(de-news.net) – The German Federal Ministry of Justice has outlined the rationale and technical framework for a second package of rental law reforms in response to sustained pressures in the residential housing market. Persistently high demand in urban areas has continued to drive rent increases, significantly burdening tenants and reducing access to affordable housing, according to the ministry. The growing prevalence of furnished and short‑term rentals has intensified affordability problems, partly because legal ambiguities allow landlords to circumvent existing rent‑control mechanisms. Rising housing costs, combined with broader inflationary pressures, have disproportionately affected lower-income households and intensified risks of displacement, prompting renewed legislative intervention.
To address these pressures, the ministry proposed a legislative package (“Mietrecht II”) intended to strengthen the effectiveness of the rent brake, expand the supply of long‑term housing, and reduce financial burdens on tenants. Most provisions are designed to take effect immediately after promulgation, pending parliamentary approval. The ministry indicated that further reforms are planned, drawing on the work of an expert commission expected to deliver recommendations by the end of 2026.
A central element of the reform package is the continued application and refinement of the rent brake, which limits rent increases for new leases in designated high-pressure markets. The mechanism restricts initial rents to a modest margin above the local comparative rent and is justified by the ongoing imbalance between housing supply and demand. The reforms also address regulatory gaps, including the treatment of furnished apartments, for which greater transparency in rent components is required to prevent circumvention of rent controls. Temporary lease exemptions are further constrained to reduce strategic avoidance of regulatory obligations.
The ministry argued that the rapid expansion of furnished rentals in tight markets cannot be explained solely by demand and is facilitated by unclear legal standards. Under current law, rent‑control rules apply, but landlords typically do not itemize the furniture surcharge, leaving tenants unable to assess compliance. Courts have relied on the depreciated value of furnishings, yet no statutory calculation method exists. The draft legislation would require landlords to disclose the surcharge separately and demonstrate that it is reasonable.
A standardized option would allow a 5‑percent supplement to the unfurnished base rent for fully equipped units, with the assumption—open to rebuttal—that furniture quality correlates with the apartment’s characteristics. If no surcharge is declared, the unit would be treated as unfurnished for rent‑control purposes. The ministry emphasized that the measure is limited to areas formally designated as having strained housing markets, where misuse of furnished rentals to bypass regulation has become most pronounced.
Six-month cap on short-term leases proposed to close rent brake loophole
Short‑term leases, which are exempt from the rent brake, currently lack a statutory time limit. Courts have in general required a tenant‑side reason for temporary occupancy, but the absence of codification has enabled landlords to label contracts as short‑term without justification. The proposal would cap such leases at six months and formally require a tenant‑specific need, such as temporary employment or study. The ministry maintained that short‑term arrangements remain legitimate for genuinely temporary stays but should not function as a regulatory loophole.
Additional measures include limits on annual rent increases for indexed leases and the introduction of enhanced tenant protections against eviction, notably through extended grace periods for remedying rent arrears. Together, these reforms are positioned as part of a broader strategy to strengthen consumer protection, improve legal certainty in tenancy law, and uphold the social function of housing while remaining compatible with constitutional property rights.
Index‑linked rents, tied to the consumer price index, exposed tenants to sharp increases following the post‑2022 inflation surge. Existing law imposes no substantive cap beyond a one‑year interval between adjustments. The reform would limit annual increases to 3.5 percent in designated tight markets, aiming to prevent sudden spikes while preserving the general mechanism. The ministry noted that index leases can still benefit tenants when market rents rise faster than consumer prices and that modernization surcharges are often restricted under such contracts.
Current rules allow tenants to nullify an extraordinary termination for arrears by paying outstanding amounts during eviction proceedings, but an ordinary termination issued alongside it remains valid. The ministry described this as inconsistent and proposed allowing a one‑time cure of ordinary terminations as well, thereby preventing avoidable evictions and reducing homelessness. Similar curative effects would apply in related situations, such as delayed security‑deposit payments.
Since 2019, simplified procedures for passing modernization costs onto tenants have been limited to projects under 10,000 euros. Rising construction costs have eroded the scope of this threshold. The draft would raise the limit to 20,000 euros in order to preserve the intended applicability of the simplified mechanism, particularly for small private landlords who often face administrative burdens in standard procedures.
