On February 19, 2026, Iceland's parliament, Althingi, voted to disband the Planning Agency and merge its functions into the Housing and Construction Agency. The new entity will be known as the Housing, Construction, and Planning Agency (HMS), although it will retain its original acronym. This decision marks a significant restructuring of government agencies involved in urban and rural planning, as the Housing and Construction Agency will now oversee all processes from planning to the completion of constructions.

The proposal, spearheaded by Minister of Social Affairs and Housing, Ragnar Þór Ingólfsson, was approved with overwhelming support across the political spectrum, reflecting a consensus on the necessity of this merger, despite three members from the Progressive Party voting against it. The merger is expected to streamline operations and enhances the government's ability to provide services, particularly in rural areas of Iceland, by consolidating relevant departments that had traditionally operated independently.

This strategic governance change aims to create a more efficient workflow in managing planning projects across the country. By centralizing these responsibilities, officials believe that coordination will improve, leading to better implementation of housing and infrastructure projects, which are increasingly critical as Iceland faces ongoing urbanization and population growth. The establishment of regional offices is also anticipated to strengthen local engagement and responsiveness.