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How to cite:
Theodórsdóttir, Á.H. (2023): Country Profile of Iceland. Hannover. = ARL Country Profiles. https://www.arl-international.com/knowledge/country-profiles/iceland/rev/3740. (date of access).


Iceland (Ísland) consists of an island of 103,000 km2, along with a number of minor islets. It is located in the middle of the North Atlantic, between southern Greenland to the west, Norway to the east and the Faroe Islands and Scotland to the southeast. The country’s northernmost inhabited islet touches the Arctic Circle. Iceland has a vast exclusive economic zone, with maritime borders with Norway (Jan Mayen) and Denmark (Faroe Islands and Greenland).

Iceland has a population of 376,000 people. Two-thirds of the population live in the capital region, in and around the capital Reykjavik, in the southwest. The remaining population lives in smaller towns, villages and rural areas, mostly along the periphery of the island, while the central interior of the country is uninhabited highlands, partly covered with glaciers.

Iceland’s population is relatively homogeneous, but with a growing proportion of inhabitants of foreign origin. Immigrants accounted for 15.5% of the population in 2021. Poles are the largest group of immigrants. The second largest group of immigrants is Lithuanians, followed by Filipinos. Icelandic is the official national language, but with increased immigration, more people have a different first language. Also, English is becoming more prominent, especially in the service sector, due to the fast growth of tourism. The annual number of foreign visitors has been up to six times the population in Iceland in recent years.

Iceland is a parliamentary republic. The Parliament, Alþingi, holds legislative and fiscal powers, e.g. the power to make decisions on public spending and taxation. The Icelandic territorial administrative system has two tiers: central government and the municipalities.

Iceland is a member nation of the Nordic Council of Ministers and the Nordic Council and a party to the European Economic Area (EEA), along with the EU member states and fellow EFTA member states, Norway and Liechtenstein.

General information

Name of country Iceland
Capital, population of the capital (2020) Reykjavik, 133,920 (Hagstofa Islands)
Surface area 103,000 km² (World Bank)
Total population (2020) 366,463 (World Bank)
Population growth rate (2010-2020) 15.23% (World Bank)
Population density (2020) 3.6 inhabitants/km² (World Bank)
Degree of urbanisation (2015) 55.92% (European Commission)
Human development index (2021) 0.959 (Human Development Reports)
GDP (2019) EUR 17,167 million (World Bank)
GDP per capita (2019) EUR 47,612 (World Bank)
GDP growth (2014-2019) 24.26% (World Bank)
Unemployment rate (2019) 3.51% (World Bank)
Land use (2018) 0,39% built-up land
2,57% agricultural land
0,89% forests and shrubland
86,46% nature
9,69% inland waters
(European Environment Agency)
Sectoral structure (2017) 74,6% services and administration
19,7% industry and construction
5,8% agriculture and forestry
(Central Intelligence Agency)

To ensure comparability between all Country Profiles, the tables were prepared by the ARL.

Administrative structure and system of governance

Iceland is a parliamentary democracy and a constitutional republic. The Icelandic Constitution (stjórnarskrá) dates back to 1944, when Iceland gained full independence from Denmark. Some amendments have been made to the constitution through the decades, but efforts made after the 2008 crash to adopt a new constitution have not been successful.

The president (forseti) is the country’s head of state, who serves primarily a symbolic role. The president is elected by direct popular vote every four years, with no term limit. The president appoints the prime minister (forsætisráðherra) and approves other cabinet ministers in the government (ríkisstjórn) and legislation passed by Parliament (Alþingi).

The government is comprised of the prime minister and eleven other cabinet ministers, each responsible for different government ministries. The ministers sit in Parliament, but only those ministers who have been elected as members of parliament have the right to vote there. The government has executive power and is responsible for executing legislation and proposing new bills and budget to Parliament. The government is normally formed by majority coalitions of two or more political parties represented in Parliament.

