Reshaping Reykjavik’s housing offer

About the Affordable Cities blog series and #BetterUrbanHousing
People living in cities across the world are facing the effects of the housing affordability and cost-of-living crisis. OECD Champion Mayors recently endorsed the new “OECD Brussels Blueprint for Affordable cities and Housing for All” at the Brussels Urban Summit where they shared innovative solutions to tackle these challenges and drive more inclusive economic growth. They continue to drive efforts that shape a more affordable, equitable and resilient urban future.

Reykjavik, like so many other fast-growing cities, faces the challenge of ensuring sustainable growth while reducing its environmental footprint and meeting the needs of low-income groups. Over the past 40 years, around 700 apartments have been built each year. During the last five years that number has grown to 1,200. This has been the most prolific period of construction in the history of the city.

Setting clear boundaries – for the city and developers

The city has adopted a comprehensive strategy for affordable housing, focussing on several key elements. First, all future housing developments are concentrated within defined growth boundaries. This approach aims to increase density, reduce sprawl and congestion and foster sustainable neighbourhoods. By bringing residents closer to hubs for essential services, it will also encourage local businesses to thrive within each area.

In addition, 80% of new apartments will be located within the catchment area of the upcoming Borgarlínan Bus Rapid Transit (BRT) system, which is currently under development. The first phase, scheduled to commence operations in 2027, will connect downtown Reykjavík with large greenfield projects in the eastern part of the city enhancing accessibility and reduces reliance on private vehicles.

The city has also committed to ensuring that 30% of all new developments are affordable or green. To achieve this, Reykjavik focusses on developing underused plots within the growth boundaries and allocating building plots to non-profit housing associations. These associations include new operators established by labour unions, including those dedicated to students and the elderly.

By engaging different stakeholders, the city strives to provide a good mix of affordable and sustainable housing options for diverse segments of the population.

In addition, 5% of new developments are allocated to the city’s housing company, Félagsbústaðir, for social housing through value-capture contracts. These contracts often include a purchasing option for Félagsbústaðir to acquire 5% of the apartments at a fixed, pre-determined price. This approach guarantees predictability and prevents social housing becoming segregated and trapping areas in decline.

Encouraging innovation

Reykjavik has not been shy in trying new approaches. Another project focusses on a public-private partnership (PPP) formed through an innovation tender system. The city conducted public consultations and an open tender process, through which participants presented their affordable housing solutions. Top teams then entered into structured contracts with the city to develop these innovative housing projects.

A second project involves Reykjavik’s participation in Reinventing Cities, a project organised by the C40 Cities consortium. This engagement has boosted the city government’s capacity to drive green developments, including the transition to environmentally friendly practices in the building sector.

Building on the success of these projects, Reykjavik launched an open competition during the winter of 2021-22, entitled “Green Housing of the Future,” to solicit ideas for the design and development of five locations within the city. Five winning ideas were selected, and the respective teams were invited to contract on the designated sites, with sustainability and carbon neutrality as guiding principles.

To expand the housing offer for individuals aged 55 and over, Reykjavik has launched a design competition to find partners who can develop small pockets of housing for the elderly within neighbourhoods. Termed “Quality of Life Clusters,” this project envisions public and private developers constructing apartments around a shared service center that offers easy access to green areas and is well-connected to public transport.

Showing our workings

To ensure effective implementation of the housing strategy, measuring its success becomes crucial. Reykjavik has developed a housing strategy map that provides geographical information on all ongoing and future construction projects, as well as the planning and technical readiness of building plots. This map is publicly accessible at:

Addressing the housing crisis requires us to act speedily but sustainably. It also requires us to forge solid partnerships – with developers, housing associations and communities – and be willing to work with them in new ways. In Reykjavik, we are proud to be at the centre of a partnership for positive change.

About the OECD Champion Mayors Initiative
Created in 2016, the OECD Champion Mayors for Inclusive Growth Initiative is a global coalition of mayors who meet on a regular basis to share their experience in the pursuit of inclusive growth in cities. Since its inception, over 100 different mayors from around the world have joined the Initiative, contributing their voice to the global debate, and making major strides in their cities toward youth empowerment, sustainable climate policy and support for SMEs. The Champion Mayors will meet at the Brussels Urban Summit on 13 June to drive change on improving housing affordability and cost of living for residents in their cities.

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Dagur B. Eggertsson became mayor of Reykjavík City on June 16 2014. Dagur was the vice-chairman of the Social Democratic Alliance from 2009 – 2013. He was first elected to the city council of Reykjavík in the 2002 election. Dagur studied, trained and worked as a physician and also has a master’s degree in Human Rights and International Law from the University of Lund in Sweden.

Dagur was was first elected to Reykjavík City Council in 2002, he was chair of the City Planning Committee from 2004 -2006 and was mayor from 2007-2008. In the years 2009 – 2013 Dagur was Vice president of the Social Democratic Alliance. From 2010 – 2014 he was chair of the City Executive Council. In his capacity as a leader for Reykjavík City Dagur has been a key note speaker at various international conferences and forums.

In the spring of 2014, Dagur lead the campaign of the Social Democratic Alliance in Reykjavík and won the single largest number of votes. He led the Social Democrats again in the elections of 2018 and was reappointed as mayor in 2018, and again in 2022.

Dagur grew up in Reykjavík and is married to Arna Dögg Einarsdóttir, a medical doctor at Landspitalinn – The National University Hospital of Iceland. They have four children.