Iceland’s housing support now favors renters over buyers, council says

More than half of Iceland’s public spending on housing support now goes to people who rent, even though only about 28% of the population lives in rented homes.

The Icelandic Business Council says housing assistance should not favor one tenure over the other. In a new review, it highlights the sharp rise in state and municipal support for renters over the past decade, alongside a proportional decline in support for buyers.

About 72% of Icelanders live in homes they own, while roughly 28% rent. Despite that gap, renters receive more than half of public housing-support spending.

Ragnar Sigurður Kristjánsson, an economist at the council, says the government’s policy of strengthening the rental market conflicts with the preferences of Icelanders, who are much more likely to want to buy a home. He also says support measures should be more clearly targeted at people who genuinely need assistance, since a very large share of renters currently receives some form of housing support.

“There is a certain distortion in placing so much emphasis on supporting rental housing instead of simply making housing support neutral as to whether an individual rents or buys,” Kristjánsson says.

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There is a certain distortion in placing so much emphasis on supporting rental housing instead of simply making housing support neutral as to whether an individual rents or buys.