Reykjavík Construction Company

1. Establish Reykjavík Construction Company – „The City Builds“

Greatly increased supply of affordable apartments

Construction companies and investors have inflated prices, which has paralyzed the housing market, and despite a housing shortage, they are reducing construction. It has also never been possible to build to meet estimated demand by entrusting these profit-driven private entities with the work. It's time for a new approach. The city establishes its own construction company that will itself handle the construction of non-profit housing. This way, the supply of much cheaper housing can be greatly increased, built in various sizes based on people's actual needs, with increased long-term housing security for residents. Quality will also be prioritized over profit maximization, and the housing crisis and cost of living crisis will be directly addressed.

The city offers non-profit rent

Most of the housing built by the company will go into non-profit rental under the city's auspices. Reykjavík City will thereby create a cost anchor in the extreme pricing of the rental market and simultaneously generate a secure revenue stream for the city for the future. We know that this method works with great success for non-profit rental companies such as Bjarg and Blær; where pricing is on average up to 40% lower than in the general market and residents are highly satisfied.

Part of apartments handed over to Félagsbústaðir

A certain portion of newly built apartments will go into social housing rental, directly under Félagsbústaðir. The rental pricing there also needs to be reviewed, as it is in fact non-profit but not at all social, i.e., it does not aim at ability to pay, but rather at covering the company's costs. Scope for this is created by transferring properties to Félagsbústaðir at no cost to the company.

Part of apartments sold at cost price

A certain portion of newly built apartments will be sold at cost price, not at an inflated property valuation, where it will be possible to register on a waiting list to acquire a right to purchase. Priority for purchase will be aimed at first-time buyers, renters, families with children, and low-income individuals. Sales revenues will be used directly to pay down the operating costs of Reykjavík Construction Company.

Low construction costs, higher quality, diverse financing

Construction costs will be much lower as Reykjavík City can provide plots directly to the company at no cost. The city can also apply for state capital contributions and explore synergies with non-profit rental companies of trade unions such as Bjarg and Blær, among others. The project will then pay for itself in the long term with the added revenue stream from non-profit rental income. Low costs and operational sustainability offer greatly increased scope for higher quality and diversity in design.

Rental prices will always be cost-linked

It is important that rental prices are cost-linked, not determined by convenience. The reference prices of the Tenants' Association should be used, which is a sensible way to a rent cap by linking rental prices to construction costs. There, the rental price is calculated as a fixed percentage based on fire insurance valuation and results in an average of about 40% lower rental price compared to the general rental market.

Increased quality of life and housing security – lower inflation

The effects of this project would be numerous. Normal competition in pricing would be strengthened, similar to what Bjarg and other companies have been doing so far, thereby creating a more natural balance in market pricing. At the same time, housing is being built to meet demand without constantly scaling back, as profit-driven entities regularly do when exorbitant prices prevent housing from selling. This will increase residents' quality of life, provide diverse, secure, and affordable housing options of higher quality, and combat both inflation and the destructive effects of the cost of living crisis of recent years.

The construction company builds kindergartens, other infrastructure, and handles maintenance

With its own construction company, Reykjavík City can directly undertake the construction of necessary social infrastructure such as nursing homes, kindergartens, emergency shelters, and modular homes to eliminate homelessness, as an absolute state of emergency has existed for years due to a shortage there. Furthermore, the path of endless profit-driven intermediaries has caused enormous cost increases, e.g., 3 billion that have gone into the Brákarborgarverkefnið project, and there is still no end in sight. Mold problems and extensive infrastructure debt in maintenance are widespread, but Reykjavík Construction Company can easily undertake these projects. This doesn't have to be so expensive; let's change that and build what is needed cheaply, efficiently, and safely.

2. All plots go to non-profit organizations

No more land speculation

We bid farewell to the era of land speculation and Reykjavík City's destructive policy of selling building rights on plots to the highest bidders. That policy has driven housing prices through the roof. In addition, investors have profited immensely by sitting on plots, reselling them, and building nothing for years, or eventually building apartments many times more expensive to meet Reykjavík City's plot sale prices, costs due to resold plots, and the profit demands of the investors themselves who build, as well as all the countless intermediaries.

