A year of change for the residential sector

2026 is set to be a watershed year for regulatory change across Europe’s private rented sector (PRS), with reforms spanning tenant protections and rent controls. For institutional owners, this highlights the need to understand the nuances of local markets and a greater focus on driving operational performance.

Limits on residential rental growth

Growing concerns around housing affordability have, in recent years, seen rules tighten across many markets, limiting rental growth. Ireland has had rent controls in place for ‘Rent Pressure Zones’ since 2016. But from March 2026, this will be extended across the country. The new rules will cap rental growth at the lower of CPI or 2%. Importantly, however, new build apartments will be exempt and will follow CPI-linked increases. This is expected to incentivise new development and a return of institutional investment.

Scotland introduced temporary rent controls during Covid, which ended in April 2025. New legislation was recently passed that will cap rental growth in ‘tight’ housing markets to CPI +1%. But with Build to Rent being specifically exempted, there is an opportunity for investors to return to the market having taken a step back under the previous regime.

Elsewhere, Germany has extended its current rent control legislation for properties in ‘tense’ markets built pre-October 2014 for a further four years to 2029. As a result, we expect continued diverging performance and investor appetite for properties built after this period that aren’t under the purview of the caps.

And in Spain, the government has designated more locations, including San Sebastián and La Coruña, as ‘tensioned’ markets, bringing them under the rent control provisions of the Housing Law. This now means there are 301 areas across four autonomous communities, including Barcelona, where rental inflation is limited to the growth of the Rental Update Index (IRA/IRAV). But with housing policy devolved to the autonomous regions, some markets, such as Madrid, have come out against the need to implement the law, positioning them well to capture investor appetite for residential assets in the country.

Increasing tenant protections

While rent controls generally grab the headlines, 2026 will witness tenant protections rise across some markets. From May 2026, the use of no-fault evictions in the UK will be outlawed, alongside the end of fixed-term tenancies. Instead, all tenants will be moved onto rolling tenancies, with a limited number of cases that landlords can use to evict tenants. Similarly, Ireland will see an end to no-fault evictions for large landlords — defined as those with over four tenancies — on new leases from March 2026. As well as a move to rolling six-year tenancies.

The tightening of tenant protections poses a double-edged sword for investors. On the one hand, increasing security for tenants could mean lower churn and long tenancies as tenants face less incentive to move. But on the other hand, it could mean fewer opportunities for landlords to rebase rents and capture growth through new lettings.

Clarity for data centres

Over the past five years, many European countries initially tightened regulations in response to the pressure data centres placed on national grids, but as the sector is increasingly recognised as critical to the digital economy, many of these constraints are now easing. This shift does not imply deregulation: in September 2025, the European Commission introduced its Cloud Sovereignty Framework, setting detailed criteria to assess the sovereignty level of cloud services procured by EU institutions. Overall, this clearer and more supportive direction should benefit the sector, giving European providers a structural tailwind as their models already align with EU jurisdiction, open-source stacks, and transparent supply chains. Conversely, the major US hyperscalers will need to adapt.

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