News - 09.02.2026

Unity on Improvements in Housing Matters

Through unity, necessary improvements can be achieved, and this applies not least to housing matters, a policy area involving many stakeholders. The state creates the framework, sets laws and regulations and has oversight; municipalities hold planning authority, issue permits and are responsible for infrastructure and basic services; the construction industry designs and builds housing; and banks and pension funds finance both development and home purchases. Each does its part, but that is not sufficient to meet the needs of the population because what is lacking is harmony. Here, the state needs to take greater responsibility through policy-making, dialogue and oversight, incentives and clear rules.

The instability that has characterised the housing market in recent years has had a major impact on people and businesses. Housing is one of the strongest drivers of persistent inflation, and the resulting high interest rates make matters worse. With rapid population growth and an ageing population in recent years, the need for housing has both changed and increased far beyond the number of homes that were built, and prices have therefore risen. At the same time, the development of housing for low-income groups has fallen short of government targets. It is therefore a major societal interest to achieve long-term stability in the housing market, to ensure that development is in line with the needs of the population, and to avoid being left with housing for which there is no demand. There is no lack of willingness to pursue improvements, judging by the public debate, but it has not been possible to translate that will into action and achieve stability. That is a serious matter.

VR and the Confederation of Icelandic Enterprise (SI) have found common ground on housing issues. We share an understanding of the problem and of the urgent need to achieve stability, for the benefit of people, businesses and society as a whole. In that spirit, we held an open meeting this week on housing matters under the heading “Unity on Improvements in Housing Matters”, where dialogue was initiated among different stakeholders on challenges and ways forward.

There are no magic solutions in housing matters, but much can be done better. Charges related to housing development have increased significantly in recent years and cost families dearly through higher housing prices, yet they are now, unlike before, a necessary source of revenue for municipalities in order to build and even operate infrastructure. Increasing the number of homes is one thing, but it is no less important that homes be built that meet the needs and changing demands of society, as with an ageing population and changing family structures there will be fewer residents per home. Planning does not take this into account today.

At the meeting, major development areas such as Blikastaðaland, the Vals site at Hlíðarendi and Ártúnshöfði were discussed, where up to half a century can pass from the first ideas of development until construction is completed. Naturally, processes need to be shortened, but ideas about the pace of development are often unrealistic. In the long term, development does not keep up with the needs of society, and sometimes insufficient consideration is given to both lifestyles and quality of life. More building plots are needed and processes must be shortened. At the same time, efforts must continue to build a robust rental market and to address transport issues.

There is much to consider and many are needed to make improvements, but the unity of VR and SI on housing matters is a challenge to the authorities to turn will into action, take responsibility, set realistic expectations and undertake reforms that lead to stability. The unity of VR and SI is also an encouragement to others to contribute their share in this policy area. It is clear that the challenges are many and that targeted paths to stability must be found. The current situation is unacceptable, and there is much to be gained for society as a whole by making improvements.

Halla Gunnarsdóttir, Leader of VR, and Sigurður Hannesson, Director General of the Federation of Icelandic Industries

The article was first published in Morgunblaðið on 7 February 2026.