The impact of short-term rental on residential property in the capital area creates many and serious problems in the housing market. At the same time that this activity reduces the supply in the general rental market it also inevitably leads to rising rental prices with increased scarcity of available apartments. In addition, the high income potential on the short-term rental market, like on AirBnB, furthermore affects how pricing is done in general on rental market. For quite a few years, Icelandic hosts on AirBnB have been the highest long-term earners in Europe. It entices many apartment owners to transfer apartments to the short-term rental market or to adjust the pricing of regular rental apartments in line with the income potential in the short-term rental market. A severe negative effect.

Income opportunities in the short-term rental market increase housing prices and rents
These income opportunities in the short-term rental market have also caused a race for investors who are sweeping up all available apartments on a large scale. This is evident by the Real Estate Register’s figures on the development of housing ownership over the past decade. The Central Bank’s investigation into the effects of such developments revealed that a large part of the increase in real estate prices is due to the desire of investors in residential real estate for the short-term rental market. Investors who buy housing as an investment care much less about the purchase price when the intention is to let others pay, and therefore there is a continuation of rising prices. This rush by investors into residential real estate significantly reduces the supply of housing for the public, which pushes up house prices even more, as more and more families fight over fewer and fewer properties that remains in their price range.

The effects of an large scale short-term rental market are therefore broad and serious. However, such a problem is not limited to Iceland because it is well known in popular tourist destinations. However, the problem is that it is hard to find a country where the problem has been wider and worse than in Iceland.

Iceland has one of the highest rates of AirBnB apartments in the world
At the moment, you can book accommodation in two thousand four hundred apartments in Reykjavík alone. Of these, there are more than nine hundred that can be booked for longer than 90 days, which is the legal maximum according to regulations on homestays. In total, there are three thousand eight hundred apartments in Reykjavík with active registration on AirBnB, which is almost 7% of all residential properties in the city. In other major tourist cities in Europe, the percentage is on average just over 2%. In addition, the number of apartments percapita is much lower in Reykjavík than in the comparison cities. Iceland has the third smallest housing stock per capita in all of Europe, only exceeded by Greece and Slovakia.

It is therefore clear that effect of short-term rentals on general housing availability is greater here than elsewhere due to the high percentage and the small housing stock. It is serious when percentage of apartments on the short-term rental market are more than three times higher in Reykjavík than in other major tourist destinations on the continent.

The current arrangement goes against the goals of the law on homestay
The Act on homestays, also known as the “Act on the letting of residential premises on the short-term rental market”, is very clear. According to them, you are allowed to rent out your home and one additional apartment for up to 90 days a year. It is clear that those laws are not being followed based on the scope of the corporate scale activities. The short-term rental market has become a playground for speculators, many of whom own dozens of apartments in urban areas that are rented out exclusively to tourists through booking sites like AirBnB.

In the same way, some local authorities have gone above and beyond in granting permission to investors to run guest houses in housing that was built and intended for general residence. For example, housing in many parts of the city center of Reykjavík, which used to be home to four to ten families, has been converted into guest houses for tourists in the middle of residential areas and streets. It is obvious that lawlessness has surrounded this issue for a while, both regarding the short-term rental of individual apartments and this part of the inn sector.

The lawlessness of the short-term rental market must be stopped
Due to the high density in Icelandic homes the impact of short-term rentals and apartments-to-geusthouse conversion  in residential buildings is much greater here than elsewhere. It is therefore very harmful for the Icelandic housing market that the percentage and number of apartments taken over for such activities should be many times higher than in the neighboring countries.

The government must stop this lawlessness in the short-term rental market immediately and at the same time impose restrictions on the local authorities when it comes to allowing residential buildings to be converted into guesthouses. The requirement must be made that the apartments that really do not belong in the short-term rental market or as a part of gusethouses  to be rented out on the public rental market, or, depending on the circumstances, on being sold. The impact this has had so far is dire for tenants on the private market and not least for those who are trying to settle into their own home.

A thousand apartments, now
At the moment, there are just under one thousand apartments for rent on AirBnB in Reykjavík alone, apartments that are fully rented for longer than the statutory 90 day maximum. These are figures obtained from airdna.com, which maintains statistics on the short-term rental market. In the vast majority of cases, these are apartments that really shouldn’t be rented out short-term. Apart from that, there are dozens if not hundreds of apartments that have been converted into guest houses in recent years.

The lack of housing for the public in Iceland has been prevalent for a decade and a half. That situation has created a playground for brats and speculators who find many ways to profit from the basic need of people to have a place, home and shelter. Society is regularly hit by shocks that increase the need for housing quickly and greatly, such as the increased arrival of foreign foreign workers, refugees and the accumulated need of young people to get their own housing without this being met with increased supply. An unprecedented need for housing has therefore developed and there is no prospect that the production of housing will meet it in the foreseeable future.

Let’s get these apartments
It is very urgent that the government takes responsibility for the state of disrepair in the housing market, not least because all previous initiatives in housing development have more or less failed. The least the government can do is to ensure that the housing that is produced for the general residence of families and individuals will indeed be used as such.

We therefore call on the government to introduce stricter rules for the letting of residential property in urban areas on the short-term rental market and the authorization of local authorities to allow residential property to be converted into accommodation. Words must be accompanied by frenzy, it is not possible to watch an overexcited rental market or a real estate market become a playground for speculators who use one of the most sacred things that a person has, which is the home. Nor can we invite our fellow travelers from Grindavík to set foot in such an over-excited market, which is surrounded by lawlessness and has shown that it uses every opportunity to increase rent.

We must stop this lawlessness and get these apartments and get them into the hands of those who need homes.