Published on and written by Cyril Jarnias
Moving to ICELAND for several months or years is not something to be improvised, especially when it comes to finding long-term accommodation. With a tight market, high rents, and strictly regulated but generally tenant-friendly legal rules, the country combines strong protections and fierce competition for every available apartment.
This guide details the steps for renting long-term property in Iceland, covering the housing search, managing rent and security deposits, as well as the rights and obligations of tenants and landlords through to the end of the lease.
Understanding the Rental Market Context in ICELAND
ICELAND is a small country of approximately 390,000 inhabitants, with nearly two-thirds living in the capital region. The housing market is marked by significant tension between supply and demand, with a housing shortage in most regions, particularly around Reykjavik.
Authorities and studies point to several converging factors: population growth, increased immigration, very high purchase prices, massive development of tourist rentals, and significant construction costs. Consequently, finding long-term housing, especially in the capital, requires time, responsiveness, and good information.
From a legal perspective, the situation differs from many European countries. ICELAND does not apply strict rent ceilings, but the Rent Act (Rent Act No. 36/1994) is considered broadly favorable to tenants, with a comprehensive arsenal of rights, protections, and appeal procedures.
Where and How to Search for Long-Term Housing
The vast majority of long-term rentals are offered by private owners. Social housing exists through municipalities, but it is scarce, in high demand, and associated with long waiting lists. Therefore, most newcomers go through the private sector.
The housing search is primarily conducted online via specialized websites, media classifieds, and dedicated Facebook groups. However, in small towns and rural areas, it is crucial not to overlook local methods: contacting the town hall or activating word-of-mouth through employers, colleagues, and neighbors, as many rentals are never published online.
A key element to keep in mind: each listing receives a very large number of responses. It is common for an apartment to be rented within a few days. Planning ahead, preparing a clear presentation of your situation, and responding quickly are essential to have a chance of being selected.
Areas to Search: Capital, Regional Towns, and Countryside
ICELAND is highly centralized. Reykjavik and its region concentrate the majority of jobs, services, and universities. But rents there are also the highest in the country. Around the capital, several municipalities – Kópavogur, Hafnarfjörður, Garðabær, Mosfellsbær, Reykjanesbær – form a residential basin well-connected by road and public transport.
In Akureyri, in the north, rents are cheaper than in Reykjavik, but the supply remains limited. In small towns and rural areas, rents are even lower, but the supply is very scarce and some jobs may require long commutes to urban centers.
The following table summarizes the average monthly rents observed for apartments of different sizes according to the type of area.
| Geographic Area | Studio / 1 Bedroom (ISK/month) | 2 Bedrooms (ISK/month) | 3 Bedrooms and + (ISK/month) |
|---|---|---|---|
| Capital Region (overall) | 160,000 – 260,000 | 200,000 – 280,000 | 260,000 – 370,000+ |
| Major Towns (e.g., Akureyri) | 130,000 – 210,000 | 190,000 – 270,000 | 250,000 – 350,000 |
| Rural Areas and Small Localities | 90,000 – 160,000 | 160,000 – 250,000 | 190,000 – 300,000 |
These ranges are averages: rent, condition of the property, specific location, actual size, and lease duration can cause prices to vary up or down.
Rent Levels: What to Expect in Practice
Recent figures confirm the costly nature of the Icelandic market. In Reykjavik, a one-bedroom apartment downtown typically costs around 250,000 to 340,000 ISK per month, while a three-bedroom easily exceeds 350,000 ISK.
An average survey for the entire country, based on newly registered contracts, gives a fairly accurate idea of current levels.
| Type of Housing (new leases) | Average Rent (ISK/month) |
|---|---|
| 1 room | 186,861 |
| 2 rooms | 241,645 |
| 3 rooms | 284,042 |
| All housing combined | 263,318 |
Per square meter, the national average is around 3,639 ISK per m² per month, with significant variations between cities.
| City / Region | Average Rent (ISK/m²/month) |
|---|---|
| Reykjavik | 4,041 |
| Kópavogur | 3,810 |
| Hafnarfjörður | 3,646 |
| Akureyri | 3,026 |
| Reykjanesbær | 3,462 |
| National Average | 3,639 |
For a 60 m² apartment in Reykjavik, these amounts translate to a rent of around 240,000 ISK per month, which aligns well with the orders of magnitude observed on the ground.
