The Swedish residential rental system and market has been discussed and criticized diligently the past years. Therefore, a reformed rental law was implemented the 1st of January 2011, which has the purpose to better reflect the consumer’s priorities with a more market related rental determination. With this change, it is of interest to compare it to another rental system, with market rents. In the German rental system, free rental setting is allowed in new leases. This thesis aims to compare and evaluate these residential rental systems. The comparison was done after reading several reports, articles and literature as well as interviews with Swedish and German actors. Results show that the reformed Swedish law will not lead to major changes, though it might lead to a more adequate rental determination system. Free rental setting allocates diversity in the market and contributes to a heterogeneous market, as it is possible to meet different consumers demand. This thesis will further discuss what a well functioning rental market is and how such is achieved.