Published August 25, 2017
101 Reykjavík has always been the beating cultural heart of Iceland; it is where Björk became a star, where Iceland Airwaves is held and where you go for a Bæjarins Beztu hot dog. But in recent years it has undergone dramatic changes, with skyrocketing real estate prices, private rental companies and a booming tourism industry turning it into a different beast entirely, and many of its residents are not happy.
“I moved away from downtown because I’d started feeling like I was living in a theme park, or a zoo,” says Grímur Jón Sigurðsson. In 2012, he bought an apartment on Laugavegur in the heart of Reykjavík. That year 673,000 tourists visited the country, while last year they numbered 1,767,726. “As an Icelander I feel like people are paying to see me in my natural habitat, but there is nothing natural about it. 101 Reykjavík has become a society that is supposed to represent Iceland and us, but it isn’t real,” he states.
Downtown—the infamous 101 post code—has in a way always been a sort of escape from Reykjavík. The city has mainly been built for cars, with large single-family homes and the endless suburban sprawl that reaches far into the lava fields surrounding the area; but the old centre has always been different. It has the highest population density of any area in the country and with services, restaurants, bars and museums within walking distance, it has been the only taste of big city European life in Iceland. But in recent years, it has been changing quite drastically at a brisk pace. The great influx of tourists has changed everything, from the number of people walking outside, to the availability of restaurants and housing prices.
Fleeing the nightmare
“I see the future downtown as nothing but lost and confused tourists looking at each other, with nothing organic left. A single use Benidorm place. The only thing that keeps downtown alive is that Icelanders can’t go anywhere else to have fun. If the entertainment finds another home, then the area is completely dead,” says Grímur. “But this is not the tourist’s fault. He just goes online to find a place to stay in Reykjavík; he has nothing to do with urban planning—that is all on the municipal government. It hasn’t stopped anything and has allowed all the greediest people in the country to place an insane number of tourist traps on these couple of square kilometres, and now I live in the middle of that trap. A tourist nightmare.”
Grímur has finally given up and has decided to move away from the downtown area. Five years ago, he moved to a place where he knew people, but in the span of just a couple of years, everything that attracted him to the area has changed. Now the booming rent prices have driven most of his friends out of the neighbourhood and forced the much loved Tíu Dropar Café in his basement to close. Outside his window there is endless construction noise and instead of neighbours, he has hotel guests living next door.
“There might be a lot of new restaurants and bars opening up, but most of those sell things at tourist prices and are, therefore, out of the price range for locals,” says Grímur.
What if there was eruption?
Real estate prices have rocketed in recent years. Landsbankinn estimated that prices will increase 20% between 2016 to 2017, with the downtown region seeing by far the biggest increase. In fact, the British consultant firm Knight Frank claims that nowhere in the world saw prices increase more during the first three months of 2017 than in Iceland. According to a report by Íslandsbanki released earlier in the year, in 2016 there was an increase of 116% in the number of accommodations listed on Airbnb in Reykjavík, with on average 809 apartments rented out at any given moment, compared to 300 in 2015. The money involved is astronomical, with the bank estimating Airbnb profits at 6.76 billion ISK in 2016—a third of the profits made by the entire hotel sector. These sums of money have not gone unnoticed by investors and while the number of apartments listed on Airbnb rose by 509 in one year, only 399 new apartments were built in the city.
Ari Skúlason, an economist with the Economics Department at Landsbankinn says that the tourism industry has had a measurable effect on real estate prices in Reykjavík and that this brings with it real risks.
“Tourism definitely has had an impact on prices, just by the very principle that if an apartment is taken out of the general market and used for renting short term for tourists, that pushes up demand,” says Ari. The recent boom has entangled the tourism industry with the housing market in a way that has created a codependent predicament.
“As it stands, we are not worried about the housing marked bursting, but the risk factors lie with the tourism industry,” says Ari. “If we start experiencing not just slower growth, but an actual decrease in the number of tourists, then many who are renting to tourists might be forced to sell, which would lead to a drop in prices. A lot of the new hotels are also built in such a way that turning them into apartments would be very difficult, should the need arise. It is a remote possibility, but, if say, a natural disaster, like an eruption in Katla, were to break out and stop the influx of tourists, then that could have serious consequences.”
The drastic increase in prices and the decrease in availability has also meant that living centrally has become impossible for many young and lower wage people. Figures from Statistics Iceland show that the price for a rental apartment has increased by 60% in just the last six years, with much of that increase being driven by the downtown market. Younger generations especially put great value on living close to culture and city life and, therefore, gravitate towards 101. One of the people who has felt the pain of booming prices is musician Kristín Björk Kristjánsdóttir, better known by her artist name, Kira Kira.