A number of state agencies form part of the central government administration, such as the National Planning Agency (Skipulagsstofnun), which is a public agency responsible for spatial planning and environmental assessment at the national level, on behalf of the respective ministers, the Minister of Infrastructure and the Minister of the Environment, Energy and Climate.

Parliament (Alþingi) comprises one chamber, with 63 elected members. Parliamentary elections normally take place every four years, but can be called earlier. Parliament shares legislative power with the president, who approves legislation passed by Parliament.

Judicial power lies with the Supreme Court (Hæstiréttur), Court of Appeal (Landsréttur) and eight district courts (Héraðsdómur). The judiciary is independent of the executive and the legislature. Furthermore, certain planning matters can be appealed to an administrative board of appeal, the Environmental and Natural Resources Board of Appeal (úrskurðarnefnd umhverfis- og auðlindamála).

Iceland has a two-tier system of central government and 64 municipalities. There are legal provisions in place to encourage local authorities to amalgamate, with the aim of reaching a minimum number of 1,000 inhabitants in all local authority areas. Currently four municipalities have fewer than 100 inhabitants, 16 have fewer than 500 inhabitants and 29 have fewer than 1,000 inhabitants. At the same time, many local authorities cover vast land areas, the largest covering 12,000 km2, but having only 1,350 inhabitants.

Elections for local government are held every four years. Local authorities are responsible for various issues at the local level, such as schools, social services and the provision of local infrastructure, as well as having primary responsibility for spatial planning.

Even though there is no formal regional administrative level, eight regional associations of local authorities perform various tasks and duties, including having a role in the formulation and execution of regional development policy. They also, in some cases, act on an informal basis as secretariats for regional planning committees.


Figure 1: Administrative structure of Iceland

Figure 1: Administrative structure of Iceland

Figure 2: System of powers of Iceland

Figure 2: System of powers of Iceland

Spatial planning system

Historical development

The first Icelandic Planning Act, the Law on the planning of towns and fishing villages, was passed in 1921. It established that central government should prepare plans for Icelandic towns and fishing villages with 500 or more inhabitants, in cooperation with local councils.

With an amendment to the law in 1938, the definition of towns and villages subject to planning was lowered to 200 inhabitants and planning allowed in other areas, where deemed necessary. Furthermore, a planning board (skipulagsnefnd), which had worked on plans for towns and villages on behalf of central government since 1921, was given a more formal status. The planning board was to be made up of the state architect, the director of the national road administration and the director of the national harbour authority. Previously a medical doctor, Guðmundur Hannesson, who was influential on planning matters in Iceland in his age, had sat on the planning board. The 1938 Act also marked the establishment of the national planning board’s office, the origins of the present day National Planning Agency (Skipulagsstofnun).

During these first decades of formal plan-making, plans were drawn up for most of the towns and villages around the country that fulfilled the criteria of 500, and later 200, inhabitants.

The 1921 planning legislation, with some amendments, remained in place until Parliament passed a new Planning Act in 1964, in which the role of the National Planning Board (skipulagsstjórn ríkisins) and the National Planning Agency (embætti skipulagsstjóra ríkisins) were further established. In the 1964 Act, the National Planning Board continued to consist of the state architect, the director of the national road administration and the director of the national harbour authority, but also included two other members appointed by the Minister of Social Affairs (who was responsible for land use planning at the time), one of whom was nominated by the association of local authorities.

The role of the National Planning Board, according to the 1964 Act, was to prepare plans for approval by the minister, take the initiative for planning where deemed necessary, and manage planning matters. The National Planning Agency was responsible for preparing planning proposals and reviewing existing plans, in cooperation with the National Planning Board and local authorities, as well as supervising compliance with existing plans. The 1964 Act also specified that the National Planning Agency could hire consultants to prepare planning proposals.

Thus, in formal terms planning continued to be primarily the responsibility of central government, although local councils had certain roles in the plan-making process and in the execution of plans. The 1964 Act remained in place until Parliament passed a new Planning and Building Act in 1997. During this period, 1964-1997, day-to-day plan-making and the supervision of planning matters was increasingly dealt with by local authorities, even though planning did not formally become primarily the responsibility of local authorities until the 1997 Act. With the 1964 Act and its amendments in the period 1964-1997, the remit of planning had also gradually expanded to include all urban areas, rural areas (except agricultural buildings) and the central highlands. Agricultural buildings were later included with the 1997 Act.