The rent index for the capital region increased by 11.4% year-on-year in early 2025, a rise well above general inflation.
Including Utilities in Your Monthly Budget
Beyond rent, you must budget for current expenses. In ICELAND, most apartments do not include electricity or heating in the rent, although some landlords prefer to offer an “all-inclusive” sum. The predominant use of geothermal heating keeps heating bills at manageable levels, but the cost of electricity remains notable, especially in winter.
Recent estimates provide the following orders of magnitude for a standard apartment: the following orders of magnitude for a standard apartment.
| Expense Item | Average Cost (ISK/month) |
|---|---|
| Electricity + Heating (average apartment) | 10,000 – 25,000 |
| Fixed High-Speed Internet | 7,900 – 16,000 |
| Mobile Phone (calls + data) | 2,600 – 10,000 |
| Monthly Public Transport Pass in Reykjavik | Approx. 10,800 – 11,200 |
These amounts are in addition to the rent. A tenant paying 250,000 ISK in rent can easily reach 280,000 to 300,000 ISK in monthly housing-related expenses once all items are accounted for.
This is the average net salary in Iceland, an amount often insufficient to cover the cost of living in Reykjavik, particularly housing.
The Legal Framework: The Rent Act and Types of Leases
Long-term residential rentals in ICELAND are governed by the Rent Act (Rent Act No. 36/1994). This text establishes minimum rights and obligations for both tenants and landlords. The clauses of a contract cannot reduce the rights guaranteed by law: if a provision is less favorable to the tenant than the legal minimum, it is likely to be voided in case of a dispute.
Two forms of leases coexist:
There are primarily two types of leases. The fixed-term lease is concluded for a specific period (for example, six months, one year, two years) and automatically ends on the predetermined date. Conversely, the indefinite-term lease has no fixed term; it remains in force until terminated by either party, subject to compliance with the legal notice period.
In practice, indefinite-term leases are considered the “standard” form of residential tenancy. When no written contract is signed, the law presumes the existence of an indefinite-term lease under conditions the landlord can prove (rent amount, utilities, etc.), illustrating the importance of formalizing everything in writing.
A particular element of Icelandic law deserves mention: if a tenant continues to occupy the dwelling more than eight weeks after the end of a fixed-term lease, without the landlord requesting their departure, the contract is then considered transformed into an indefinite-term lease.
Lease Agreement Content: What Must Absolutely Be Included
The law lists the information that must mandatorily appear in a residential lease. The Ministry of Social Affairs, in fact, provides standard lease agreement templates, translated into several languages.
A compliant lease includes, among other things:
Mandatory information and important clauses to include in a lease agreement to ensure clarity and legal security for both parties.
The full identity of the landlord (or their representative) and the tenant, as well as a precise description of the dwelling (address, surface area, number of rooms, type).
The rent amount, the payment date (generally the 1st of the month, in advance), and the terms for any revision (indexation, annual increase).
The terms of the security deposit, the type of security chosen, and the bank where it is held if it is a cash deposit.
The exact allocation of expenses (water, electricity, heating, property taxes, condominium fees) between the landlord and the tenant.
The duration of the lease and, if applicable, the conditions and reasons allowing for early termination.
A detailed condition report upon entry, including the general condition, any observed defects, and compliance with fire safety requirements.
All signatures must be affixed, either on a paper version with witnesses or in a manner electronically recognized by Icelandic services. In the absence of a written lease, the tenant is still protected by law, but is in a weak position to prove the details of the initial agreement.
Lease Registration: The Basis for Benefits and Taxation
ICELAND has established an official rental registry, managed by the Housing and Construction Authority (HMS). Registering the lease in this registry is not just an administrative formality: it is a condition for accessing certain public benefits and a tool that secures the relationship between landlord and tenant.
Registration offers several concrete advantages:
– It allows the tenant to apply for housing benefits.