“It was never cheap living downtown, but you always managed,” says Kristín. “But now, real estate companies and wealthy individuals have started misusing the Airbnb format by buying entire apartment complexes, and small apartments that once were perfect for people with typically low wage professions, like artists, are now rented out to tourists year round.”
Kristín has been homeless since January and is very critical of the way City Hall has handled the rapid changes to tenants’ lot. She asks, “what have authorities done to help people who can’t pay 250,000 ISK a month in rent?”
Dagur B. Eggertsson, from Samfylkingin and the mayor of Reykjavík, claims, however, that creating affordable housing for people like Kristín is a central priority for the municipal government.
“Constructing apartments for low income and young people centrally is a downright priority in our housing policy and to achieve that we have started cooperating with non-profit rental organisations,” says Dagur. “We want to greatly increase the number of affordable apartments, social housing, student apartments and rental apartments in general to reach market equilibrium.”
Out with the young and in with the greed
While an increasing number of immigrants and sustainable birthrates keep pushing the population of Iceland up, the number of inhabitants in 101 has actually decreased by 10%. Benóný Ægisson, head of Íbúasamtök Miðborgar Reykjavíkur, the residents’ organisation of downtown, says that the decrease in the number of children in the area has caused a drop in students in the only elementary school in the neighbourhood, and explains that some kindergartens have had to shut down whole departments.
“Young people can’t compete with the prices that the lodging industry can pay, so there is no renewal happening,” says Benóný. Since 1989 he has lived in his apartment on Skólavörðustígur. Back then, he had neighbours in the eight apartments surrounding his; now he has none.
“You used to walk around greeting dozens of people, but now you barely look at people’s faces, as you probably don’t know anyone anyway,” says Benóný. “It’s a lot of fun seeing life and people on the streets, but the service for those of us who live here is getting worse and worse. There is no point in opening up a store selling paint because it doesn’t cater to tourists. Inevitably you get a more monotonous retail environment.”
But Benóný doesn’t see the tourists as the problem—for him, it’s the Icelanders.
“I don’t see tourists as the enemy, they are just travelling like we do. Those who are ruining things are those who, with horrible greed, raise prices and profit off of locals and visitors alike. We can hardly afford to go out to eat anymore and that is due to my wolfish countrymen.”
He says that municipal authorities, as well as the national ones, have not done their job in regards to the citizens and that they weren’t ready for the massive increase in the number of foreign sightseers. He feels that the infrastructure needed to receive the large number of people visiting Iceland has not been in place, and that there has been a lack of a longterm plan.
“People are very giddy over the prospect of there being 3 million tourists in Iceland, but what is the point if we can’t even receive 1 million?” he says. “I want to believe that the municipal authorities can see that this can’t go on anymore. If downtown is to maintain any character, then we need to stop the hotel development and find other places where tourists can sleep.”
The flight of creativity
Another significant impact of the changes 101 has been undergoing is the effect on art and culture. Kristín claims that price increases downtown are even forcing some creative people to leave the country for cities where affordable housing and workspaces are available.
“I know a lot of artists and musicians who have either left the country or moved out of downtown due to a lack of affordable apartments and studio spaces. We used to have this beautiful village feel, which has changed drastically and now instead you have almost a ghost town feel. In order for creativity to thrive it needs to exist in a community and through a dialogue with other artists, which is what existed in 101.”
She points out that in recent years several prominent studios for musicians have been torn down to make ways for hotels, including Kolgeitin in Grandi and the old Kling og Bang on Hverfisgata. She feels that if authorities want to help, they could ensure that affordable studio spaces be available.
“Old Reykjavík is ruined and the new Reykjavík hasn’t risen yet. These are really weird times. I think a lot about how the city is and I don’t find it an easy place to be these days and I’ve decided to go to LA.”
Despite Kristín’s criticism, Hjálmar Sveinsson from Samfylkingin, who heads the city’s planning committee claims that the city does a lot to help the creative industries thrive.
“I don’t want to sound too boorish, but I think a lot has been done in that regard. For instance when the private market gave up on building Harpa, then Reykjavík and the state took over and finished the project. This is now an important venue for concerts and performances, such as Iceland Airwaves. The Marshall House also offers amazing opportunities for creativity and we want to make sure that artists have access to studios and studio apartments and we especially look to Grandi as a spot for those.”
The mess we’re in
What has also happened in recent years is an increase in the power of privately owned real estate companies and rental firms that buy up properties and then rent them out to individuals. Jón Trausti Reynisson is the Editor in Chief of the newspaper Stundin, which has written extensively about the development.