The 1997 Act marked a turning point in the development of the Icelandic planning system. Local authorities were given prime responsibility for planning, under the supervision of the National Planning Agency. The Act also defined for the first time in law the various planning instruments – regional plans (svæðisskipulag), municipal plans (aðalskipulag) and site plans (deiliskipulag). These planning instruments had previously only been defined in planning regulations. Furthermore, the 1997 Act introduced the aims and values that should underpin all plan-making (first article of the Act), including that planning should serve the economic, social and cultural needs of the population, as well as their health and safety. Planning should promote the sensible and efficient use of land with sustainable development as a guiding principle. Also, planning should take account of individuals’ rights, while having the public interest as a guiding principle.

Current planning system

The current planning legislation, the Planning Act of 2010 (skipulagslög nr. 123/2010), introduced less extensive changes to the planning system than the previous 1997 Act had done, but did still introduce some important new aspects. The aims of planning, defined in the first article of the Act, were expanded to include landscape protection and an emphasis on public consultation in the planning process. Also, the 2010 Act introduced a new planning instrument, the National Planning Policy (landsskipulagsstefna). The introduction of a platform for central government to present its planning policy had been discussed for decades and debated throughout the 1990s as part of the new planning system that was introduced in the 1997 Act. But it was not until the 2010 Act that sufficient political consensus had been formed to introduce the legal provisions for such a planning instrument at the national level.

A special Act on Marine Spatial Planning (lög um skipulag haf- og strandsvæða) was passed by Parliament in 2018 which introduced a new planning instrument, coastal plans (strandsvæðisskipulag). Coastal plans can cover areas that lie outside of local authority jurisdiction (which extends 115 metres from mean low water spring).

Authorities responsible for planning

With the establishment of an Environment Ministry in 1990, planning matters moved from the Ministry for Social Affairs to the new Ministry for the Environment, where planning remained until it was moved in 2021 to the new Ministry for Infrastructure.

The National Planning Agency (Skipulagsstofnun) is a state authority under the Ministry of Infrastructure, and is responsible for the administration and implementation of the Planning Act, the Act on Marine Spatial Planning and the Act on Environmental Impact Assessment. The last-mentioned legislation remains under the supervision of the Minister of the Environment, Energy and Climate.

Among the main roles of the National Planning Agency under the Planning Act is to advise on planning issues, assist local authorities in preparing spatial plans and to examine and approve spatial plans produced by local authorities. The National Planning Agency is also responsible for preparing the National Planning Policy on behalf of the minister.

Local authorities are responsible for the preparation and adoption of regional, municipal and site plans. They issue building and development permits and supervise the implementation of regional, municipal and site plans and of building and development permits.

As previously mentioned, there is no regional administrative level in Iceland. Regional planning is the responsibility of the respective local authorities, in cooperation with each other. They establish regional planning committees, which are responsible for regional planning and the implementation of regional plans on behalf of the local authorities in question. In some cases, where regional plans cover areas that correspond to the areas of the regional associations of local authorities, the latter may serve as secretariats for the respective regional planning committees.

Planning instruments

The Planning Act of 2010 defines four types of planning instruments:

  • National Planning Policy (landsskipulagsstefna)
  • Regional plans (svæðisskipulag)
  • Municipal plans (aðalskipulag)
  • Site plans (deiliskipulag)

National Planning Policy

The National Planning Policy is a strategic policy document on spatial planning, providing guidance for local authority plan-making and other public authorities dealing with urban development, land use and infrastructure.

