Foreign Tenants Pay More For Smaller Apartments

Foreign tenants pay 14 percent higher rent than local tenants, despite typically choosing smaller apartments, according to a new report by the Housing and Construction Authority (HMS).

A new report finds that foreign tenants tend to rent smaller apartments than locals, yet do not necessarily pay less. In many cases, they pay more. The report also highlights that lower-income groups are now less likely to own housing than before.

According to the findings, tenants in Iceland are generally in a worse position than homeowners, with housing conditions that are in many ways also poorer than those of tenants in other Nordic countries.

At the same time, government housing support for tenants in Iceland is broadly comparable to that in similar countries.

Jónas Atli Gunnarsson, chief economist at HMS, in an interview with RÚV, points to disparities in rent between Icelandic and foreign tenants as one notable issue highlighted by the data.

“We clearly see that foreign tenants choose smaller apartments than native tenants. But what is interesting is that the rent is not necessarily lower for foreign tenants despite renting smaller apartments. In many cases, it is even higher,” says Jónas.

According to data on active rental agreements in the HMS rental register, foreign tenants paid on average 14 percent higher rent than local tenants in January 2026, even though they rented smaller apartments on average. Jónas says the data also suggests that housing support varies depending on tenants’ nationality.

“There are many indications that housing support reaches foreign tenants to a lesser extent, meaning they pay higher prices for their rental housing and receive less public support,” he says. “Whether in the form of housing benefits or access to municipal or general rental housing, there is clearly a significant difference in tenants’ circumstances depending on nationality.”

According to Jónas, the report shows that lower-income groups are now less likely to own housing than before. This may reflect the expansion of the rental market in recent years, driven by population inflows. Interest rate increases over the past four years have also had an impact.

“We consider this somewhat concerning, especially given that most tenants do not want to be in the rental market. They want to own their homes and are renting out of necessity,” Jónas says.

The report also discusses the mandatory registration of rental agreements, which came into effect at the start of the year. The requirement applies to all landlords and is intended to strengthen the rental market framework and improve access to information.

Despite the introduction of the requirement, Jónas says registrations have not increased significantly. He adds that HMS hopes to gain a better overview of the rental market through the measure, and that penalties will be applied if landlords fail to comply.