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State Aid

State aid: The Authority recommends amendments to the Housing Financing Fund in Iceland


Today, the Authority has recommended certain measures to the Icelandic Government in order to bring the Housing Financing Fund (HFF) in line with the state aid provisions of the EEA Agreement. The deadline for implementation of this decision has been set at 1 January 2012.

The Housing Financing Fund (HFF) is a state owned institution that provides a public service in the form of long term stable lending for housing purposes on manageable terms. The main activity of HFF is to foster private home ownership in Iceland, by providing mortgages for the purchase, construction or renovation of residential housing. HFF also provides loans to municipalities, associations and companies for construction and purchase of residential housing for the purpose of rental.

The Authority has today concluded, in line with an earlier judgment of the EFTA Court[1], that the scope of HFF's public service activities needs to be more clearly defined in order to ensure that various state aid measures only benefit the public service activities of HFF and not other commercial activities outside the scope of the public service. HFF enjoys an unlimited state guarantee, income tax exemption, interest support for mortgages to rental housing activities and lack of a requirement of adequate return on capital.

The Authority has therefore recommended appropriate measures in order to bring the HFF scheme in line with the state aid provision of the EEA Agreement. It has, amongst other things, requested Iceland to clarify the definition of the public service entrusted to HFF by introducing caps on cost and size of the dwellings eligible for HFF funding. The Authority's recommendation for amendments to the scheme also aims at avoiding cross-subsidisation of commercial activities of HFF.

If the Icelandic authorities accept and implement the Authority's recommendation for changes within the proposed deadline, the case will be closed. Otherwise, the Authority may decide to initiate a formal investigation procedure.


For further information, please contact:


Per Andreas Bjørgan
Competition and State aid directorate
Tel. (+32)(0)2 2861836

[1] Case E-9/04 The Bankers' and Securities' Dealers Association of Iceland v EFTA Surveillance Authority [2006] EFTA Court Report, p. 42.

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