Kristrún says rental bill aims to make rents predictable

Icelandic Prime Minister Kristrún Frostadóttir says a bill introducing a so-called rent brake is primarily intended to make the rental market more predictable, mbl.is reported. She said the measure alone would not solve the market’s problems and that more housing must be supplied to curb rent increases.

Frostadóttir was responding to questions from Guðrún Hafsteinsdóttir, leader of the Independence Party, during an unscheduled question session in parliament. Hafsteinsdóttir asked how the proposed rules would prevent landlords from charging higher rents at the start of a tenancy or offering fewer apartments for rent.

Frostadóttir said the bill would not impose a rent cap. Its aim was to prevent rents from changing every month in response to inflation, while still allowing rents to be adjusted annually in line with inflation. “The idea behind this bill and its objective is first and foremost predictability,” she said.

The prime minister agreed that housing supply must be secured. She pointed to increased initial grants, the development of the public housing system and shared-equity loans. She also called for larger, professionally managed rental companies with a long-term outlook, and said Denmark offered examples of similar rules.

Hafsteinsdóttir argued that the impact on tenants should be assessed. Citing a Financial Times report on Spain’s housing problems, she said rent restrictions could protect people who already had rental contracts while making it harder for others to find housing. She said more homes, more land for development and fewer barriers to construction were needed to strengthen tenants’ position. She also referred to warnings from the central bank governor that price controls would not solve a housing shortage and could make matters worse. According to Hafsteinsdóttir, the Central Bank had not been asked to comment on the bill before it was introduced.

Hafsteinsdóttir interpreted the prime minister’s response as meaning tenants might have to pay higher rents in exchange for greater predictability. Frostadóttir rejected that interpretation, saying the bill was one part of broader efforts to improve the rental market. A stronger public housing system and social support measures could also help restrain rent increases, she said.

Hafsteinsdóttir also criticised the government for not publishing the bill on the public consultation portal. She said the explanation had been that consultation could prompt landlords to raise rents before the law took effect. The bill is already public, she noted, and is expected to take effect on 1 July next year, giving landlords nearly nine months to respond.