Looking for affordable stays in Iceland? Discover the top 12 best cheap budget hotels and hostels in Reykjavík. Find affordable rooms near major sights today!Let’s be honest: Iceland is notoriously expensive. Between the breathtaking glacier tours and the pricey pints of local beer, your wallet can take a hit pretty fast. But here is the good news—your accommodation doesn’t have to drain your travel funds.Reykjavík boasts some of the cleanest, safest, and most stylish budget accommodations in Europe. Whether you are looking for a lively hostel to meet fellow travelers or a quiet, no-frills budget hotel to rest after a long day of exploring the Golden Circle, the city has you covered. The secret to surviving Iceland on a budget is picking a spot with great kitchen facilities, proximity to discount supermarkets, and easy access to public transit.Here is our ultimate guide to the top 12 best cheap budget hotels and hostels in Reykjavík to help you save money for the adventures that actually matter.1. Kex HostelAddress: Skúlagata 28, 101 ReykjavíkApproximate Price: $40 – $70 USD (Dorms) | $150+ USD (Privates)Facilities: Communal kitchen, lively gastro-pub, heated patio, laundry room, luggage storage.Nearby Amenities: Just two blocks from the famous Laugavegur street, close to a Bónus discount supermarket, and walking distance to the Harpa Concert Hall.Why it’s the best location under a budget:Housed in an abandoned biscuit factory, Kex is an institution in Reykjavík. It makes this list because of its massive, well-equipped communal kitchen. By buying groceries at the nearby Bónus and cooking your own meals here, you can easily save $30 to $50 a day. Plus, its hyper-central location means you won't need to spend a dime on city buses to see the downtown sights.👉 Get the latest price and information: View Kex Hostel on Agoda2. Loft - HI Eco HostelAddress: Bankastræti 7, 101 ReykjavíkApproximate Price: $50 – $80 USDFacilities: Rooftop terrace, eco-certified practices, guest kitchen, bar with regular free events.Nearby Amenities: Dead center of the main shopping street. Krambúðin (Iceland's version of a 7-Eleven) and major bus stops (#1, #3, #6) are right outside.Why it’s the best location under a budget:You literally cannot get more central than Loft. Staying here means you are stepping directly out into the heart of the city. For budget travelers, the regular free events (like watercolor painting nights or live local music) offer cost-free entertainment. Furthermore, being right at a major bus artery makes catching cheap public transit incredibly easy.👉 Get the latest price and information: View Loft - HI Eco Hostel on Agoda3. Bus Hostel ReykjavikAddress: Skógarhlíð 10, 105 ReykjavíkApproximate Price: $35 – $55 USDFacilities: 24/7 reception, shared kitchen, board games, cozy lounge, bike rental.Nearby Amenities: Located right next to the Reykjavík Terminal (BSI) and a short walk to the Kringlan shopping mall where you’ll find plenty of cheap eating options.Why it’s the best location under a budget:If you want to save money on airport transfers and early morning tour pickups, this is the place. Being a stone's throw from the main bus terminal means you can walk to your airport shuttle instead of paying for a pricey taxi. It’s slightly outside the expensive 101 downtown zip code, which drops the nightly rate significantly while keeping you connected.👉 Get the latest price and information: View Bus Hostel on Agoda4. CityHub ReykjavikAddress: Hverfisgata 46, 101 ReykjavíkApproximate Price: $80 – $110 USD (Pod for two)Facilities: Futuristic private pods (Hubs), Bluetooth audio, self-service bar, sauna access, free mobile Wi-Fi hotspot.Nearby Amenities: Next to a 10-11 convenience store and just down the street from the Hlemmur Mathöll (food hall).Why it’s the best location under a budget:CityHub bridges the gap between a hostel and a hotel. You get absolute privacy in your pod for the price of a standard hostel bed. The biggest budget hack here is the free Wi-Fi hotspot they lend you; you can take it around the city, entirely eliminating the need to buy a local SIM card or roaming data plan.👉 Get the latest price and information: View CityHub on Agoda5. Dalur - HI Eco HostelAddress: Sundlaugavegur 34, 105 ReykjavíkApproximate Price: $35 – $60 USDFacilities: Large outdoor seating, on-site cafe, large guest kitchen, free parking.Nearby Amenities: Next door to Laugardalslaug pool, right on bus route #14, and close to a Krónan discount supermarket.Why it’s the best location under a budget:Located in the green valley of Laugardalur, this is the best budget stay for families or those wanting a quieter trip. You are right next to Iceland's largest geothermal pool complex, which costs only a few dollars to enter—an incredibly cheap way to spend a whole day relaxing. The free parking is also a massive money-saver if you are renting a car.