One year since ESA complaint over unlawful state aid in the housing market

One year has now passed since the Iceland Chamber of Commerce submitted a complaint to the EFTA Surveillance Authority (ESA) concerning what the Chamber considers to be unlawful state aid in the housing market. The Authority still has the case under review. The complaint concerns public support from the state and municipalities for so-called non-profit housing associations, and whether that housing support is compatible with the EEA Agreement's rules on state aid.

Following the Chamber's complaint, ESA announced that it had decided to take the complaint up for substantive review. With that decision, ESA considered the case to meet the conditions for further investigation and it entered the Authority's standard procedure, under which the Authority generally allows itself 12 months from receipt of a complaint to issue a preliminary conclusion.

The Chamber's complaint set out how the authorities provide so-called non-profit housing associations with financial subsidies in three ways: (1) allocation of building plots below market price, (2) direct financial contributions through capital grants, and (3) subsidised loans from the Housing and Construction Authority (HMS). Combined, this support is equivalent to a 46% subsidy of the construction cost of new apartments, according to the Chamber's estimates.

In the Chamber's view, this support distorts competition in the housing market and does not meet the conditions of the EEA rules on state aid. The Chamber's complaint points out that housing associations enjoy substantial public subsidies through the allocation of plots below market price, capital grants and favourable loans from the Housing and Construction Authority. According to the Chamber's calculations, this aid amounts to up to 46% of the construction cost of new apartments.

It is not yet known when ESA will conclude its review of the case. The Iceland Chamber of Commerce will continue to follow its progress and provide updates on next steps once further information is available.

The Chamber reiterates its position that public support for housing should be transparent, clearly delimited and accessible on equal terms, regardless of who receives it.

This article was automatically translated from the Icelandic original.