Minister pledges housing reforms to tackle costs and inflation

Housing costs are the biggest economic issue facing Icelandic households, Social Affairs and Housing Minister Ragnar Þór Ingólfsson said in a speech to Althingi, the national parliament. The minister outlined planned reforms to housing, construction and lending, mbl.is reported.

Ingólfsson said the housing market had been in a poor state for too long and called for a shared plan to end a cycle in which the market was either frozen or overheating.

He said municipalities should not treat building land solely as a source of revenue or encourage land speculation. He also criticised situations in which municipalities could block growth elsewhere through veto powers over regional planning or growth limits, and in which entire neighbourhoods remained undeveloped for decades while banks or investors waited for the right price for the land.

The minister said it was unacceptable for the next generation to be shut out of the housing market and for a decade to pass between the initial planning of a project and the completion of an apartment for sale. The government, he said, would work to ensure a more stable supply of housing and building plots, with homes available for ordinary people to buy or rent.

Ingólfsson announced an updated building regulation for the next parliamentary session. It would be reduced from 18 chapters to eight, with an emphasis on efficiency, consumer protection and quality. The government would also propose amendments to planning legislation to shorten procedures and remove veto powers linked to growth limits.

He said agreements had already been reached on developing up to 1,400 plots, most of which had stood empty for a long time. The government had also begun changing the system of shared-equity loans, which had helped more first-time buyers than before.

The general housing system had been strengthened and initial contributions increased to support more non-profit rental apartments, he said. Planned amendments to rental legislation would ban monthly index-linking and change the rules on rental deposits. A new rent-to-own model was also being considered.

Finally, Ingólfsson said the government would reduce the role of price indexation in housing loans. He compared price-indexed loans to a straitjacket in Icelandic society and said a working group reviewing the housing loan system would report during the current parliamentary session. The first steps towards reducing indexation are planned for this autumn.