Is the Montgomery County Housing Policy at a Crossroads?

Selzer Gurvitch Rabin Wertheimer & Polott, P.C.

Montgomery County has been a leader in establishing affordable housing policy over the past 50 years, including the adoption of a Moderately Priced Dwelling Unit (MPDU) program in 1973. While the MPDU program continues to achieve its primary goal of delivering affordable housing (both for-sale and rental units) throughout the County, the County has had to contend with the pandemic, inflation, and other economic challenges over the past several years that constrain opportunities to produce and preserve affordable housing. This article examines two pending legislative bills that propose alternative regulatory concepts for controlling rent and the potential impacts of these regulatory restrictions to housing supply in the County. It also suggests alternative policies that could better increase the supply of affordable housing without the documented negative impacts experienced by other jurisdictions that have adopted rent control measures in the past.

By way of background, the County Council adopted temporary, emergency legislation during the pandemic that limited rent increases beyond the County’s annual voluntary rent guideline. This temporary rent control measure limited rent increases on market-rate units to a maximum of 2.6% in 2020, a maximum of 1.4% in 2021, and a maximum of 0.4% in 2022. This temporary measure expired in August of 2022. The County Council’s actions to establish temporary rent control measures in response to the pandemic’s impact on County residents’ ability to afford rental housing were consistent with what most neighboring jurisdictions adopted during this unprecedented time of crisis. With the state of emergency associated with the pandemic now lifted, the County Council is now considering two permanent rent control measures that are likely to have broad and far-reaching implications if adopted (albeit with one dramatically more impactful than the other).

Council Bill No. 15-13, titled the Anti-Rent Gouging Act, has the following lead sponsors: Councilmember Fani-Gonzalez, Council Vice-President Friedson, Councilmember Albornoz, Councilmember Balcombe, Councilmember Katz, and Councilmember Luedtke. The Anti-Rent Gouging Protections bill, if enacted as presently drafted, establishes an annual rent increase allowance of 8% plus the Consumer Price Index-Urban (CPI-U) index, while exempting a number of projects from rent controls (including a unit that has been offered for rent for less than 15 years).

Council Bill No. 16-23, titled the HOME Act, has the following lead sponsors: Councilmember Jawando and Councilmember Mink. The HOME Act, if enacted as presently drafted, establishes an annual rent increase allowance of the lesser of 3%, or the allowable increase in the rental component of the CPI-U, while exempting only units that have been offered for rent for less than 10 years.   Although the HOME Act undoubtedly still constitutes “rent control” notwithstanding the bill’s title, of the two, the Anti-Rent Gouging Act is much more narrowly tailored to achieving the goal of ensuring affordable housing at rents closer to market conditions in the County.

The County Council held public hearings on both bills on March 28, 2023, and is expected to hold work sessions on both beginning in June. The public hearing record contains vigorous debate on the merits of each bill from a diverse group of stakeholders, including tenants, tenant advocacy groups, property owners, and developers.

Other jurisdictions that have adopted rent stabilization or rent control measures have experienced various negative impacts, including a sharp reduction in the production of new housing, decreased investment in capital expenditures, and resulting declines in real property tax revenues. Given these outcomes, the County Council should pursue alternative regulatory measures and tools that it has at its disposal (and in some instances, regulatory measures which have already been adopted) to encourage more affordable housing in the County. By way of example, the County Council adopted amendments to its Payment in Lieu of Taxes (PILOT) provisions through Council Bill No. 26-21 (sponsored by Councilmember Friedson and former Councilmember Riemer) to allow for greater flexibility for non-profit housing developers to partner with more traditional housing developers with the goal of producing a substantial number of regulated affordable units. Amendments to the County’s PILOT provisions were also adopted by the County Council through Council Bill No. 29-20 (sponsored by Councilmember Friedson and former Councilmember Riemer) to spur redevelopment of affordable housing on Washington Metropolitan Area Transit Authority land. Similarly, County Executive Marc Elrich has placed an emphasis on leveraging surplus public land through Request for Development Proposals that identify the delivery of affordable housing (including deeply affordable units) as part of the criteria for evaluation of responses. In addition to these policies that encourage the production of housing and are only in the early stages of implementation, the County has an opportunity to establish policies that encourage adaptive re-use of underperforming or vacant hotels and office buildings to produce additional affordable housing. All of these alternative policies are aimed at producing affordable housing, while avoiding the negative aspects of rent control that have been well documented in other jurisdictions.