The High Cost Of Living: Renting And Being Foreign In Reykjavik

Upon first moving to Iceland, the primary factor that must be arranged is a place to live; if one is from outside the European Economic Area, in most cases this has to be established before even setting foot in the country. For immigrants who are moving to Iceland on their own or with their family, this will invariably mean renting a place to live.

Reykjavík’s rental market is daunting at best. Demand for affordable housing has increased while the supply has not. As a result, the cost of renting has been climbing steadily. But cost and availability are not the only challenges that immigrants hoping to rent in Iceland must face. A lack of knowledge about housing rights, a financial catch-22 created by the banks that locks the working poor (who are more often than not immigrants) and single parents out of housing loans and a reluctance by national and municipal actors to take a more active role in creating more affordable housing can keep many trapped in what is effectively a permanent underclass with potentially deadly consequences.

It does not have to be this way and authorities can take material steps to alleviating the situation—but they are not. In this article, we examine exactly what challenges await new arrivals to Reykjavík seeking an affordable place to live.

Who is the market?

One of the most expedient ways to search for a place to rent in Reykjavík is in any one of the Facebook groups dedicated to advertising rooms and apartments for rent. These groups, however, by and large favour property owners over tenants through an administrative double standard.

First off, many of the spaces for rent being advertised do not openly disclose what the actual rent and insurance deposit amounts are. Even when they are, feedback from prospective tenants is often shut down with the admonishment from group admins that if someone has objections with the listing, they can simply keep scrolling. At the same time, a common response to “the asking price is too high for this kind of property” is that the “market will decide” how much rent any given property can demand—raising questions about how what is considered fair rent can be determined without renter feedback.

“As usual, being poor is more expensive than having money. This is why the poor keep being poor. It’s the poverty trap.”

There is a fallacy hidden in this notion that renters on the open market decide how high the rents can go. Unlike a manufacturer of goods, a property owner is not mass producing apartments on an open market competing with other mass producers; most times they are offering a single space. The property owner, in a position where demand vastly exceeds supply, is also not trying to appeal to hundreds or thousands of customers to buy enough of their products to keep their business afloat. A property owner has a single unit and only needs one person to agree to the price. According to a Zenter poll conducted for Íbúðalánasjóður in 2018, the largest proportion of renters (35.1%) are renting from a single property owner; only 15.7% rent from an established rental company. This same poll showed that rental prices from individual property owners also tend to be much higher than those from other sources. It also bears mentioning that while a manufacturer sells a single unit once, a tenant buys a property owner’s “product” over and over, month after month, with the price almost always rising. The “market” is clearly not deciding how much can be charged for any given property; the person capable of paying the most for the least on offer decides.

When rental properties can advertise without disclosing the price, renters cannot provide public feedback on the asking price, so when the single highest bidder—not prospective renters as a whole—determine what the highest rent can be, it stacks the deck against other prospective renters. Further muddying the waters is that available data on how much rent in Reykjavík has grown over the years—and it has nearly doubled since 2011—is based solely on properties that have registered with the district commissioner. Many renters, immigrants especially, live in places that are not registered, sometimes without even a valid contract. With that being the case, the real average cost of rent of Reykjavík is hard to determine, as a wide swath of properties being rented are not being factored into the total.

Why not just buy an apartment?

Icelandic culture leans heavily towards buying properties rather than renting them, so often times people are advised to buy apartments as a solution for getting out of the cycle of renting.

However, this is not exactly an option for people who have newly arrived in the country. Furthermore, there is a vicious circle that arises for immigrants, who are more often than not minimum wage earners.

As rent in Reykjavík can be at least 50% of a person’s salary—and for minimum wage workers, even more—it is all too easy to fall behind on paying bills. Doing so, however, puts the debtor on a credit black list, which then automatically disqualifies them from being able to take out a loan to buy an apartment.

Photo by Art Bicnick

Laufey Líndal Ólafsdóttir, who is on the board of social housing for the city, Félagsbústaðir, and lives in social housing herself, answered the question of why more people don’t simply buy apartments succinctly.

“Because they’re not allowed to,” she told us. “They don’t get the loans that they need. There’s no programme for social lending in this country.” You cannot qualify for loans if you’re on the black list for not paying bills, which is more likely to happen if you’re making minimum wage. And you’re more likely to be a minimum wage worker if you’re an immigrant. “This puts you on the rent market. As usual, being poor is more expensive than having money. This is why the poor keep being poor. It’s the poverty trap.”

