Reykjavík City Council will discuss a new road construction fee regulation today. Reykjavík's road construction fees have been equal to or lower than other municipalities across most categories, covering only about a third of street construction costs.
Current Reykjavík City fee schedule compared to proposed new rates scheduled to take effect Sept. 1. Fee schedules from other municipalities in both the capital area and rural regions are provided for comparison.
Road construction fees represent a vital municipal revenue source meant to fund street construction and infrastructure maintenance. Current revenue falls short of covering these costs, prompting the proposed fee increases in the new regulation. Despite the increase, road construction fee revenue will still not fully cover construction and maintenance expenses.
If approved, the current road construction fee regulation No. 725/2007 and its amendments will be repealed, except for two provisions detailed in temporary articles I and II of the new regulation. The regulation establishes the following road construction fees as percentages of the base price, which Statistics Iceland updates monthly according to the construction cost index:
a) Multi-family residences 10%
b) Single-family and other residential buildings 15%
c) Above-ground parking structures and bicycle shelters 5%
d) All other buildings not covered in sections a), b) and c) 13%
Key changes in the new regulation include:
- revising the fee assessment base for specific building categories
- introducing a new assessment category for above-ground parking structures and bicycle shelters
- limiting the city's authority to reduce or waive road construction fees in certain cases Provisions allowing fee reductions for non-profit organization properties remain unchanged
- harmonizing the regulation's language and content with current legislation
Revenue covers only one-third of costs
The 2025-2029 budget forecasts the following road construction fee revenue, factoring in late 2025 fee increases. For comparison, actual fees collected in 2023 and projected figures for 2024 are:
Recent years have seen significant investment in street infrastructure, with road construction fees serving as a statutory revenue source for construction and maintenance costs. The following table shows the city's road construction fee revenue from 2018 through 2023, plus forecasts for 2024 and 2025. Comparative figures show the city's investment in street construction and related infrastructure. During this period, road construction fee revenue has covered only about one-third of total costs:
Road construction fees must cover infrastructure costs
During the last City Council meeting, representatives from the Social Democratic Alliance, Progressive Party, Pirate Party and Liberal Reform Party emphasized that road construction fees must cover municipal infrastructure development and maintenance costs. "Too many municipalities, both in Iceland and abroad, have created unsustainable situations by overbuilding, often with excessive sprawl, without securing adequate revenue to cover infrastructure costs. This can create dangerous situations that are very difficult to resolve," the minutes state. "Road construction and infrastructure fees must be fair, maintain development incentives, while ensuring necessary infrastructure and sustainable development."