October Rent Control and ROFR Updates

As a follow-up to our prior alert, here are some updates on legislative activities in the region:

Montgomery County Right of First Refusal (ROFR) and Rent Control Updates

Recently introduced Expedited Bill 38-23 proposes to allow for the assignment of County ROFR rights to “qualified entities” – similar to the ROFR process in Prince George’s County. As originally drafted, the process for qualifying and selecting eligible assignees and other important aspects of the expanded ROFR process are to be established by the County Executive. However, we understand that the bill may be revised to allow for County Council input on the regulations. We are meeting with members of County Council staff to advocate for several important changes. The bill will be reviewed in work session by the Planning, Housing and Parks Committee on October 30, 2023 before being considered by the County Council.

As noted in our prior alerts, Bill 15-23 was passed by the County Council and signed into law earlier this year. However, the law also provides that new rent control requirements “must not apply, and must not be enforced” until the enabling regulations take effect. Although the law is effective as of October 23, 2023, the Department of Housing and Community Affairs (DHCA) does not plan to enforce the law until the regulations are adopted. DHCA is required to submit proposed regulations by January 23, 2024, which will then be subject to public comment and County Council approval. DHCA recently issued formal guidance confirming additional details on the implementation of the law, such as:

1. Rent increases which are effective prior to the implementation of the regulation are not subject to the limitations of the rent control law.
2. A landlord can increase the rent above the allowable amount (CPI-U + 3% or 6% ) by either banking, or the approval of a Capital Improvement or Fair Return Petition.
3. Once implemented, the rent control law will regulate the creation and increase of new and existing fees on rental units.
4. Tenants and prospective tenants will be able to file complaints with DHCA’s new Rent Stabilization Office if they believe their current or prospective landlord is not in compliance with the new rent control law and regulations.

Howard County Executive Housing Package

Howard County Executive Calvin Ball recently unveiled his plans for a suite of legislative proposals focused on housing. Among the bills to be introduced is an amendment to the County ROFR law to allow for the assignment of ROFR rights to nonprofit and for-profit affordable housing providers. Executive Ball will also seek to amend the State payment in lieu of tax law to facilitate the administration of an expanded ROFR process. Another bill would limit residential rent increases to the lesser of (i) inflation plus 5%, or (ii) 10%. As currently proposed, the cap would apply to occupied and vacant units. Exemptions to rent restrictions would include units constructed in the last 20 years, low-income housing tax credit units, and units owned by nonprofit housing providers. This “rent gouging” bill would sunset in four years and establish a working group to study and recommend long-term solutions. If the housing package is filed this week as expected, the County Council could consider the bills as soon as their next legislative session on November 6, 2023.

Prince George’s County Rent Control Update

Passed by the County Council earlier this year, the Rent-Stabilization Act temporarily limits residential rent increases to 3% for existing tenants over a 12-month period. A Rent-Stabilization Work Group has been meeting on a monthly basis to make recommendations for subsequent rent stabilization legislation when the Act sunsets in April 2024. The first two Work Group meetings have been posted online (August ǀ September). Although no video is available for the October Work Group meeting, the agenda indicates that the discussion focused on possible exemptions. Other subcommittees are reviewing rent increases, regulated units, vacancy decontrol, and tenant protections.

Rent Control Coalition Update

In response to this recent wave of rent control measures, Ballard Spahr has convened a large group of stakeholders to evaluate these rent control laws. We are also closely watching the Supreme Court of the United States to see if it will grant certiorari to one or both of the Takings Clause challenges to the New York rent control law. We expect to know more about this soon. In the interim, we continue to advise clients on strategies and options for complying with the new laws, as well as means to provide input on the forthcoming regulations.

Anne Arundel County Moderately Priced Dwelling Unit (MPDU) Proposal

A new proposal to expand the pipeline of affordable housing in Anne Arundel was introduced on October 2, 2023, at the request of County Executive Steuart Pittman. Bill 78-23 would require new projects of 20 or more units to set aside at least 15% of the rental units or 10% of the for-sale units as MPDUs. Projects with 10 to 19 units would have the option to pay a fee to the Housing Trust Special Revenue Fund in lieu of providing MPDUs, whereas projects with nine or fewer units would be exempt. As an incentive, the bill would permit the grant of density bonuses to developers of up to 15% for rental projects and 10% on for-sale projects (consistent with the proposed MPDU set-aside requirements). Other incentives include a 50% reduction in water and sewer connection charges and a full exemption from impact fees. A hearing is scheduled for the bill on November 6, 2023.

Baltimore Single-Family ROFR

On October 16, 2023, Baltimore Mayor Brandon Scott signed Bill 22-0250 into law, which requires the seller of a dwelling unit to provide an offer of sale to the tenant prior to offering the dwelling unit for sale to a third-party. By its terms, the new law only affects transfers of title “to any single-family residential rental property” – i.e., it does not apply to transfer of multifamily properties. Once an offer of sale is provided, the tenant has 14 days to sign a letter of intent and enter a contract to purchase the unit, or all purchase rights lapse and the owner can move forward with potential buyers. The new law also includes a number of reporting and data requirements.

Please contact us at CondoMultifamilyTeam@ballardspahr.com if you have any questions related to these new laws or if you are interested in joining the rent control coalition.

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