“The Airbnb development is natural and it can help people pay for expensive apartments, but it seems that the sharing economy is a temporary phase, which leads to increased prices and to companies taking control of the market,” says Jón. “Today, if you own property downtown or in the Vesturbærinn neighbourhood, you can make more money renting it out than by going to work, while at the same time it is getting increasingly difficult for young people to enter the market.”
The investment firm GAMMA and the rental company Heimavellir are the biggest actors in the market and together they own upwards of 3,000 apartments in Iceland—most of which are in the capital area. (GAMMA could not be reached for comments).
“Young people benefit from living downtown and being able to live a car free and sustainable lifestyle,” says Jón. “These companies present themselves as a solution to the problem, saying that they are fixing the rental market, but in reality the purpose is to make money and I don’t think they help the issue. The concentration of property ownership is something we need to beware of, because when we need to pay more and more to others for housing, inequality increases,” says Jón. “When young people pay companies like GAMMA rent, they are paying their shareholder’s dividends. Young people need to be able to rent and authorities in Reykjavík should have reacted to the situation sooner.“
Benóný has witnessed this development taking place in 101 firsthand, claiming that “there are men in suits walking around offering people deals they can’t refuse.”
Fixing the city
It is apparent that the people Grapevine spoke with feel that much of the blame for the current situation can be laid on the shoulders of the Reykjavík municipal government. Dagur claims that concerns expressed in this article are issues the municipality takes seriously.
“It is a worry that the population of downtown is decreasing,” he says. “We need to make sure that the city centre remains a flourishing residential area, even though there is an uptick in tourists. A part of that is our plan for building more apartments in the area.”
Dagur claims that when it comes to renting out to tourists there needs to be made a clear distinction between people who temporarily rent out apartments they live in (which you are allowed to do for 90 days per year), and those who move apartments out of the rental market and turn them into short term accommodations for tourists. “I think we need to make a clear distinction between the two as the latter is bad for the city,” he says.
Higher powers at play
Gísli Marteinn Baldursson is a former Reykjavík municipal politician, who currently works for national broadcaster RÚV. He has for years been one of the loudest commentators on urban planning in Reykjavík and has fought for better public transportation and a higher density city. He feels that too often the wishes of the residents of downtown have been ignored:
“I think the wishes of residents who live centrally have been ignored too often. Especially when you consider they want what almost everybody wants, including the tourists—nobody wants big tourist busses downtown and nobody wants a city centre filled with hotels.”
But despite being critical of the municipal government, when it comes to listening to the people of downtown and urban planning, Gísli doesn’t want to place the blame for the problems that have arisen with tourism at its feet, and claims that the blame lies with a higher authority.
“The increase in tourism was a surprise to all of us and I don’t think any authority has done better than the Reykjavík municipal government. The most popular tourist destination is Laugavegur; Harpan is the most photographed spot in the country according to Flickr; yet the national government keeps pumping money into the countryside and has no interest in Reykjavík as a tourist destination,” says Gísli. “But the city doesn’t complain, and even though it receives no direct income from tourism, it is flourishing. People often forget that just a decade ago, city council fought fiercely over who was to blame for Laugavegur being terrible, why there was all this empty retail space, etc. Now the street life there is great with shops of all shapes and sizes—even though some of them sell puffins …”
Fuck your puffin
Geoffrey Þór Karl Huntington Williams is a prominent figure in the 101 culture scene. He runs three of Reykjavík’s most popular bars, along with the Punk Museum and the old school arcade Freddi. He has witnessed up close the rapid changes the city has undergone.
“There are a lot more people downtown than there used to be and I think a lot of the people who were most against increased tourism a couple of years ago are now getting worried about number dropping,” says Geoffrey. “As a bar manager I don’t want to lose the tourists, but we must also 100% keep up the local scene.”
He believes that Reykjavík is in the middle of a difficult transition period; he agrees with Kristin that the old city no longer exists, but the new one has yet to arrive. What this new Reykjavík will be, he says, is up to us. And we all need to ask ourselves, what do we want? He doesn’t believe that tourists are interested in tacky souvenirs and puffin dolls, and that when you travel you want to experience real, local culture.
“A ton of puffin shops just means a ton of stupid, unimaginative people. What are we gonna do? Sell puffin asses to make money?” Geoffrey demands. “If we keep doing that then we are 100% killing the area. What is important for us is to think about the development and find a way for us all to benefit. I think there are plenty of opportunities to do better and we can do it together. Let’s not get lost in the negativity. Let’s be fresh, positive, live well, full on, and fuck your puffin!”