Housing is to remain affordable for all citizens. The Federal Cabinet has therefore set in motion an extension of the rent cap until 31 December 2029 in order to slow rent increases. The legislation has now passed the Bundesrat.
The rent cap, which limits rent increases, is due to expire on 31 December 2025. The extension drawn up by the Federal Government was approved by the Bundestag and has passed the Bundesrat. It helps people looking for a home, particularly those on low and middle incomes.
Affordable housing is “one of the most important social issues of our time”, Federal Chancellor Merz said in his policy statement on 14 May 2025. This requires changes to the rules governing the permissible rent at the start of a tenancy.
Initial rents capped until the end of 2029
This will allow the state governments to continue designating “areas with tight housing markets” beyond 31 December 2025. In these urban areas, the rent at the start of a tenancy may exceed the customary local comparative rent by no more than ten per cent.
The aim is to keep housing in these areas affordable for everyone, including families, pensioners on low incomes and young people. At the same time, the Federal Government will make efforts to create more housing.
Owners who let homes should not be burdened disproportionately. The rent cap therefore does not apply to flats that were first occupied and let after 01 October 2014. This is also intended to strengthen the incentive to build new homes.
Housing must not become a luxury
Federal Minister of Justice and Consumer Protection Dr Stefanie Hubig (SPD) explains: “Housing must not become a luxury. That is why extending the rent cap is the first bill I am introducing. We have no time to lose. The current rent cap expires at the end of the year. Tenants need protection, and they will get it. It is a matter of fairness.
But it is also clear that extending the rent cap is only a first step. The coalition agreement sets out further plans to protect tenants. We want to create greater transparency around ancillary costs. We will also subject index-linked tenancy agreements to stricter rules and improve tenant protection for furnished flats. A landlord cannot simply put two chairs in an empty flat and then claim the right to charge substantially higher prices. Strong tenant protection is a shared concern across the Federal Government.”