The Minister for Infrastructure shall present a National Planning Policy proposal to Parliament within two years after parliamentary elections. The National Planning Policy is a policy on planning, based on sustainable development and the aims of the Planning Act, which integrates public plans for transport, regional development, nature conservation, energy and other issues related to land use and the utilisation of marine areas. The National Planning Policy can address the whole country or certain regions. It must always include a planning policy for the central highlands and marine areas, but apart from that, the minister decides on the emphasis of the policy when she/he initiates the process of drafting a new National Planning Policy.

The National Planning Policy is submitted to Parliament by the minister and enters into force when Parliament has passed it as parliamentary resolution.

Local authorities must take the National Planning Policy into account in their plan-making, but can deviate from it if sufficient reasons are presented to the National Planning Agency.

For further information about the national planning policy instrument, the current National Planning Policy 2015-2026 and a proposal for an amended national planning policy introduced in 2021, see the Fact Sheet on the National level.

Regional plans

Regional plans provide a strategic, regional planning policy on those aspects of urban development, land use and infrastructure for which the relevant local authorities find it important to establish a common policy. Regional planning is voluntary except for the seven municipalities that form the capital region, where regional planning is mandatory.

Regional plans are prepared by regional planning committees, which are appointed by the respective local authorities.         Regional plans are adopted by the regional planning committee in question and all relevant local councils and approved by the National Planning Agency prior to entering into force.

Regional plans are binding for municipal plans and site plans, as well as for building and development permits.

Currently there are seven regional plans in place (see map) with different themes and focal points, ranging from a comprehensive spatial planning policy to an emphasis on place making and tourism or energy provision and transmission.

For further information about the regional plan instrument and the case of the Regional Plan for the Capital Region, see the Fact Sheet on the Regional level.

Municipal plans

Local authorities are responsible for having a municipal plan in place, setting out the policy on land use and development throughout the whole municipality with at least a twelve-year perspective.

Municipal plans must be consistent with a regional plan that may be in place, and must take the National Planning Policy into account, but local authorities can deviate from the latter if sufficient reasons are presented to the National Planning Agency.

Municipal plans are adopted by the local authority in question and approved by the National Planning Agency prior to entering into force.

Municipal plans are binding for lower tier plans, i.e. site plans, as well as for building and development permits.

For further information about the municipal plan instrument and the case of the Municipal Plan for the capital Reykjavik, see the Fact Sheet on the Municipal level (Municipal plans).

Site plans

Local authorities are responsible for preparing and adopting site plans. However, they can permit landowners and developers to prepare and submit a site plan proposal to the municipality.

Site plans must be consistent with the local authority’s municipal plan. They establish the premises and design guidelines for building permits and the design of streets, open areas, etc., including the use, size, height and location of buildings.

Site plans are adopted by local authorities. Prior to entering into force, they are subject to an examination by the National Planning Agency after adoption by the local council.

Building permits must be in accordance with a site plan for the area in question.

For further information about the site plan instrument and an example of a site plan, see the Fact Sheet on the Municipal level (Site plans).

Planning process and participation

The requirements set out in the Planning Act on the planning process and participation for all the planning instruments described above have some common elements, such as:

  • The planning process is initiated by the relevant planning authority with the publication of a prospectus (lýsing), laying out the aims for the plan-making and planning process ahead, e.g. who will be consulted during the planning process.
  • During the planning process, the planning authority shall seek opinions and suggestions from the public, other public authorities and interested parties.
  • In preparing the planning proposal, the environmental impacts shall be assessed, e.g. by comparing different alternatives.
  • The final planning proposal is put out for public consultation for at least six weeks.
  • The plan is adopted by the relevant planning authority after it has processed the comments received from the public, stakeholders and public agencies during the public consultation period and made changes to the plan, as applicable, in response to the comments received.
  • From 2023, all planning proposals and documentation related to the planning process will be accessible via a national planning portal (skipulagsgátt).

