The Effects of Short-Term Rentals on Housing in Iceland

Abstract

The internationalisation of housing and rental markets has profoundly affected many countries, with some describing vacation rentals as the ‘new gentrification battlefront'. Most studies have focused on the impact of tourism on local rental markets in southern Europe, where wealthier northern Europeans invest in housing or use short-term rentals (STRs). This chapter, however, focuses on a Northern European country, Iceland, highlighting how STRs have profoundly impacted the housing and rental market. The authors concentrate primarily on the 2011-2024 period, beginning with the rise of STR platforms in Iceland and concluding with legal changes in 2024 that considerably restricted STRs in the capital area. They show how Icelandic state policies on STRs have heavily influenced the situation of people in Iceland's rental market, making it increasingly precarious.