– It allows the landlord to pre-fill their tax return by including rental income.
– It formalizes the duration and main conditions of the lease, which can serve as evidence in case of a dispute.
– It contributes to public statistics used as a basis for calculating the rent index.
Currently, landlords renting more than two apartments are legally required to register their leases within 30 days of signing. Starting January 1, 2026, all landlords, including those renting only one property, will be required to perform this registration.
Electronic registration via the official HMS system is free for both parties. Private providers exist for drafting and managing contracts, but their services are at the landlord’s expense if they are used. A paper lease can also be registered by sending it to the HMS, subject to fees and a processing time of about one week.
Right to Housing and Rental Assistance
Many tenants are eligible to receive housing assistance. This program, managed by the HMS, takes the form of a monthly payment intended to alleviate the burden of rent for low- or middle-income households.
To be eligible, you must notably:
– Have a registered lease.
– Have established your official domicile (lögheimili) at the address of the rented dwelling.
– Meet income, household composition, and rent amount criteria.
Tenants can estimate the amount of assistance via the calculator on the HMS website. However, the number of beneficiaries has significantly decreased recently, and the amount of assistance, often not adjusted at the pace of rent inflation, is losing real purchasing power.
Alongside national assistance, some municipalities offer complementary programs: help with deposits, grants for basic equipment (furniture, appliances), or supplemental housing assistance for people in great difficulty.
Security Deposit: Amounts, Forms, and Recovery
Icelandic landlords almost systematically require a security deposit before moving in. The law regulates this practice quite strictly.
The total amount cannot exceed the equivalent of three months’ rent. In practice, most landlords require a sum ranging from one to three months. This deposit can take several forms:
Different forms of financial guarantees that can be offered by a tenant to secure a lease, according to conditions set by the landlord.
Written commitment from a bank to guarantee payment of rent and utilities in case of tenant default.
Joint and several commitment made by an individual (such as a relative) to pay on behalf of the tenant in case of arrears.
Subscription to rent guarantee insurance (GLI) with an insurance provider to cover non-payment risks.
Sum of money paid by the tenant and placed in a separate, unblocked bank account at the best available rate.
Participation in a collective insurance fund for landlords, often offered by certain institutional property owners.
Any other type of guarantee proposed by the tenant and deemed acceptable and sufficiently secure by the landlord.
Important point: the tenant has the right to refuse a cash deposit if they propose another form of guarantee deemed satisfactory. The landlord cannot mix this deposit with their personal funds, nor use it freely during the lease term. The interest generated rightfully belongs to the tenant at the time of repayment.
At the end of the lease, the landlord has four weeks to claim a deduction from the security deposit in writing (for unpaid rent or damages). After this period, they must return it in full, plus interest. If the tenant contests the deduction, the landlord then has an additional four weeks to refer the matter to the Appeals Committee or the courts, otherwise their claim risks being dismissed.
Condition Report and State of the Dwelling
Icelandic law requires that the rented dwelling be habitable, clean, and compliant with safety requirements, particularly regarding hygiene, water and drainage systems, and fire protection. At the handover of keys, the tenant should carefully inspect the apartment or house, report any anomaly in writing, and record these elements in the contract or in an annex document.
A detailed inspection is mandatory upon entry and exit of the premises. It can be conducted jointly by the landlord and tenant, or by an independent third party. If one party requests an independent expert, the other cannot refuse. The costs of entry and exit inspections by an expert are then shared equally.
This inspection report plays a central role at the end of the lease, as it allows distinguishing normal wear and tear from any damages attributable to the tenant. It is also recommended to supplement the inspection with dated photos sent to the landlord, to have objective proof of the initial condition.
The tenant must report any defect observed upon moving in writing within 4 weeks. For a problem arising later, the notification period is 14 days after its discovery. If the landlord does not initiate repairs within 4 weeks of the alert, the tenant may, after an expert assessment, have the work done and deduct the cost from the rent. In the absence of a solution after 8 weeks for a serious defect, early termination of the lease may be considered.
Maintenance, Repairs: Who Does What?
