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Should Norway introduce a temporary cap on rent increases? 

Frazer Norwell
Frazer Norwell - [email protected] • 8 Sep, 2022 Updated Thu 8 Sep 2022 11:58 CEST
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With inflation so high should Norway decide to introduce a temporary rent cap. Pictured is a row of apartments in Oslo. Photo by Jeremy Bezanger on Unsplash

Landlords in Norway can raise rent in line with the consumer price index, but with inflation at its highest level since the 1980s, should the government introduce a temporary limit on rent increases? The Local spoke to housing market experts. 

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Much like the rest of Europe, prices are rising in Norway, with everything from energy bills to food shopping becoming more expensive. 

This has led to inflation rising to the highest levels Norway has seen since the 1980s. Inflation in Norway has not been higher since 1988, and the country's consumer price index (CPI) rose by 6.8 percent between July 2022 and the same month last year, the latest figures from Statistics Norway (SSB) show. 

Rising prices have had knock-on effects for rent too. During the second quarter, the cost of renting in Norway's four biggest cities rose 4.2 percent compared to a year ago. 

Currently, landlords can raise the rent for tenants in line with inflation or the CPI for those who have been renting with them for over a year. This can be done once a year. There are slightly different rules for increasing the rent for longer-term tenants where rent can be raised in line with current market values

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READ MORE: How much can my landlord legally increase my rent by in Norway? 

Cost of living increases have led several countries, including DenmarkFrance and Spain, to introduce temporary caps on rent increases to help ease rising consumer costs. Caps in these countries range from two (Spain) and four (Denmark) percent. 

So, should the Norwegian government follow suit and introduce a limit on rent rises to protect against hefty increases? 

Jardar Sørvoll & Kim Astrup, both researchers at BOVEL, the centre of housing and welfare research at Oslo Metropolitan University, who specialise in the Norwegian property market, believe the government should consider a temporary limit. 

"In normal circumstances, it is a good idea that there is a legal mechanism in place that allows landlords to adjust rents annually to keep up with prices. However, in periods with exceptional levels of inflation, there is a case to be made for introducing a cap on rents to protect tenants. We are not opposed to a sensible temporary cap on rents given the current difficult situation for many tenants," the researchers told The Local. 

They believe that a temporary cap should be introduced because most tenants' wage increases are not keeping up with current inflation, leaving them worse off in real terms. The researchers told The Local that a new rent cap would represent a burden-sharing exercise between tenants and landlords. 

"A cap will reduce real rents to the detriment of the legitimate economic interests of landlords (who are not all wealthy). However, the incomes of many tenants will not keep up with inflation, and if there is no cap on rents, the tenants will have to carry the whole burden of the exceptional price growth. A temporary cap may be seen as a step towards a reasonable risk sharing between landlords and tenants in an age of inflation," Sørvoll and Astrup explained. 

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READ MORE: Is now a good time to buy property in Norway?

However, not everyone is convinced by the prospect of a short-term rental market cap. Kjetil J. Olsen, CEO of Husleie, a platform where landlords can manage tenancies, argued that a temporary rental cap would make the market harder for tenants to navigate as a knock-on of limiting increases would be fewer homes being available for rent. 

"Generally, we do not believe in price caps or regulation of the rental market. A consequence of regulations could be inefficiencies in the market with fewer homes for rent as a price cap could make it a loss-making investment for the landlords. Secondly, we could also experience the growth of a black market where money is exchanged between the parties and labelled as something other than rent. While not the solution to everything, we believe more in reverting the increased taxes that were imposed in 2022," Olsen told The Local. 

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Instead, high rent prices in Norway could be attributed to new tax rules which impact landlords and cost of living increases, rather than a lack of regulation.

"The steep increase of rental prices we see in the Norwegian rental market is a result of the toxic cocktail we predicted last fall, consisting of increased wealth taxes, taxable value of secondary homes impacting landlords renting out, and the now new reality of increased interest rates and expensive electricity. The result of this "cost increase" sadly ends up with the tenants. We are now seeing price levels that we have never seen before in Norway," Olsen explained. 

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Frazer Norwell 2022/09/08 11:58

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