Mrs. Gudmunda Nielsen built the oldest part of this house, the restaurant on the first floor, in 1919, for her retail shop. Mrs. Nielsen was a person of many talents: an organ player, choir conductor, music teacher and song writer, as well as being very active in the Woman’s Association of Eyrarbakki. She studied business management in Copenhagen before opening her retail shop here, which was considered the trendiest shop in the region. Eyrarbakki was the first port of call for foreign influences in music, literature and art, and was the largest trading centre in the country for a very long time. Mrs. Gudmunda Nielsen lived in The House (Húsið).
In 1957, a second floor was added to the building and it became home to Plastiðjan and later Álpan. In 2004, after being abandoned for a few years, it was renovated and lovingly restored and the restaurant opened its doors there at the new location on 14 May 2005 (though at the time the house was white!).
In fact, the history of the Red House restaurant stretches back longer than this. It originally opened in 1990 at a location down the road in the old building called Gunnarshús. The original Rauða Húsið sign can be found on the wall of the basement bar area of the current restaurant.