to address price and supply pressures, with a strong focus on providing security for disadvantaged and lower-income residents.

Housing cooperatives have a minimal presence in Iceland’s housing landscape, especially when compared to other European countries. There are no significant national statistics publicly reporting the share of cooperative housing, but available evidence and policy documents indicate that this model represents only a very small fraction of the total housing stock—well below the share of public or social housing, which itself forms just 3.8–4% of all units. Cooperative models in housing have not historically played a notable or structured role, and the rental sector is still dominated by private landlords and municipally run, means-tested social housing with a limited focus on non-profit or co-operative alternatives.

However, the government is now recognizing the need to explore a wider range of solutions to Iceland’s acute affordability crisis. Although there are no established large-scale cooperative housing programs, recent national strategies for sustainable development and housing stability mention stronger partnerships with housing associations and non-profit entities as a policy priority, aiming to encourage innovation in affordable housing supply and community-led models. This direction is reflected in the government’s 2030 sustainability strategy and in planning reforms intended to boost collaboration between the state, municipalities, and civil society. In summary, while cooperative housing remains marginal, new policy frameworks could modestly expand the sector through pilot projects and institutional support, but concrete numbers and programs are not yet in place.