The Great Housing Revolution: 30 thousand apartments in ten years

The Socialist Party's address in the parliamentary elections on September 25, 2021: A second offer to voters presented on May 4:

The Great Housing Revolution – Eradicating the housing crisis: 30 thousand apartments in ten years

Housing costs are the most serious threat to the livelihood of the general public today. The most important task of the public sector is to ensure safe and affordable housing for all citizens. No single project will have as good a general impact on society in the next term as what the Socialist Party of Iceland calls the Great Housing Revolution.

What is the situation?

According to official surveys, more than a third of families in Iceland struggle to make ends meet. The most significant reason for this is high housing costs. A solution to the ongoing housing crisis is therefore the most important step to improve general living standards.

The historical reason for the housing crisis is, on the one hand, that Icelandic authorities did not take comparable steps to neighboring countries in the last century in building a social housing system, and on the other hand, the complete commodification of residential housing during the neoliberal years. The destruction of workers' housing and the drastic weakening of social rental housing was probably the most serious attack on the living standards of the general public during this sad period.

But the commodification of other parts of the housing system also had serious effects on the livelihood and security of the general public. With the auctioning of plots and the takeover of housing construction by contractors, which was previously largely under public control, either directly or indirectly through housing cooperatives, housing prices rose far beyond construction costs. Oligopolistic companies managed to maintain scarcity to maximize their usury, thereby doubling the public's housing costs in just a few decades. The entry of large investors into the rental market then undermined the living standards of tenants.

The result of the neoliberal years was an excessively expensive housing market that relentlessly siphoned money from the masses and transferred it to the few, rich, and powerful, while tens of thousands of households were kept in poverty and gnawing insecurity.

The social housing system accounts for one-third to half of residential housing in our neighboring countries. Here, it is well under 10 percent. The main reason for worse living standards here than in neighboring countries is that a larger proportion of households in Iceland try to survive in an unregulated housing market; at the mercy of land speculators, contractors, and landlords, and significant fluctuations in apartment prices and interest rates in the financial market.

What is the need?

The estimated accumulated housing shortage today is about 4,000 apartments. This is an estimate based on unchanged basic assumptions of the current housing market. This figure therefore does not include long waiting lists for municipal social housing, waiting lists for housing for the disabled, students, or the elderly, nor an assessment of what is needed to eliminate modern-day shantytowns; industrial housing and other uninhabitable housing that many of the lowest-income individuals have to settle for. The Socialist Party of Iceland therefore estimates the accumulated housing need today at 8,000 apartments.

It is estimated that about 2,000 apartments need to be built annually in the coming years. As before, this is a plan to maintain an unchanged housing market. It does not take into account young people living with parents who would like to have the option of establishing their own home, lower-income families who would prefer safer housing if available, nor homeless people living with relatives and friends. It is the assessment of the Socialist Party of Iceland that it is more accurate to aim for a need of about 2,200 apartments annually in the coming years.

In total, there is therefore a need for 30 thousand new apartments in the next ten years. There is a need for all kinds of housing; large apartments for families with many children, smaller apartments for individuals, apartments for students, disabled people and the elderly, temporary housing for people at turning points in life, apartments in the capital area and in the countryside, apartments in cities, towns, villages and rural areas.

But the need is first and foremost for secure housing that is protected from fluctuations in apartment prices and interest rates in the capital market. If all these apartments are built within a social housing system in the next ten years, the proportion of that system of the total will increase from just over 8% to almost 25%. Even then, the proportion of social housing would be among the lowest in our part of the world.

What is the solution?

The Socialist Party of Iceland offers voters to cast their vote this autumn for the Great Housing Revolution, the construction of 30 thousand apartments in ten years, which will go a long way in eradicating the endemic housing crisis.

This will be done by establishing a Public Housing Fund which will raise 70% of the necessary capital by issuing bonds that will be sold to pension funds and other investors. The collateral for the bonds is secure, residential housing in secure long-term leases, and will therefore bear comparable interest rates to government bonds. About 13% of the cost will be contributed by the state and municipalities in the form of plots, and 17% will come as a loan from the state treasury at the lowest interest rates, a loan that will be repaid over the lifespan of the apartments. Capital costs will therefore be as low as possible today.

The Public Housing Fund will then lease housing to Public Rental Associations, which can be of various types: Municipal rental associations, student associations, associations for the disabled, the elderly, single parents, or any kind of public organizations, but also general rental associations of the tenants themselves, user-controlled housing management companies, which tenants establish to obtain good, secure, and affordable housing. The rental associations are not tied to one building, and within one building there can be apartments belonging to different rental associations; e.g., disabled people, students, the elderly, single parents, and others, along with people belonging to other rental associations.

Design and decisions regarding housing development can come from both the Public Housing Fund and the Rental Associations. Once an agreement is reached, the Housing Fund will tender the construction of the apartments. To ensure inexpensive construction and to break down contractor oligopoly, the state will establish a State Construction Company and promote the establishment of municipal construction companies and construction workers' cooperatives. Together, these construction companies will implement non-profit residential housing development to escape the exorbitant usury of contracting companies. Usury, profit, and dividends have no place within a social housing system.

