The German government is preparing a far-reaching overhaul of national rental law as the country grapples with rising housing costs and a shortage of affordable apartments. The Federal Ministry of Justice, led by Minister Stefanie Hubig of the SPD, presented a draft bill on Sunday outlining a broad package of new tenant-protection measures. The proposal seeks to close gaps in existing regulations that critics say have allowed rents to rise sharply in many cities and left tenants vulnerable in an increasingly strained market.
According to the ministry, the goal of the reform is to counter the rapid rise in rents and strengthen the position of tenants in areas where affordable housing has become scarce. Minister Hubig described the current situation as severe, noting that many people struggle to find reasonably priced housing, particularly in metropolitan regions. While Germany’s social rental law is generally viewed as robust, Hubig argued that existing protections contain “significant gaps” that the reform aims to eliminate.
The draft focuses on limiting problematic rental practices and increasing transparency in areas where abuses have been widely reported. Among the main issues the ministry seeks to address are the growing use of furnished apartments, the sharp rise in temporary lease agreements, and steep increases linked to index-based rents tied to inflation.
The Justice Ministry reports that the share of furnished and short-term rental offerings has reached a record high. These categories often fall outside standard rental caps, allowing landlords to charge substantial premiums. According to Hubig’s ministry, this trend has contributed to an environment where affordable homes in major cities are increasingly difficult to find.
To counter this, the bill requires landlords to clearly list and justify any furniture surcharge in regions with tight housing markets. If a landlord fails to specify the surcharge separately, the apartment would legally be considered unfurnished, meaning only the standard rent applicable to an unfurnished unit can be charged. The proposal also limits the furniture surcharge to a maximum of five percent of the basic rent and ties it to both the purchase value and the depreciation of the furnishings. For example, the surcharge on a monthly net rent of 1,000 euros could not exceed 50 euros.
Hubig argued that these measures are intended to create clarity and fairness, stating that the government aims to “set clear and transparent rules on what is allowed and what is not.”
Temporary rental contracts have become another point of concern for the ministry. Currently, short-term leases are not legally time-limited, which the ministry says has created legal uncertainty. Some landlords, it argues, use these flexible contracts to bypass the rental-price brake by repeatedly reissuing short-term leases.
Under the reform, temporary rental contracts would only be exempt from the rent brake if they run for a maximum of six months. Additionally, a temporary contract would require a specific reason on the tenant’s side, such as a temporary job assignment. The ministry believes this will prevent misuse while preserving legitimate temporary arrangements.
Another significant part of the reform concerns index-based rents, which adjust automatically based on inflation. During periods of sharp price increases, such as after the start of Russia’s invasion of Ukraine,these contracts have resulted in rent hikes of up to seven percent per year.
To prevent such increases from becoming unaffordable, the draft legislation caps index-based rent rises at 3.5 percent annually in particularly expensive markets. Hubig stressed that index leases must not become “a cost trap when inflation climbs,” and that rent increases must be limited where housing is already expensive.
The reform also strengthens protections for tenants at risk of losing their homes due to missed rent payments. Under the proposal, a tenant who receives an ordinary termination notice for payment arrears could avert eviction once by paying the outstanding amount in full. Hubig stated that “everyone deserves a second chance,” especially in cases where payment difficulties can be resolved quickly.
The ministry emphasizes that while the reform prioritizes tenant protection, it also considers landlords’ interests. For example, the threshold for simplified rent increases after modernization would rise from 10,000 to 20,000 euros. This provision is designed to ease administrative burdens particularly for small private landlords undertaking legitimate upgrades.
The rental reform proposal has already drawn criticism from the CDU/CSU Bundestag faction. Deputy parliamentary leader Günter Krings told AFP that the Union sees a need for corrections, particularly regarding the six-month limit for short-term rental contracts and the planned cap on index rents. Krings argued that rigid limits could undermine reliability for landlords and further discourage investment.
He also took issue with the proposed rules on furnished rentals, saying the planned lump-sum surcharge is too schematic and could trigger additional disputes. While supporting efforts to improve tenant protections, Krings stressed that stronger safeguards cannot replace the need for increased housing construction. He called for parallel efforts to simplify building regulations and accelerate the creation of new homes, arguing that affordable rents are ultimately secured through “faster, simpler, and more economical” construction.
Despite these criticisms, Krings emphasized that the Union generally supports efforts to protect tenants, acknowledging the strain that rising rents place on many households. He welcomed the early presentation of the reform, noting that it leaves time for careful review in the cabinet and parliament.
The Justice Ministry highlights the urgency of reform by pointing to significant rent increases over the past decade. In Germany’s 14 largest cities, asking rents have doubled on average between 2010 and 2024. From 2022 to 2024 alone, rents rose by more than 20 percent. The ministry argues that without updated regulations, pressures in already stressed housing markets will continue to intensify.
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