Reykjavik [Credit: Annie Spratt on Unsplash]

Iceland takes steps to regulate short-term rental market

Iceland: Iceland is taking steps to further regulate its national short-term rental market after a new law was passed in Parliament that will prohibit units classified as long-term residential housing from being rented out on short-term rental platforms like Airbnb.

The new bill, which has been driven by Lilja Dögg Alfreðsdóttir, Iceland’s minister of culture and business affairs, was passed last week in Alþingi, the country’s Parliament. It comes in response to rising housing prices in the country and a rise in Airbnb listings, particularly in the capital city of Reykjavik, an increasingly popular tourism destination.

Under the new law, apartment and property owners will still be allowed to rent out their units for up to 90 days a year for up to two million ISK [€13,300 / $14,300 / £11,400]. After that point, the Icelandic ministry has ruled that property owners will no longer be able to apply for a lodging licence and these will instead only apply for units rented out under the 90-day limit or properties in rural locations [e.g. farm accommodation] across Iceland.

Short-term rentals will remain subject to registration and owners will be required to renew their licence on a yearly basis,

The law is designed to increase residential housing supply in and around the southwest corner of the island, otherwise known as the Capital Region where Reykjavik is located, as demand rises.

Earlier this year, Iceland was impacted by volcanic eruptions, which have also exacerbated the country’s existing housing shortage. Lava flowing out of the Fagradalsfjall volcano led to the evacuation and relocation of around 3,800 residents from the southwestern town of Grindavík from January onwards, and those residents have since had to be accommodated in hotels, vacant apartments or in the homes of family members.

Alfreðsdóttir was quoted as saying in a press release that there will be a “clearer distinction between residential and commercial buildings when it comes to accommodation and the actual use of the premises”.

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