What investors need to know about Germany's new landlord-tenant rules

The Federal Cabinet's approval on 30th April of a sweeping reform of German tenancy law has landed in a market already under severe stress. The draft bill, presented by Federal Justice Minister Stefanie Hubig of the SPD and still requiring Bundestag approval, introduces five substantive changes to the landlord-tenant relationship that will affect millions of rental contracts across Germany's tightest housing markets. For institutional investors in German residential real estate, the implications extend well beyond the political debate.

Germany has approximately 44 million tenants. Advertised rents rose 4.5% in the final quarter of 2025 compared with the same period the previous year, according to the GREIX Rent Index, with Munich averaging €23.35 per square metre and Frankfurt €17.36. Against this backdrop, the government has moved to close what it describes as systematic loopholes that landlords have been exploiting through furnished apartments, short-term contracts and index-linked rent escalation to circumvent the rent cap. "Especially in times of rising inflation, renting a home must not become a cost trap," said Hubig.