The government imposes regulation on unregulated rentals for the first time
The German government has approved a comprehensive rental reform that will also apply for the first time to previously unregulated rental contracts. The new law, known as the Rent Value Protection Act, is set to come into effect in January 2026 and aims to protect tenants from significant cost increases amid high inflation rates, while extending the protections already applied to regulated rents.
According to the law, if the inflation rate exceeds 3% over two years, landlords can only pass on half of the increase to tenants. For example, if inflation reaches 6%, a maximum rent increase of 4.5% will be allowed. This measure will apply to both new and existing contracts, except for single-family or two-family homes. Additionally, rent can only be adjusted once a year, starting from April 1st at the earliest, to prevent repeated increases within the same year.
Organized rents will remain subject to strict restrictions. About 600,000 reference and category rents, in addition to all apartments covered by the rental law, can only increase by 1% in 2026 and by 2% in 2027. Starting in 2028, the same rules applied to the unregulated sector will apply, where increases are linked to the inflation rate but only half of the increase is allowed to be passed on to tenants. Non-profit housing associations are still exempt from these restrictions.
The government has decided to extend the minimum duration for new or renewed rental contracts from three years to five years, starting from November 1, 2025. However, small landlords renting out fewer than five apartments will not be subject to this rule. Officials have confirmed that the reform is not a rent ceiling but a "brake" designed to balance tenant protection with maintaining incentives for property owners to offer their housing on the market.
The reform also includes addressing disputes related to value protection clauses. Starting now, tenants will be able to recover overpaid rent for up to five years only, compared to 30 years previously. This measure aims to create greater legal clarity and stability in the rental market.
The government has also announced plans to make environmental renovations more attractive and affordable. A team of experts will propose by mid-2026 how to fairly distribute the costs of thermal updates and decarbonization. These steps are part of a broader strategy to modernize housing while keeping it affordable for tenants.