Main spatial planning challenges and issues on the spatial planning agenda

As previously mentioned, Iceland is sparsely populated, with only 3.65 inhabitants/km². Around two-thirds of the population is concentrated in and around the capital Reykjavik in the southwest, with the remaining population living in smaller towns, villages and rural areas along the periphery of the island, while the central interior of the country is uninhabited highlands. Furthermore, the local authorities, which have the main responsibility for plan-making, vary greatly in size, from fewer than 50 inhabitants to over 100,000 inhabitants. Accordingly, there is a great disparity in both planning capacity and competence and what are the most pressing spatial planning challenges and issues. Some of the issues that have been prominent on the planning agenda in recent years are:

  • Compact urban development and planning for multi-modal transport in the capital region.
  • Expansion of local communities within commuting distance of the capital region.
  • Provision of sufficient housing, affordable housing and housing in remote areas where construction costs exceed the market value.
  • Development related to tourism, such as provisions for the short-term rental of residential accommodation, and the development of hotels and different tourist attractions around the country.
  • Extensive proposals for the development of wind energy, primarily initiated by different private developers, but so far wind energy has not been built on an industrial scale in Iceland.
  • Preservation of agricultural land vs. pressure for scattered residential development and second homes in the countryside.
  • Preservation of wilderness areas and the pristine nature of the central highlands vs. the interests of both infrastructure development for energy provision (hydro, geothermal and wind) and energy transmission lines as well as infrastructure for tourism (roads and accommodation).
  • Expansion of fish farming off the coast in the Westfjords and by the East coast.
  • Climate issues, both mitigation and adaptation, which can be seen in the emphasis on compact urban development, active transport modes and public transport. Also an emphasis on green infrastructure, such as sustainable urban drainage solutions, and on the preservation and reclamation of wetlands and afforestation, as well as attention to rising sea levels and the increased frequency of incidents like landslides.
Figure 3: Planning system of Iceland

Figure 3: Planning system of Iceland

Important stakeholders

Institution/stakeholder/authority (including webpage) Special interest/competences/administrative area
Ministry of Infrastructure (Innviðaráðuneyti) Ministry responsible for planning, transport, building, housing, regional development and local authorities.
Ministry of the Environment, Energy and Climate (Umhverfis-, orku- og loftslagsráðuneyti) Ministry responsible for environmental assessment, nature conservation, environmental protection, climate issues, natural hazards and energy.
Ministry of Food, Agriculture and Fisheries (Matvælaráðuneyti) Ministry responsible for agriculture, forestry, fish farming and fisheries.
Parliament (Alþingi) Parliament approves the national planning policy by a parliamentary resolution.
Environmental and Natural Resources Board of Appeal (úrskurðarnefnd umhverfis- og auðlindamála) Decides on appeals of environment-related decisions by municipal and government bodies, including issues relating to site plans and building and development permits.
National Planning Agency (Skipulagsstofnun) National public agency under the Ministry of Infrastructure responsible for planning and environmental assessment. Prepares the National Planning Policy.
Local authorities (sveitarfélög) Responsible for plan-making (regional, municipal and site plans).
Association of local authorities (Samband íslenskra sveitarfélaga) Represents the interests of local authorities.
Regional associations of local authorities (Landshlutasamtök sveitarfélaga) Represent the interests of local authorities in the respective region. Can have a direct role in regional planning and regional development policy e.g. for North-West Iceland
National sectoral agencies and national park authorities Various national sectoral agencies dealing with transport, environmental protection, energy, housing, etc. National park authorities responsible for the planning and management of national parks.
Non-governmental organisations Active participants in planning processes and in the development of the planning legislation.

Fact sheets


List of references

Administration of Althingi (2018): Althingi, information brochure. Available at: http://www.althingi.is/pdf/Althingi2018_enska.pdf (Accessed 31 August 2022).

Directorate of Labour (2022): Atvinnuleysi – tölulegar upplýsingar (Engl.: Unemployment – statistical information). Available at: http://www.vinnumalastofnun.is/maelabord-og-tolulegar-upplysingar/atvinnuleysi-tolulegar-upplysingar (Accessed 31 August 2022).

Government of Iceland (2022): How is Iceland governed? Available at: http://www.government.is/topics/governance-and-national-symbols/how-is-iceland-governed/ (Accessed 31 August 2022).

