Reykjavik infrastructure charge adds 15 million krónur per apartment

The infrastructure charge for a 100-square-metre apartment is 15 million Icelandic krónur, according to Reykjavik city council member Ari Edwald, in an article published by mbl.is. He says land costs, infrastructure fees, financing and requirements for rental housing can total 40.5 million krónur per apartment before construction, about 40% of an estimated sale price of one million krónur per square metre.

For a 60-square-metre apartment, the same costs would exceed 24 million krónur, Edwald says. He also argues that the land’s price can double between purchase and delivery of the keys, a period he puts at four to five years. Requirements governing the use of ground floors also add to costs, according to the article.

Edwald says the infrastructure charge is 150,000 krónur per square metre, based on recent prices in the capital region. He describes that figure as conservative compared with the Vesturbugt development. In a deal involving 177 apartments there, Reykjavik paid nearly 3.2 billion krónur in land-related charges, or almost 18 million per apartment.

The deal also included requirements for Félagsbústaðir to buy 14 apartments for 585,000 krónur per square metre and for the Student Housing Foundation to buy 50 for 750,000 krónur per square metre. Edwald says the market price is about one million krónur per square metre.

He calculates that the difference between those prices amounts to 520 million krónur, or 5.2 million per apartment when spread across all 100 apartments. He says that cost is then added to the 80 apartments sold without those requirements, increasing their price by 6.5 million krónur each. He describes the affected apartments as 36% of the total and says they are sold below market value at the expense of other buyers in the building.

Edwald says that when the city owns land, it captures the increase in value by selling building rights; when someone else owns it, the city collects an infrastructure charge through its planning powers. He argues that both costs are ultimately reflected in apartment prices. He says the charge has been upheld by courts, so the debate is about its scale and effect on housing prices, not its legality.