👉 Get the latest price and information: View Dalur - HI Eco Hostel on Agoda6. Hostel B47Address: Barónsstígur 47, 101 ReykjavíkApproximate Price: $45 – $70 USDFacilities: Pin-code contactless access, cozy lounge, shared kitchen, free Wi-Fi.Nearby Amenities: Right beside Sundhöllin (the oldest public bath in Iceland) and a short walk to cheap bakeries.Why it’s the best location under a budget:Location is everything here. You are in the immediate shadow of the iconic Hallgrímskirkja church, meaning you can walk absolutely everywhere in the downtown core. For a budget traveler, skipping bus fares and walking to all the free museums, street art spots, and discount grocery stores makes B47 a highly strategic base.👉 Get the latest price and information: View Hostel B47 on Agoda7. Lækur HostelAddress: Laugarnesvegur 74A, 105 ReykjavíkApproximate Price: $45 – $65 USDFacilities: Nordic-design common areas, guest kitchen, boutique cafe on the ground floor.Nearby Amenities: Bus stop #14 is right outside. Nearby local bakeries and hot dog stands offer cheap local eats.Why it’s the best location under a budget:Lækur is tucked away in a quiet, authentic residential neighborhood. Because it sits just outside the main tourist zone, local restaurants and bakeries nearby cater to residents rather than tourists—meaning the prices for coffee and food are noticeably lower. The bus outside whisks you downtown in under 10 minutes.👉 Get the latest price and information: View Lækur Hostel on Agoda8. Student HostelAddress: Hringbraut 29, 101 ReykjavíkApproximate Price: $80 – $120 USD (Private Rooms)Facilities: Spacious rooms, communal kitchens on each floor, bar and cafe downstairs.Nearby Amenities: Located on the University of Iceland campus, steps from the National Museum, and near cheap student cafeterias.Why it’s the best location under a budget:If you want a private room but can't afford standard hotel prices, the Student Hostel is a hidden gem. You get access to cheap campus dining options designed for student budgets. It is also an incredibly safe and quiet area, yet perfectly situated within a 10-minute walk to the lively city center.👉 Get the latest price and information: View Student Hostel on Agoda9. Hotel CabinAddress: Borgartún 32, 105 ReykjavíkApproximate Price: $90 – $130 USDFacilities: On-site restaurant, bar, 24-hour reception, compact and efficient rooms.Nearby Amenities: Across the street from a 10-11 convenience store, a Subway, and a beautiful waterfront walking path.Why it’s the best location under a budget:Hotel Cabin is famous for its "standard" rooms, which are tiny, cruise-ship-style cabins. By sacrificing square footage, you get a completely private hotel room for a fraction of standard Reykjavík prices. It’s perfect for the budget traveler who simply needs a clean, private place to crash after a 12-hour glacier tour.👉 Get the latest price and information: View Hotel Cabin on Agoda10. Igdlo GuesthouseAddress: Gunnarsbraut 46, 105 ReykjavíkApproximate Price: $70 – $100 USDFacilities: Free parking, communal kitchen, outdoor BBQ area, self-service laundry.Nearby Amenities: A short walk from the Hlemmur bus station and a large Krónan supermarket.Why it’s the best location under a budget:Igdlo feels more like staying in a local friend's home than a hotel. The absolute biggest draw for budget road-trippers here is the free parking. Parking in central Reykjavík can rack up massive daily fees, so leaving your rental car here for free while you walk to the nearby city center is a major budget win.👉 Get the latest price and information: View Igdlo Guesthouse on Agoda11. Guesthouse PaviAddress: Brautarholt 4, 105 ReykjavíkApproximate Price: $75 – $105 USDFacilities: No-frills private rooms, shared and private bathroom options, shared kitchen.Nearby Amenities: Steps away from the Hlemmur Mathöll (food hall), the central bus hub, and a Bónus supermarket.Why it’s the best location under a budget:Guesthouse Pavi is all about functional, budget-friendly convenience. It doesn't have luxury bells and whistles, but it places you less than a two-minute walk from a discount Bónus supermarket and the city's main public transit hub (Hlemmur). You can stock up on cheap groceries, cook in the shared kitchen, and hop on a bus anywhere in the city effortlessly.👉 Get the latest price and information: View Guesthouse Pavi on Agoda12. Refurinn Reykjavik GuesthouseAddress: Stýrimannastígur 8, 101 ReykjavíkApproximate Price: $80 – $120 USDFacilities: Spotlessly clean shared bathrooms, well-equipped communal kitchen, quiet atmosphere.Nearby Amenities: Located in the local Vesturbær district, right down the street from a Krónan grocery store and the Old Harbour.Why it’s the best location under a budget:Vesturbær is arguably the coolest local neighborhood in the city. By staying at Refurinn, you are a short walk from the touristy downtown, but you get to shop at the local Krónan and swim at the Vesturbæjarlaug thermal pool at local prices. It offers a premium, high-end guesthouse feel at a highly competitive budget price.👉 Get the latest price and information: View Refurinn Guesthouse on AgodaFinal Budget Tip: Accommodation prices in Iceland fluctuate wildly depending on the season and local festivals. To lock in the best deals, be sure to book well in advance. Safe travels, and enjoy exploring the Land of Fire and Ice without breaking the bank!