Economist warns rent controls could fuel a black market

Economist and University of Iceland lecturer Már Wolfgang Mixa says Iceland’s government should have taken more time to consult the public and experts on its planned rent controls. In an interview with Morgunblaðið, he warned that rules that place too much burden on landlords could reduce the supply of rental homes.

Mixa said he supports some limits on rent increases but believes they should be balanced. He would have preferred a system linking rent changes to housing prices rather than the consumer price index, so rents could rise or fall as property values change.

He pointed to Sweden, where he said strict rent limits had contributed to a shortage of rental housing and a black market. According to Mixa, some landlords had bypassed the rules or sold their properties, leaving many tenants struggling to find homes.

He also noted that lower demand for rental housing over time could create opportunities to build more rental homes, and said there were arguments both for and against such measures.

Mixa criticised the government for not allowing more time for consultation, saying the proposals could have been put to the public for feedback. He cited the years after the financial crash, when housing prices fell by 17 to 18 per cent in nominal terms, as an example of how rents might have fallen if they had been linked to property prices.