In Icelandic folklore, the huldufólk (meaning hidden people) are like elves. These beings are also said to be very similar to human beings and live in little houses in the rocks. Although the huldufólk are usually hidden from the view of people, some humans are believed to be privileged enough to see them. There are many stories of encounters with the huldufólk. As a matter of fact, almost everyone in Iceland has a story of an encounter with elves or huldufólk, often involving a close friend or family member.
President Ólafur Ragnar Grímsson has explained the existence of huldufólk tales by saying: “Icelanders are few in number, so in the old times we doubled our population with tales of elves and fairies.”
Álfhóll (Elf Hill) is the most famous home of elves in Kópavogur, and Álfhólsvegur (Elf Hill Road) is named after it. Late in the 1930s, road construction began on Álfhólsvegur, which was supposed to go through Álfhóll, which meant that Álfhóll would have to be demolished. Nothing seemed to work well, and construction was stopped due to money problems. A decade later road construction through Álfhóll was to be continued, but when work resumed machines started breaking, and tools got damaged and lost. The road remained routed around the hill, not through it as originally planned. In the late 1980s, the road was to be raised and paved. Construction went as planned until it came time to demolish part of Álfhóll. A rock drill was used, but it broke. Another drill was fetched, but that one broke, as well. After both drills had broken to pieces, the workers refused to go near the hill with any tools. Álfhóll is now protected by the city as a cultural heritage and remains much as it was after the last Ice Age. Kópavogur has remained one of the most prominent sites of stories about elves disrupting road-building.
In 1982, 150 Icelanders went to the NATO base in Keflavík to look for “elves who might be endangered by American Phantom jets and AWACS reconnaissance planes.” In 2004, Alcoa had to have a government expert certify that their chosen building site was free of archaeological sites, including ones related to huldufólk folklore, before they could build an aluminum smelter in Iceland.
In 2011, huldufólk were believed by some to be responsible for an incident in Bolungarvík where rocks rained down on residential streets.