The highest rent increase in five years

Skoðun Guðmundur Hrafn Arngrímsson 28. mar 2024

According to the newly published monthly report of the Agency for Housing and construction (HMS), the real increase in rent over the past twelve months has not been higher in five years, or since the spring of 2019. This is in line with the results of the rental market survey published last February, which clearly showed how the financial and social status of tenants has declined in the past year.

An uncontrolled increase in rent above the price levelinflation
From the beginning of 2011 until the end of 2019, inflation rose by thirty percent. At the same time, the official rent index rose by one hundred and five percent, or nearly four times as much. But between the years 2020 and 2022, the situation reversed slightly when the inflation rose more than rent, or twenty percent, while the rent index rose sixteen percent. The reason why rent rose less than the inflation from early 2020 until middle of 2022 was increase in supply of available apartments due to decline in short-term rental of apartments to tourists during the covid pandemic. But tenants still had to shoulder the unbearable burdens imposed on them by uncontrolled increases from the years before, despite this temporary reduction.

It was in the middle of 2022 when rent started to rise again above inflation, directly as a result of housing benefits being increased. It was therefore a very limited period when tenants livelihood was „improved“ as the current Minister of housing likes to claim when he is asked to describe the situation of the tenants. The turnaround was very swift because from July 2022 until the end of 2023, the rent index increased by fifteen percent, while inflation increased by ten percent, i.e. fifty percent more.

The year hell broke loose
Housing benefits were increased again in January 2023, and as a result, in the first six months, rent increased by over six percent, while inflation rose by little over four percent. From June to September of the same year, however, the increase according to the official rent index decreased slightly when the effect of increased housing benefits began to decrease. When the Minister of housing presented a bill to amend the Rent Act in September last year wich did not include any protections for tenants but only approval of the merciless extortion of tenants, as a result began the greatest increase trend ever observed in the rental market, which is still ongoing.

However, it looked as if the labor movement would demand restrictions being placed on the rental market as a part of their overall criteria, a demand that has been a part of their rhetoric in the past decade. The tenant union collaborated closely with labor leadership and were confident that the demand was a vital criteria and a part of the collective bargaining in the labor market but sadly was eventually dismissed by all parties. Tenants have not only experienced enormous insecurity, displacement and extortion in the rental market over a long period, but have also been met with reprehensible indifference from the government. Despite the escalating distress and the growing force of the tenant’s struggle, the government still managed to form some a kind of consensus accross stakeholders to maintain the situation.

Anticipated further speed in rent increase
All economic indicators indicate that rents will continue to rise and that the increases will be greater than ever before. The rent is rising so fast at the moment that only in the few weeks that the broad coalition of Peoples Alliance was withe national mediator, the rent in the capital area increased more than the amounts of annual wgae increase plus increase in housing benefits, which at the same time have not yet been implemented. The real value of housing benefits have been declining since they were put in place in 2017 and are still doing so.

Stakeholders in the housing market say there is no indication that the rental market is slowing down. Workers who live as tenants therefore can not expect better times in the coming future. Unfortunately the current Minister of housing’s main reaction and strategy is that tenants should have some form of predictability towards the mercyless situation they are stuck in, but there with no mediating actions planned.

Samstöðin er umræðu- og fréttavettvangur sem studdur er af almenningi í gegnum Alþýðufélagið. Ef þér líkar efni Samstöðvarinnar getur þú eflt hana með því að gerast einskonar áskrifandi sem félagi í Alþýðufélaginu.

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