The general rule in ICELAND is simple: the landlord covers structural maintenance and major repairs, both inside and out, while the tenant assumes minor day-to-day work and must repair what they themselves have damaged.
Are normally the responsibility of the landlord:
– Structural work (walls, roof, exterior joinery).
– Replacing floor coverings and paint at reasonable intervals.
– Maintenance of heating, electrical, and plumbing installations.
– Major repairs related to normal wear and tear or a hidden defect.
– Property taxes, building insurance, and basic condominium fees.
Are normally the responsibility of the tenant:
The tenant is required to perform routine maintenance of the dwelling. This includes replacing light bulbs, minor maintenance work like unclogging drains or tightening screws, as well as regular cleaning of the dwelling in compliance with hygiene rules. They are also responsible for repairing or compensating for any damage caused by themselves, members of their household, or their guests.
It is possible to deviate from this classic allocation, for example by assigning certain interior work to the tenant in exchange for a rent reduction. But these arrangements must be precisely described in the lease, otherwise they risk becoming a source of dispute.
In case of damage attributed to the tenant, the landlord must notify them of the problems in writing and allow a period of four weeks to act. After this period, they can organize the repairs themselves at the tenant’s expense, provided they have the estimate validated beforehand by an independent expert.
Tenant Rights and Duties
Icelandic law grants tenants a non-negotiable set of rights. Among the main ones:
– The right to a written contract compliant with the law.
– The right to know the identity of the landlord or their representative.
– The right to peaceful enjoyment of the dwelling, without unjustified intrusion.
– The right to a safe, healthy, and properly maintained dwelling.
– Protection against unjustified rent increases and illegal evictions.
– The right to a refund of the security deposit within the stipulated deadlines, if no debt or damage is noted.
In return, the tenant has clear obligations:
The tenant must notably: pay the rent on the agreed date even in case of conflict, maintain the dwelling and report problems quickly, settle their bills (electricity, water, etc.), allow the landlord access for repairs with notice, not sublet without explicit agreement, and respect the rules of good neighborliness.
In case of disagreement over the “reasonableness” of a rent or compliance with legal obligations, the tenant can contact the Housing Appeals Committee or free support services like the tenant helpline managed by the Consumer Association.
Landlord Rights and Duties
On the landlord side, the law also imposes a number of responsibilities, which cannot be avoided by contract:
– Provide a lease compliant with legislation.
– Deliver and maintain the dwelling in good usable condition.
– Pay property taxes, insurance, and common charges, unless explicit contrary agreement.
– Respect legal procedures for termination, revocation, and, if applicable, eviction.
– Announce visits with reasonable notice and not enter the premises in the tenant’s absence without their explicit consent.
The landlord nevertheless has several levers:
The landlord can request a rent review in case of a significant increase in operating costs, in compliance with the law and the contract. In case of late payment, a written formal notice must be sent; failure to regularize within seven days may constitute grounds for early termination of the lease. For damages or a serious breach of clauses, it is possible to refer the matter to the courts or the Appeals Committee.
An eviction can never be carried out by the landlord themselves (changing locks, removing the tenant’s personal belongings, etc.): these practices are illegal and may fall under the Icelandic penal code. Eviction must necessarily go through a court decision or an enforcement order from the district commissioner.
Termination, Non-Renewal, and End of Lease
In ICELAND, the length of notice depends on the type of lease and the nature of the rented property. For indefinite-term residential leases, the general rule is six months’ notice, for both the tenant and the landlord, with the period starting from the first day of the month following notification.
For particular situations, the law provides for different deadlines:
– A single room under an indefinite-term lease: three months’ notice.
– A storage unit: one month’s notice.
A fixed-term lease (FDL) automatically ends on the predetermined expiry date specified in the contract, without any notice obligation. However, early termination is only possible if the contract explicitly provides for it. In this case, it must be justified by specific reasons and respect a notice period of at least three months.