Renting from your boss

One experience unique to immigrants to Iceland is the prospect of renting housing being provided by your employer. The quality of these places can vary, but they have far too often come up in the news for being overpriced and in poor condition. One prime example was in an investigative news story by Kveikur concerning largely Romanian workers. Up to ten workers at a time shared a single room, with each one of them paying 50,000 ISK per month for this rudimentary shelter. Furthermore, they typically worked 220 hours per month, six days a week, for salaries that were far below the minimum wage. One of the workers interviewed said that after rental deductions and other charges he was paid a paltry 38,000 ISK for two weeks of work.

But the most notorious example was Bræðraborgarstígur 1, which in June 2020 was set ablaze by a tenant, killing three and leaving many more without a home. Apart from not even being registered as a residential property, making it illegal to rent the place out for people to live in, some 73 people were registered as living at the property, although the real number was likely close to a dozen. In 2015, Stundin interviewed a former resident of the house, who described the house as dilapidated, infected with mold and housing mostly foreign workers who paid as much as 90,000 ISK per month in rent for a small room, with no fire exit apart from the main entrance. In 2018, journalist Eiríkur Jónsson also reported on the unsanitary living conditions visible even from outside the house.

Sanna Magdalena Mörtudóttir, who is the Socialist Party representative for Reykjavík City Council, in fact cites company housing first amongst the challenges immigrants face on the rental market.

Photo by Timothée Lambrecq

“Then you have to rely on your boss for both work and housing,” she points out. “I’ve seen cases where money for the housing is taken out of wages. Bosses may say ‘this is something they chose and are OK with’, but at the same time, if you’re put in that situation, if you quit your job, are you also going to lose your home? Should they not be separate? Even if it’s not illegal, it’s definitely unethical.”

Ignorance not just of the law but also of social norms contributes to this.

“People are coming to the country, maybe not knowing a lot about the country and think this is normal, maybe you don’t want to upset your boss,” she says. “You’re supposed to be paying people who work for you in money; not in something else. These two things need to be totally separated. It could be so dangerous, so many people living in one place. I think the city needs to take more action into this.”

The AirBnb Effect

While the pandemic has effectively torpedoed the market for AirBnB properties this year, in normal situations these properties can have an outsized impact on the rental market.

As one example, the law caps the amount of time per year that a property owner can rent their property on AirBnB to 90 days. While this sounds reasonable enough, a side effect of this is that it has become increasingly difficult to find renewable, 12-month contracts. Before the pandemic, it was very common to see properties being offered for rent specifying “available until June”, which is typically the start of the tourist high season. This put renters in greater housing precarity; instead of being able to live in the same property, year by year, many renters face the prospect of having to find a new place to live at the start of each summer.

AirBnB had broader effects as well. Ólafur Heiðar Helgason, from the Housing Financial Fund (HFF), found that AirBnB has contributed to apartment prices increasing by 5% to 9% from 2015 to 2017. Ólafur added that landlords can often make twice the amount on Airbnb that they would make renting their properties out to locals, undercutting incentives to provide housing for people who actually live here.

“The effect of AirBnB on the increase of property values are twofold,” a report from Arion Bank noted in 2017. “First of all, it leads to an increased expectation of profit for renting a room or apartment in that people are ready to pay a higher amount. Second of all, AirBnB reduces the supply in the apartment market. The first effect is difficult to quantify but carries with it the great increase of property values in downtown Reykjavík.”

Photo by Art Bicnick

And that’s just largely counting the landlords who are abiding the law. 60% of landlords using AirBnb beyond the 90-day limit did not register their properties as a vacation rental depriving Reykjavík of millions in revenue — all these factors combined, it can make renting out properties through Airbnb far more lucrative for local landlords than providing housing for the already-choking rental market.

Laufey notes that in areas where AirBnb is dominant, “I can safely say that there are not as many children in Austurbæjarskóli (a downtown elementary school) for example, because the families have moved away. A lot of families moved out of downtown during [the boom time of AirBnb] because there were so many problems around AirBnB properties, such as the noise and there being no neighbours; just people coming and going 24 hours a day.”

Social housing

Social housing is a very common phenomenon across Europe, but Iceland is exceptional in this regard, in that qualifying for social housing is extremely difficult and the wait is very long.

Sanna says that there are some 500 people on the waiting list for social housing. The wait can last for about three years, although sometimes less, but they need to have lived in Reykjavík for a year to even begin to qualify. “So a lot of people are renting on the black market, because they can’t rent a single flat that might be 180,000 to 200,000 ISK per month, because that would be pretty much all of their salary. When they rent on the black market, they’re not eligible for rent assistance,” as it is dependent on the property being registered.

