Real estate · 4 min read

Deviating from the Rent Index with Furnished Letting: A Lever for Returns amid Growing Regulatory Uncertainty

This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.

For many investors in urban housing markets, furnished letting at first glance appears to be an elegant way of noticeably increasing returns. Higher rents, financially sound target groups and flexible contract structures seem to offer economic advantages. Yet 2025 in particular shows that this model is under considerable political and legal pressure. The German federal government is increasingly responding to rising rents and tight housing markets by regulating furnishing surcharges, fixed-term contracts and index-linked rents (Indexmieten) more strictly. For investors, this means that the scope for permissible deviations from the rent index (Mietspiegel) is narrowing, and the legislative focus is clearly shifting towards transparency, control and limitation.

In a recent statement, the Federal Ministry of Justice (BMJ) emphasised that furnished flats should in future be identified more clearly, so that it is clear exactly what a surcharge is being charged for. At the same time, compliance with the rent brake (Mietpreisbremse) in this segment is to be made easier to verify. The previous exemption for short-term and fixed-term tenancies that are well above the rent index is also under review. Policymakers are considering fixed limits. In addition, the spread of index-linked tenancy agreements is to be restricted, as rising consumer prices are increasingly turning these models into a burden for households. The signal is clear: furnished letting is to be defined more narrowly in legal terms and at the same time made more transparent.

Rent index, rent brake and furnishing surcharge: the legal framework

The permissible rent level continues to be based on the local comparative rent (ortsübliche Vergleichsmiete). For furnished flats too, the basic rent remains tied to the rent index; the rent brake limits the permissible mark-up to a maximum of ten per cent above this value. The furnishing itself does not justify breaking out of this system but can only be claimed as a separate surcharge on top of the basic rent. For this surcharge to stand up legally, it must be based on the actual acquisition costs and current values of the furniture. Courts only accept surcharges if the furnishing is clearly described as part of the contractually owed services, comprehensibly valued and of unquestionable quality.

Supposed "luxury furnishings" that merely consist of outdated fittings or random individual pieces are not recognised as grounds for a surcharge. A flat-rate furnishing mark-up that is not based on the value of the furnishings is also considered unlawful. In recent years, the tenancy courts have repeatedly made clear that furnished letting must not be an instrument for circumventing the rent brake. Political developments are considerably reinforcing this trend.

What counts as "furnished" – and what does not

The concept of furnishing is often misunderstood in practice. From a legal point of view, not every existing fitting is sufficient to justify a surcharge. What matters is that the flat is handed over in a condition that allows the tenant to live there fully without making their own purchases. This includes functional places to sleep and sit, adequate storage space, a fully usable kitchen, sufficient lighting and basic household items.

Courts are increasingly examining whether the furnishings actually correspond to the contractually owed condition and whether their value supports the surcharge. A half-furnished condition or furniture that the landlord places in the flat for purely decorative or opportunistic purposes is not sufficient. Investors must be aware that the furnishings must be maintained, documented and permanently provided not only economically but also legally. Otherwise there is a risk that the surcharge will lapse entirely and the rent will have to be adjusted retrospectively.

Deviating from the rent index through furnishing: realistic surcharges and legal limits

The permissible furnishing surcharge is usually derived from the current value of the furniture provided. In practice, the valuation is often carried out using recognised current-value tables, in which the original purchase price is depreciated according to the useful life. This produces a monthly amount that can be justified as a surcharge on the basic rent. This surcharge must be in reasonable proportion to the actual value of the furnishings. A disproportionate mark-up that significantly exceeds the rent index is not legally tenable and is being challenged with increasing frequency.

The federal government wants to ensure in future that furnished tenancy agreements disclose in detail which items support the surcharge. This has two consequences for landlords: on the one hand, the documentation requirements increase; on the other, the risk grows that excessive surcharges will be identified more easily. This shifts the entire return model more strongly towards conservative calculations that also stand up to judicial review. Anyone who has so far tried to achieve a de facto circumvention of the rent index through furnishing will hardly be able to do so in a legally secure way in future.

Growing regulatory risks in Germany and internationally

The development in Germany is part of an international trend. In many European cities, models of furnished or fixed-term letting have been severely restricted because they are regarded as driving up prices in the housing market. Berlin is pursuing this course particularly decisively. Discussions about stricter rules, additional registration or verification obligations and the expansion of consumer protection particularly affect furnished or fixed-term contract forms.

For investors, this means fundamental uncertainty in long-term planning. Furnished letting may bring higher income temporarily, but the regulatory framework is becoming increasingly restrictive. Models that still appear economically attractive today may be considerably restricted legally or politically within just a few years. In an environment in which the federal government is explicitly focusing on limitation, transparency obligations and tackling symptoms rather than causes, furnished letting should only be used with great caution.

Conclusion: furnished letting remains possible, but only within narrow and uncertain guard rails

Furnished letting offers investors short-term advantages but is accompanied by considerable risks. The rent brake, the strict requirements for furnishing surcharges and the political dynamics mean that any deviation from the rent index must be carefully justified. The federal government's new plans reinforce this development and tighten the requirements for documentation and transparency.

Anyone who continues to rely on furnished letting should regard it solely as a supplementary strategy and only use it in cases where the furnishing can be documented soundly in professional, contractual and economic terms. In future, a stable long-term return will be driven all the more by classic factors such as location, energy performance and structural demand, not by model variants that are increasingly in the political spotlight.