Pressure for Reform in the Rental Market: What Institutional Investors Should Consider Now

By Igor Strehl, CEO Dunaj Family Office Consulting.

The summer of 2025 was not only hot in terms of temperatures, but also in debates surrounding the real estate market. In particular focus: fixed-term rental contracts. The Austrian Chamber of Labour (AK) is demanding that institutional landlords in the future should only be allowed to offer unlimited contracts. In addition, the minimum statutory lease term is set to be raised from three to five years this autumn. The goal is to create more stability for tenants.

On the other hand, industry representatives warn of the economic consequences of such measures. At the center of the criticism are concerns about investment security, room for planning, and the long-term renewal of the housing stock.

For investors, it is crucial to analyze these developments with a clear head – and to adjust their strategies accordingly.

Longer Lease Terms: Stability with Limitations

Five-year or open-ended leases can lead to more stable rental income. Fewer tenant turnovers mean lower marketing costs, better cash flow predictability, and reduced vacancy risks. In well-established micro-locations with strong demand, this model can work well, provided that initial rents and indexation are calculated with long-term economic viability in mind.

At the same time, the elimination of short-term lease options reduces flexibility in responding to market changes. For new construction or extensively renovated heritage buildings, this means that potential rent adjustments during operations can no longer be achieved through new lease agreements. Investors will need to pay closer attention to contract details, such as graduated rent clauses, value protection mechanisms, and termination regulations.

Calculation Certainty in Project Development

This debate doesn’t just affect property owners—it also impacts developers. A legal requirement for open-ended leases or longer minimum rental periods changes the economics of planned projects. If rent increases cannot be regularly reflected in new contracts, the initial pricing becomes even more critical. Location analysis and target group positioning also need to become more precise.

There is already little room to maneuver due to capped guideline rents and index-linked limits on rent increases. Any further restrictions could dampen enthusiasm for new developments.

Alternative Housing Models as a Response to Regulation

Some institutional providers have already begun exploring alternative usage concepts, such as furnished apartments, business living, or co-living models. These formats often involve services or temporary stays, typically based on different types of agreements (e.g., service contracts or accommodation models). They offer flexibility in meeting temporary housing needs while potentially avoiding direct conflict with rental law requirements.

Target groups like young professionals, project workers, or commuters benefit from such offerings. For investors, this creates an opportunity to tap into niche markets, albeit with increased administrative effort and specific legal frameworks.

Private Landlords as Potential Beneficiaries

The AK proposes that only private individuals should retain the right to offer fixed-term rentals, for example, to accommodate children or grandchildren. If this distinction is written into rental law, it would create a clear advantage for small private landlords. They could fill gaps that institutional providers would no longer be allowed to serve, especially in the area of flexible, short-term leases.

This particularly applies to smaller properties in urban areas that do not fall under the full scope of the Austrian Tenancy Law. Whether this actually results in a yield advantage, however, depends heavily on how the law is ultimately defined and implemented.

Even though the outcome of the debate remains uncertain, the first trends are emerging: investors must prepare for an environment where planning certainty outweighs short-term adaptability. Portfolios should be optimized for sustainable demand, solid location quality, and long-term lease structures. At the same time, opportunities are opening up in niche markets, special-use formats, and the private rental sector, where flexibility remains feasible. Those who act strategically and factor in regulatory developments can continue to invest successfully, even under changing conditions.