Faroese employment agency proposes building smaller apartments despite higher per-square-meter costs

The Faroese Employment Office (Vinnuhúsið) has recommended constructing smaller residential units to address housing shortages, even though smaller apartments currently cost more per square meter than larger ones, Kringvarp Føroya reports.

Under new municipal requirements, developers must allocate a portion of new projects to smaller housing units. Niels Winther, director of Vinnuhúsið, confirmed the proposal in a public statement outlining solutions to the housing crisis.

Despite the policy push, market data shows smaller apartments in Tórshavn now sell for the same total price as entire detached houses did recently. A 66-square-meter unit in the Fløtum district, initially listed for 3.595 million krona (approximately 64,393 krona per square meter), has received a bid of 4.24 million krona. By comparison, a 152-square-meter row house in the same area is priced at 5.895 million krona (38,782 krona per square meter).

Winther acknowledged the paradox: “A smaller apartment has a higher cost per square meter, but there is greater buyer demand for compact units, reducing financial risk for developers.”

Economist Hans Ellefsen cautioned that smaller units alone may not resolve systemic housing shortages. In a March 19 broadcast, he argued that broader structural reforms are needed alongside adjustments to unit sizes.

The proposal reflects growing pressure to expand housing accessibility as prices rise, with banks and Vinnuhúsið emphasizing smaller, more affordable units as a partial solution.