It is the role of the Public Housing Fund to align its financing with the lifespan of the buildings, their maintenance, and the normal operating costs of the Rental Associations. The goal is not for one family to repay the capital, construction, and operating costs of the apartments in forty years, but rather for these costs to be spread over approximately 120 years. With this, it can be expected that rental prices in this new system will be about half of what is common today within non-profit organizations, and even lower than what is common in the untamed rental market.

Those who prefer to own an apartment rather than rent can do so by contributing equity at the beginning of the contract period and owning the apartment jointly with the Public Housing Fund. The rental price of the rental associations is adjusted to the lifespan of the apartments, and rent therefore covers the construction cost over a very long period. If owners want their ownership share to grow, they can agree to pay higher monthly payments, depending on their ability and goals for how quickly the ownership share grows.

Owner-occupied apartments in this system will not be sold on the market, just like the old workers' housing, but rather people will receive their equity contribution and ownership share of installments recalculated based on the same interest rates that pension funds receive from the Public Housing Fund. This system is closed and protects residents from market fluctuations, and apartments are sold back into this closed system.

What will be the effects?

The Great Housing Revolution will take power in the housing system from speculators, contractors, large investors, banks, and financial companies, and transfer power to the general public. Apartments will be built according to the needs, hopes, and expectations of the public, not for profit companies. Speculators can build their apartments, but they will be outside the public system and receive no support from the state treasury. The supply of affordable apartments within the Great Housing Revolution will curb housing price increases in the wild market, as price increases in recent years have been driven by a planned shortage of housing.

A reduction in housing costs will lead to a general improvement in living standards. The general public, and especially those currently in the wild rental market; young people, immigrants, and low-income individuals; will have more disposable income and will therefore stimulate the economy with funds that previously flowed into the coffers of the few and wealthy. People's anxiety about their livelihood will decrease, fewer will need to work two or three jobs to make ends meet, labor exploitation will diminish, people will have more time with their children, relatives, and friends, and more time to engage in social life and active participation in the community.

The construction of the apartments will create jobs and stimulate the economy after the economic downturn of the coronavirus pandemic. The design and implementation of apartments and neighborhoods will become a lever for society, and the development of diverse residential centers will increase the variety of human life.

The eradication of the housing crisis will be like spring after a long, harsh winter.

Can we do this?

The scope of the project can be estimated based on Statistics Iceland's assessment of the construction cost of a so-called index house, which is an inexpensive apartment in a multi-family building without land costs. According to Statistics Iceland's calculations, it costs just over 16.8 million ISK to build a 70 square meter apartment today. If we add 20% to this cost for common areas and 10% for design, where the goal is to build good apartments that suit people and last well, then it would cost less than 22 million ISK to build such an apartment today. 30 thousand such apartments cost just over 650 billion ISK. As this is a massive project, it offers great opportunities to keep costs down through economies of scale and size.

The project is no larger than this, about 65 billion ISK in construction costs per year for ten years. That is the effort to eradicate the housing crisis.

The Confederation of Icelandic Industries' estimate of the neglect cost of the neoliberal years on infrastructure such as roads, harbors, utilities, and sewage amounted to about 420 billion ISK. It should therefore come as no surprise that it costs about 650 billion ISK to overcome the neglect of the neoliberal years towards the social housing system. And from a societal perspective, it is even more important.

When the Swedes embarked on their million-project, the construction of a million apartments in ten years, in the 1960s and 1970s, its scope was comparable to if Icelanders aimed to build 45 thousand apartments in the next ten years. The first workers' housing in Iceland was built during the Great Depression, and a major effort was made to build apartments for the disabled at Hátún after the herring collapse in 1968. More examples can be found domestically and internationally of major housing initiatives, all of which have led to good outcomes. There are no examples in all of human history of a major housing initiative that did not have widespread positive effects on societies.

However, there are countless examples in history of how detrimental a persistent housing crisis is for people, families, and society. We have experienced such harm in recent decades.

A housing crisis is a political decision, no less than housing development is politics. It was a decision by Icelandic authorities to dismantle the small social housing system that existed here, to fully commodify the housing system, and to maintain a housing shortage here to maximize the profits of speculators. This has been the housing policy of the economy of cruelty, the governing policy of many previous governments.

The housing policy of the socialists' economy of compassion is the Great Housing Revolution, which will transform the housing situation of the nation's residents in the next ten years. A vote cast for the Socialist Party of Iceland is a vote for the economy of compassion and the Great Housing Revolution, the construction of 30 thousand apartments in ten years, and the eradication of the housing crisis.

Let's vote for the Great Housing Revolution this autumn!Approved at a joint meeting of the executive and policy boards of the Socialist Party on May 3, 2021