Icelandic Coast Guard (2022): Hafsjá – Efnahagslögsagan (Engl.: Maritime map viewer – Exclusive economic zone). Available at: https://atlas.lmi.is/mapview/?application=haf (Accessed 31 August 2022).

National Land Survey of Iceland (2020): CORINE-landflokkun 2018. Landgerðabreytingar á Íslandi 2012-2018. Available at: http://www.lmi.is/static/files/corine/corine_2018_lokaskyrsla.pdf Accessed (31 August 2022).

National Land Survey of Iceland (2022): Kortasjá – Sveitarfélagasjá (Engl.: Map viewer – Municipal boundaries). Available at: https://atlas.lmi.is/mapview/?application=markasja (Accessed 31 August 2022).

OECD (2022): Gross domestic product (GDP). Available at: http://data.oecd.org/gdp/gross-domestic-product-gdp.htm (Accessed 31 August 2022).

Statistics Iceland (2021): Immigrants 15.5% of the population of Iceland. Available at: http://statice.is/publications/news-archive/inhabitants/population-by-origin-1-january-2021/ (Accessed 31 August 2022).

Statistics Iceland (2022a): The population increased by 2.0% in 2021. Available at: http://statice.is/publications/news-archive/inhabitants/the-population-on-january-1st-2022/ (Accessed 31 August 2022).

Statistics Iceland (2022b): Population, municipalities and urban nuclei. Available at: http://statice.is/statistics/population/inhabitants/municipalities-and-urban-nuclei/ (Accessed 31 August 2022).

Statistics Iceland (2022c): Geography, Area of Iceland, sq.km. Available at: http://statice.is/statistics/environment/land-and-air/geography/ (Accessed 31 August 2022).

Statistics Iceland (2022d): Localities with 200 inhabitants or more. Available at: http://statice.is/statistics/population/inhabitants/municipalities-and-urban-nuclei/ (Accessed 31 August 2022).

Statistics Iceland (2022e): Annual GDP volume growth 1980-2021. Available at: http://px.hagstofa.is/pxen/pxweb/en/Efnahagur/Efnahagur__thjodhagsreikningar__landsframl__3_landsframleidsla_althj/THJ01702.px (Accessed 31 August 2022).

Statistics Iceland (2022f): Gross Domestic Product by industries, percentage breakdown, 1997-2021. Available at: https://px.hagstofa.is/pxen/pxweb/en/Efnahagur/Efnahagur__thjodhagsreikningar__framluppgj_ISAT2008/THJ08401.px (Accessed 31 August 2022).

UNDP (2020): Iceland, UNDP Human Development Reports. Available at: http://hdr.undp.org/data-center/specific-country-data#/countries/ISL (Accessed 31 August 2022).


National Planning Agency (n.d.): Skipulagsstofnun (Engl.: National Planning Agency). Available at: https://skipulag.is (Accessed 31 August 2022).

National Planning Agency (n.d.): Landsskipulagsstefna (Engl.: National Planning Policy). Available at: https://landsskipulag.is (Accessed 31 August 2022).

National Planning Agency (n.d.): Skipulagsvefsjá Skipulagsstofnunar (Engl.: National Plan Viewer). Available at: https://www.map.is/skipulag/ (Accessed 31 August 2022).

Association of Municipalities in the Capital Area (n.d.): Svæðisskipulag höfuðborgarsvæðisins (Engl.: Regional Plan for the Capital Region). Available at: https://ssh.is/svaedisskipulag (Accessed 31 August 2022).

City of Reykjavik (n.d.): Skipulagssjá Reykjavíkurborgar (Engl.: Reykjavík City Plan Viewer). Available at: https://reykjavik.is/skipulagssja (Accessed 31 August 2022).

City of Reykjavik (n.d.): Aðalskipulag Reykjavíkur (Engl.:Reykjavik Municipal Plan). Available at: https://reykjavik.is/adalskipulag (Accessed 31 August 2022).