Allocate plots directly to needed projects

A new district in Úlfarsárdalur must therefore be based on this new approach instead of what is planned, which is to once again rely on profit-driven real estate companies and investors; whether private entities or pension funds, all of which have strong profit demands.

3. The Competition Authority investigates market manipulation

Reykjavík City advocates for an investigation

HMS, the Housing and Construction Authority, has analyzed the situation and considers it clear that construction companies have sufficient funds at hand, given that they do not adhere to the so-called „laws“ of the market by keeping prices high despite their properties not selling. There are substantiated signs that these construction companies are colluding and engaging in price fixing. Reykjavík City should therefore advocate for the Competition Authority to investigate these entities for market manipulation.

4. A campaign must be launched against the transformation of contracting companies into lending institutions

Prevent further increases in housing prices

A strange mix of construction companies and investors has started providing a profit-driven version of shared equity loans, which puts borrowers at great risk due to additional rental payments and has the effect of driving up housing prices even further in the long run.

5. Ensure that vacant housing is used for habitation

Vacant property fee to compel sale and utilization of apartments

HMS estimates that many thousands of newly built apartments stand vacant in Reykjavík. This is unacceptable while a housing crisis prevails and is a waste of enormous city funds and thus taxpayer money from residents who cover the cost of building and maintaining infrastructure in the meantime. Until this is resolved, Reykjavík City will increase property taxes on newly built apartments that stand vacant for a long time without valid explanations and to cover infrastructure costs, but an exception will be granted if apartments are used as homes, e.g., for rent, while they are not sold. Such a vacant property fee is intended both to cover costs and to incentivize the utilization of housing.

Habitation guarantee – Vacant apartments go into non-profit rental

When profit-driven private entities build but apartments are not utilized long-term due to exorbitant pricing, Reykjavík City will step in and ensure that vacant housing is used as homes. Reykjavík City will seek ways to put housing that stands vacant for an excessively long time and without valid reasons into non-profit rental with a habitation guarantee. Rental income will be returned to the property owners while the property is not sold.

6. Short-term rentals and guesthouse operations in residential housing permanently banned from Reykjavík

Strengthen oversight

The problem with AirBnB and short-term rental operations has been evident to everyone in recent years. The government has decided to significantly curtail permissions for individual short-term rental speculation, and that is good. Reykjavík City needs to be prepared to follow through with robust oversight in cooperation with the state.

Guesthouses and „apartments“ companies in residential housing gone

What remains untouched is extensive guesthouse operations in residential housing, both guesthouses and so-called “apartments” companies, which the government's actions do not address. Reykjavík City needs to ban such operations from the city with stricter regulations in all possible areas and by applying property taxes against such speculators. Residential housing is for providing homes for city residents, not a commodity for commercial profit.

7. Pressure Althingi for a rent cap and a public construction fund

Reykjavík is a national leader – Show courage and boldness

Reykjavík City's leadership needs to recognize its national leadership role as Iceland's largest interest entity. We can and should pressure Althingi and the government for necessary reforms and legislation for the benefit of Reykjavík residents and, by extension, residents of all municipalities. Courage and boldness must be shown.

Utilize our negotiating position – Pressure for a rent cap

As long as Althingi and the government neglect their duties by not seriously addressing the housing crisis, such as by legislating the reference prices of the Tenants' Association, that sensible path to a rent cap with rental price adjustments, then Reykjavík City needs to make its voice heard and cause disruption in all negotiations with the state. The issue concerns the existential security of residents, many of whom spend all their savings each month on exorbitant rent and usurious loan payments.

The interests of tenants and borrowers are shared

The exorbitant rent resulting from investors' pursuit of the rental market, as well as the short-term profit-driven behavior of investors in buying and selling apartments, is a key and main reason for enormous increases in housing prices. These increases make life difficult for first-time buyers and low-income individuals, but also drive inflation, which thus directly affects those who are dealing with housing loan payments. The interests of tenants and borrowers are the same.