The very first night I ever spend in Iceland, I spend in this hostel. And I really liked it.
The hostel is build in an old biscuit factory and that is why it is called Kex (Icelandic for biscuit).
It is a super cozy place and they organize a lot of interesting things: They organize live music nights, you can watch sports games there, they host pub quizzes, and they eve n have knitting nights!