Rental legislation and the changing Icelandic rental market

Authors

• Ólafur Sindri Helgason Housing and Construction Authority, Iceland
• Fredrik Kopsch Division of Real Estate Science, Lund University

DOI:

https://doi.org/10.30672/njsr.95233

Keywords:

Iceland, rental markets, rent legislation, transaction costs

Abstract

Rental markets hold an important role for a functioning housing market as a whole. Households with shorter time horizons, as well as households with little private equity and difficulties acquiring capital can see their housing needs met on the rental market. A functioning rental market does however require some sort of legislation. In this paper we argue that legislation must adapt to changing rental markets. We do so from the specific case of Iceland. The Icelandic rental market has, since the financial crisis, undergone noticeable structural change, evident from a number of perspectives. By applying a framework based in the role of rental market legislation, we provide a comparison between legislation in the Nordic countries. We conclude, based both in the presented structural change of the Icelandic rental market, and in aspects of Nordic rent legislation, that there is a case to be made for changes to the Icelandic legislation.

References

Arnott, R. (2003). Tenancy rent control. Swedish economic policy review, 10(1), 89–134.

Bengtsson, B. (2001). Housing as a social right: Implications for welfare state theory. Scandinavian Political Studies, 24(4), 255–275. https://doi.org/10.1111/1467-9477.00056

Bengtsson, B., Annaniassen, E., Jensen, L., Ruonavaara, H., & Sveinsson, J. R. (2013). Varför så olika?: Nordisk bostadspolitik i jämförande historiskt ljus. Égalité. se.

Diamond, R., McQuade, T., & Qian, F. (2019). The effects of rent control expansion on tenants, landlords, and inequality: Evidence from San Francisco. American Economic Review, 109(9), 3365–94. https://doi.org/10.1257/aer.20181289

Donner, H., & Kopsch, F. (2018). Housing Tenure and Informational Asymmetries. Journal of Real Estate Research, 40(2), 155–177.

Elíasson, L. & Pétursson, Þ. G. (2009). The Residential Housing Market in Iceland: Analysing the Effects of Mortgage Market Restructuring, Housing Studies, 24:1, 25–45. https://doi.org/10.1080/02673030801981696

Elíasson, L. & Ragnarsson, Ö. P. (2018). Short-term renting of residential apartments. Effects of Airbnb in the Icelandic housing market, Economics wp76, Department of Economics, Central bank of Iceland.

Glaeser, E. L., & Luttmer, E. F. (2003). The misallocation of housing under rent control. American Economic Review, 93(4), 1027–1046. https://doi.org/10.1257/000282803769206188

Haurin, D. R., & Gill, H. L. (2002). The impact of transaction costs and the expected length of stay on homeownership. Journal of urban economics, 51(3), 563–584. https:// doi.org/10.1006/juec.2001.2258

Institute of Economic Studies (2011). Þróun á húsnæðismarkaði og samanburður við önnur lönd. Report C11:03. Institute of Economic Studies, University of Iceland, Reykjavík.

Isaac, M., Allen, M., & Mary, S. (1991). The economic theory of housing demand: a critical review. Journal of Real Estate Research, 6(3), 381–393.

Kemeny, J. 1995. From Public Housing to the Social Market. Rental Policy Strategies in Comparative Perspective, London: Routledge. https://doi.org/10.4324/9780203308554

Kemeny, J., Kersloot, J., & Thalmann, P. (2005). Non-profit housing influencing, leading and dominating the unitary rental market: Three case studies. Housing Studies, 20(6), 855–872. https://doi.org/10.1080/02673030500290985

Kopsch, F. (2019a), Reglering av hyresmarknader. Finanspolitiska rådet, rapport 2019/1.

Kopsch, F. (2019b), Hyresmarknad i kris: Fortsätta lindra symptomen eller bota sjukdomen? Stockholm: SNS Förlag

Malpezzi, S. (1998). Welfare analysis of rent control with side payments: A natural experiment in Cairo, Egypt. Regional Science and Urban Economics, 28(6), 773–795. https://doi.org/10.1016/S0166-0462(98)00021-0

Malpezzi, S., Ozanne, L., & Thibodeau, T. G. (1987). Microeconomic estimates of housing depreciation. Land Economics, 63(4), 372–385. https://doi.org/10.2307/3146294

Martin, R. F. (2003). Consumption, durable goods, and transaction costs. FRB International Finance Discussion Paper, (756). https://doi.org/10.17016/IFDP.2003.756

Ministry of Social Affairs. (2004). Íslenskur húsaleigumarkaður – staða og horfur. Report Reykjavik, Iceland.

Mermet, A.-C. (2019). The ‘Airbnbfication’ of the Icelandic capital. Towards an assessment of the socio-spatial impacts of Airbnb in the Reykjavik capital area. Icelandic Tourism Board. Rental Legislation and the Changing Icelandic Rental Market 28 https://doi.org/10.30672/njsr.95233

Piazzesi, M., & Schneider, M. (2009). Momentum traders in the housing market: Survey evidence and a search model. American Economic Review, 99(2), 406–11. https://doi.org/10.1257/aer.99.2.406

Quigley, J. M. (2002). Transactions costs and housing markets.

Statistics Iceland (1997) Hagskinna – Sögulegar hagtölur um Ísland (Icelandic Historical Statistics). Reykjavík.

Sveinsson, J. R. (1992). The “Scandinavisation” of Icelandic Housing Policy. Scandinavian Housing and Planning Research, 9:sup2, 61–70. https://doi.org/10.1080/02815737.1992.10801443

Sveinsson, J. R. (2004). The Formation of Urban Homeownership in Iceland. Paper presented at the ENHR Conference in Cambridge, 2–6 July 2004.

Torgersen, U. 1987. “Housing: the wobbly pillar under the welfare state”. In Between State and Market: housing in the post‐industrial era, Edited by: Turner, B, Kemeny, J and Lundqvist, L. 116–126. Stockholm: Almqvist and Wiksell International. https://doi.org/10.1080/02815737.1987.10801428

Turner, B., & Malpezzi, S. (2003). A review of empirical evidence on the costs and benefits of rent control. Swedish Economic Policy Review, 10(1), 11–60.

Van Ommeren, J., & Van Leuvensteijn, M. (2005). New evidence of the effect of transaction costs on residential mobility. Journal of regional Science, 45(4), 681–702. https://doi.org/10.1111/j.0022-4146.2005.00389.x

Weber, J. P., & Lee, G. (2018). On the Measure of Private Rental Market Regulation Index and its Effect on Housing Rents: Cross Country Evidence.

Wilhelmsson, M. (2008). House price depreciation rates and level of maintenance. Journal of Housing Economics, 17(1), 88–101. https://doi.org/10.1016/j.jhe.2007.09.001