An important point concerns the tenant’s “right of priority” at the end of a lease. In most cases, if the dwelling remains available for rent for at least one year, the outgoing tenant has a preferential right to conclude a new lease. To exercise this right, they must notify the landlord in writing at least three months before the end of the lease. The landlord then has 14 days to respond and justify any potential refusal. This right does not apply, however, in certain situations: dwelling occupied by the landlord themselves, planned sale within six months, major works rendering the premises uninhabitable, furnished dwelling in some cases, or serious breaches of the lease by the tenant.
At the end of the lease, the tenant must return the dwelling clean and in a condition comparable to entry, accounting for normal wear and tear. It is also their responsibility to cancel or transfer energy and service contracts by informing the relevant providers.
In Case of Conflict: Appeals and Assistance
Despite a detailed legal framework, rental conflicts exist. They can concern the amount of rent, the refund of a deposit, carrying out repairs, the validity of a termination, or the conditions of an eviction.
In ICELAND, several actors can intervene:
In case of a rental dispute, several organizations and avenues of appeal are available to advise you, defend your rights, or resolve a conflict.
Issues binding administrative decisions on disputes. These decisions can be challenged in court within eight weeks.
Free service managed by the Consumer Association. Offers legal advice, helps direct procedures and prepare a case for the Committee.
Advocate for better protection for households and the development of affordable non-profit housing. Can offer support and advice.
Resorted to as a last resort, notably for eviction procedures or to challenge an administrative decision from the Committee.
In all cases, the law emphasizes the importance of communicating in writing: defect notifications, formal notices, notices, disputes. Emails can be considered equivalent to registered letters if they allow proof of the date of receipt and the content transmitted.
Market Tension, Seasonal Rental, and Outlook
Data from the Housing Authority shows persistent pressure on the Icelandic rental market. The rent index has increased faster than overall consumer prices for several years, and the country is among those where the housing cost burden is heaviest relative to income.
This is the proportion of apartments in some central Reykjavik neighborhoods now dedicated to short-term tourist rentals.
Despite these adjustments, forecasts converge: without a significant increase in the supply of residential housing and without stronger measures on rents, it is likely that rental prices will continue to remain high in the medium term, even if interest rates begin to ease and the real estate market as a whole slows slightly.
Long-Term Renting in ICELAND: A Balance Between Strong Protections and Expensive Reality
Renting long-term property in ICELAND, whether in the Reykjavik region, in Akureyri, or in a small provincial town, involves dealing with a paradox: on one hand, a highly structured legal framework, often favorable to tenants, which regulates contracts, deposits, repairs, notices, and evictions; on the other hand, an extremely tight market, rents high relative to income, and fierce competition for every apartment put on the market.
For a long-term settlement project, it is useful to keep in mind a few key ideas derived from all the available data.
– Prepare a realistic budget in advance, incorporating both rent, utilities, and local salary levels.
– Begin the search several months in advance, using both Icelandic websites, Facebook groups, and personal networks.
– Refuse any request for remote payment without a physical or virtual viewing of the property, to avoid scams.
– Demand a written contract and ensure it meets the minimum requirements of the Rent Act.
– Have the lease registered with the HMS to secure your situation and qualify for potential benefits.
– Carefully document the condition of the property upon arrival to limit disputes upon departure.
– Keep all important communications with the landlord in writing.
It is possible to rent in Iceland with more security by respecting certain principles and using existing public services: the HMS (housing service), tenant helplines, and the Appeals Committee, even in a market where the cost per square meter is high.
A French business owner, around 50 years old, with a financial portfolio already well-structured in Europe, wanted to diversify part of his capital into residential real estate in Iceland to seek rental yield and exposure to the Icelandic krona. Allocated budget: $400,000 to $600,000, without using credit.
After analyzing several markets (Reykjavík, Kópavogur, Hafnarfjörður), the strategy adopted consisted of targeting a small apartment or townhouse in a dynamic neighborhood of the capital, combining a target gross rental yield of 6–7% (the higher the yield, the greater the risk) and medium-term appreciation potential, with a total outlay (acquisition + fees + possible renovations) of around $500,000. The mission included: market and neighborhood selection, connection with a local network (real estate agent, lawyer, tax advisor), choice of the most suitable structure (direct ownership or local company), and definition of a multi-year diversification plan integrating French and Icelandic taxation.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