Laufey, who being on the board of Félagsbústaðir understands the situation intimately, has criticisms of her own.

“The city and the national government has a lot of responsibility to socialise housing. It’s a commodity now, but it shouldn’t be.”

“As long as it’s run as an independent body, although owned by Reykjavík City, the funds and operations are in the hands of the company,” she says. “Their only ‘controllable’ source of income is rent, so if there are losses, their only means of meeting that is increasing rent. We have been calling for more cooperation between the City and the team of Félagsbústaðir, which has increased a lot, but we feel it’s a crazy set-up. The tenants are among the city’s most financially vulnerable people and the last thing they need when times get hard for Félagsbústaðir is for their rent to go up.”

“And like I was saying about the housing benefit system, this is supposed to be the tool to protect people who are renting, both within the social system and outside it,” she continues. “This is simply not working as the system has too many flaws and obstacles. The rent for tenants of Félagsbústaðir is lower than that on the free market but it’s still high considering the tenant’s income. The tenants are mostly minimum wage workers and people on social benefits… The criteria for qualifying for social housing is being not only financially vulnerable, but also socially vulnerable, so many of the tenants come from poor or working class backgrounds, are immigrants, have poor safety-nets and many are also dealing with health issues that limit their options on the job-market. Some form of rent control would obviously be needed to protect people who rent in general, but I think this is a decision for Parliament to make and there has been a reluctance to discuss this as it has been heavily opposed by the right wing.”

All this can be fixed

The solutions to these problems are many, requiring concerted effort from both the City of Reykjavík and Parliament. A lot of that goes towards education for immigrants on what their rights even are.

“It should be that when you first arrive in the country, the first thing you get in your hands is contact information for your union representative and a printed sheet of your rights,” Sanna offers. “If it isn’t clear already, put it into the law that if you’re renting from someone you’re working for, they cannot take the money for the rent from your salary. It should be the worker’s right to get the bill and pay it, instead of someone with so much power taking money out of their salary.”

Laws on suitable housing apply to company housing as well, she says, but “the reason why it’s so difficult to make sure that this housing follows the law is that it’s not our house. We can’t just like storm in and check that it’s all suitable. But it should raise a red flag if in the National Registry there are over 70 people registered in one house or flat. The municipality should get a notification saying ‘this doesn’t add up, you should do a house call’. But right now, you can just register your home as being anywhere.”

“I think we have all the answers of what needs to be done,” Sanna continues. “I don’t understand why it’s so difficult to implement it into law. Why can’t we just knock on the door and say, ‘Hey, there’s a lot of people registered here, and we’ve been getting complaints and tips from neighbours that this place needs to be fixed up. Can we just take a look inside?’ I know we need to respect people’s privacy, but why can’t we establish regulations to watch people’s safety, to prevent something like this?”

Photo by Art Bicnick

Overall, Sanna would also like to see an expansion of social housing.

“Housing needs to become more social,” she says. “We have social housing for the most vulnerable in our society, but in other countries, it’s more common and available to other groups in society. Make it more available so that people aren’t forced to live in a situation that is dangerous. The city and the national government has a lot of responsibility to socialise housing. It’s a commodity now, but it shouldn’t be.”

Sanna adds: “I want to stress that it shouldn’t be the job of immigrants to tell us what needs to be fixed, but I would be glad to see, instead of us politicians saying ‘this and that needs to be done’, if we could see the direct voice of immigrants that want to tell us what needs to be fixed—if they could do that, I think that’s the best thing really.”

Laufey agrees, saying:

“We need more social housing and more options for people on a low income. It should be available to a broader expanse of people—more like what we see in Europe. It’s terrible to be on the free market and have a family and you have a short-term contract. It’s a terrible insecurity to never know where you’re going to be next year. The free market is not working as a solution. They’re not building what we want fast enough. Obviously, whatever is being done now is not enough.”

In the end, while all low income workers on the rental market in Reykjavík face challenges, immigrants are always going to be more vulnerable. As Laufey points out, “If an Icelandic person is having certain problems [with the rental market], the problems are not going to be less for the immigrant. You have xenophobia adding to the myriad things that affect all of us.” Still, there are at least practical solutions that can be taken to ensure housing for all of Iceland’s residents, foreign-born and domestic, provided the political will is there.

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