2,800 apartments for low-income and asset-poor individuals

On Tuesday, there was a significant moment in the premises of the Housing and Construction Authority when a three billion allocation for the development of affordable housing for those with lower income and assets was announced. During the years 2023-2025, 2,800 apartments will be built for this group, which is a substantial increase from previous plans. Of these, 800 will be built this year. This allocation is part of the government's efforts to address pressure on the housing market during challenging inflationary times. The government has decided to double contributions to foundation loans for rental apartments within the general housing system and shared equity loans for home purchases. Funding is secured with latitude in the financial plan and reallocation of other projects.

Fewer fluctuations – more balance

The most important task of these periods is to create balance in the housing market. In recent years and decades, we have experienced significant fluctuations in the housing market that have an extremely large impact on inflation and thus the interest rate environment for families and businesses. These major fluctuations affect most those who have the least.

Support to own or rent

In recent years, we have been creating a new framework to support young people and other low-income groups in owning or renting housing at affordable prices. The system can be divided into two parts. On one hand, it is the foundation loan system where support is provided for the development of rental apartments within the general housing system. By the state and municipalities providing foundation contributions for development by non-profit rental associations such as Bjarg and Bríet, a foundation is laid for a robust general housing system where the emphasis is placed on the rental amount generally not exceeding a quarter of income. As no dividend is paid out from the rental association, the funds accumulated within them will be used for further development of rental apartments for lower income and asset groups.

On the other hand, it is the shared equity loan system. Shared equity loans involve the state investing 20% in the property with the first-time buyer or a buyer who has not owned a property for a specified time, thus the buyer only needs to contribute 5% of the purchase price as a down payment. There are no interest or repayments on the shared equity loan, and when the property is sold, the state receives its 20% share back. There is a maximum price on the apartments so that they are as affordable as possible with the specified size and number of rooms. This route of ownership appeals to those who prefer to own rather than rent.

Aim to reduce pressure

Now is the time for the government to step in with support for those groups who find it hardest to own or rent housing. Increased support for the development of housing for these groups is a counter-cyclical measure that reduces the pressure on the housing market and decreases the likelihood of significant increases in the future. For the first time, the government has a comprehensive overview of housing issues. Information is now available on what type of housing needs to be built, for whom, and where, but also what plans are in place for housing development. The overview achieved with the new infrastructure ministry, which covers housing, planning, and municipal affairs, is extremely important. The good cooperation between the Housing and Construction Authority, Planning Agency, and municipalities in making the housing development process a unified and efficient process is the backbone of our effort to unwind the imbalance that currently exists in housing issues.

Justice in the housing market

It is now exactly a year since I signed a framework agreement with the Association of Icelandic Municipalities on a joint vision for the development of residential housing and a goal of 35,000 new apartments in the next ten years. Half a year has passed since the first agreement of the infrastructure ministry and the Housing and Construction Authority with the City of Reykjavík. This close cooperation between the government and municipalities marks a milestone in housing development and paves the way for balance in the housing market. Balance that will ensure more justice and security in the housing market.

Sigurður Ingi Jóhannsson, Minister for Infrastructure and leader of Framsókn.

The article was first published in Morgunblaðið on 22 June 2023.