From Iceland — So What's This Overpriced Rental Market I Keep Hearing About?

So What’s This Overpriced Rental Market I Keep Hearing About?

Published September 16, 2013

So What’s This Overpriced Rental Market I Keep Hearing About?

As Jimmy McMillan, founder of New York’s The Rent Is Too Damn High Party, who released the album ‘The Rent Is Too Damn High (vol. 1),’ often points out: the rent is too damn high.
I Take It The Songs On The Album Are About High Rent
Yes, they include “When You Can’t Pay Your Rent,” “Rent Party Christmas,” “R.E.N.T.” and “Land Lord Listen Up.” Since January 2011, the average rental price has risen by 22.8% in Iceland. The area worst afflicted by high rental prices is the older part of Reykjavík, the area roughly within postcodes 101, 105 and 107. A number of factors make this part of town desirable enough to make people grudgingly willing to put up with the high rent.
The Answer Is Hipsters, Right? They Always Ruin Everything.
Part of the reason, yes, is that it is considered cool to live in that part of the city. But that is for the perfectly sensible reason that if you want to enjoy some of the nicer pleasantries of city life, cafés, bookstores, theatre, restaurants, bars, swimming pools and bakeries, all within easy walking distance, the older part of town is your best bet.
I’ve Seen All Of These Things Elsewhere In Reykjavík.
They are all over, but very spread out. Most of Reykjavík was built after cars became common property. So the city has low population density, which means that it is easy and convenient to get around by car, but everything is quite far apart. Conversely, if you are driving around the older parts of Reykjavík, you have to deal with a nightmarish web of one-way streets and parking metres.
And Then You Get Eaten By Giant Hipster Spiders?
No, but living in that part of the city without a car is rather easy. So what you lose in rent expenses you can make up by not having a car. Younger people tend not to have cars anyway, are more likely to care about living close to bars, and are more likely to rent rather than buy. But there is one other big factor that brings young people to that part of town: higher education. The University of Iceland, parts of the Icelandic Academy of the Arts, and Reykjavík University are all there.
Whoo! Dorm Parties Are The Best! Quick, Someone Hand Me A Beer Bong.
There are almost no dorms. Most student housing is in the form of small apartments for families or for a few occupants. Many students choose to live with family, but those who are unable to, or simply wish to leave home now that they are adults, have to rent.
So It’s Not Hipsters Who’re To Blame, But Students?
That is simply one factor. Financial and political institutions have made decisions in the past that now push prices up. There used to be an extensive system of social housing that was dismantled in 1998 by the Independence Party and Progressive Party government as part of long-standing government policy to encourage homeownership, rather than renting. Earlier this year, Gylfi Snæbjörnsson, the president of the Icelandic Federation of Labour, said there is a need for 25,000 apartments in social housing, but that only 4,000 exist, down from 11,000.
Politicians! I Knew It, It’s Always Them. Them Or Spiders.
Again, that is only one factor. Another aspect is that housing mortgages can mean up to 40-year loans. That means that if you earn enough to qualify for one, your monthly mortgage payment will be far lower than what you would pay in rent—often by 30–50% less. That results in people choosing to buy their own apartments fairly early in life, which removes apartments from the rental market.
Easy Loans, Now There Is Something I’m As Comfortable Blaming Things On
As Blaming Hipsters.

There is also the lack of accommodation for tourists. The rapid increase in tourism to Iceland has left the hospitality business lagging behind. This has meant that tourists often rent apartments while here. Since it is much more lucrative to rent to a large number of short-term occupants than one long-term, a lot of the rental places are turned into tourist accommodation.
So The Solution Is More Hotels?
No, because hotels get built in the same areas of the city where people are seeking to rent. This only pushes people out, which increases rent in the newer parts of Reykjavík. The only solution is to bomb the city to the ground and start again. If that is too radical a solution, then perhaps building more student accommodation and social housing will help. Though of course if tourism collapses, people can always live in the empty hotels.

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