Government package includes up to ISK 3bn in one-off interest benefits

The government will pay one-off interest benefits of up to ISK 3 billion to indebted households in 2028, as part of a package agreed with VR, LÍV and the Professional Associations, mbl.is reports. The measures were announced by Prime Minister Kristrún Frostadóttir.

The payments will depend on inflation at the end of October 2027. If annual inflation is above 3.8%, the benefits will total ISK 1.3 billion. They will rise to ISK 2 billion if inflation exceeds 4%, and ISK 3 billion if it is above 5%.

The government also plans to introduce a bill during the autumn session allowing the state to temporarily fund municipalities’ initial contributions for the construction of public housing. The measure is intended to take effect immediately and remain in place until the end of 2027, with the aim of increasing the supply of affordable homes and supporting continued construction.

Other planned housing measures include stabilising the development of child benefits, setting clearer rules for rental agreements, changing how rental security deposits work, and reviewing housing support for homeowners.

The government will also launch an effort to simplify regulations for businesses and reduce cost pressures. A bill setting penalties for violations of workers’ minimum terms under collective agreements is planned for the 2027 spring session.

The package includes further work on a proposed labour-market disability benefits fund, plans to draft a bill introducing chain liability for larger construction projects, and work on a response plan for rising unemployment. The latter two measures are to be pursued this year.

The government also plans to review the Wage Guarantee Fund Act. A bill is due no later than the 2027 spring session to ensure that workers’ minimum terms in Iceland’s labour market are not lost because a claim was not pursued in time.