Ragnar calls central bank governor’s rent-cap remarks irresponsible

Social and Housing Affairs Minister Ragnar Þór Ingólfsson has called Central Bank Governor Ásgeir Jónsson’s criticism of a proposed rent cap “completely irresponsible”. In comments to mbl.is, Ragnar said the remarks, made at a presentation on Wednesday morning, did not surprise him, though he found the wording strong.

Ásgeir said that economics courses teach that setting a ceiling on rents is not a solution. Ragnar argued that this amounted to criticism of many European countries with some form of regulated rental market.

He also said the comments could be directed at Scandinavian governments, where comparable rules have been in place for decades, often with stricter conditions and greater protections for tenants. Ragnar said those rules had not had a significant effect on rental supply.

Ragnar said the greatest harm to tenants came from the status quo and regulations that did not ensure a basic level of predictability in rents. He described the proposed measure as part of the government’s efforts to reduce the role of inflation indexation, which affects rents, loans and other costs.

Monthly index-linked rent adjustments were not common in the countries Iceland compares itself with, he said. The government wanted the rent cap to curb increases of tens of percentage points above inflation, including increases within a 12-month period.