DC and Maryland Multifamily Update

As a follow-up to our recent alert, here is an update on rent control and other legislative activities in the region:

1. Prince George’s County Rent Control FAQs. This week the County published responses to frequently asked questions (FAQs) regarding the Rent Stabilization Act of 2023 (the Act). The FAQs confirm that the 3% rent cap applies only to lease renewals and not to the leasing of vacant units. They also confirm that the law took effect April 17, 2023 and expires on April 16, 2024. However, a number of questions remain unanswered. For example, the FAQs provide that “units that received an initial Use and Occupancy (U&O) Permit in the last five years of the effective date of the legislation are exempt” but units that receive U&O Permits after the effective date are not mentioned. We will continue to work with the County to get clarification on the implementation of the Act, including the timing for appointing the working group to study long-term solutions in anticipation of the expiration of the Act on April 16, 2024.
   
   
2. Prince George’s County Townhouse Freeze. Introduced last week, Bill 052-2023 would put a two-year pause on townhouse development outside of areas designated for medium to high-density development in the County's approved General Plan and comprehensive plans. Councilmember Wala Belgay, who co-sponsored the bill with Councilmember Thomas Dernoga, indicated that at least 6 members of the Council support the measure right now. The Bill has been referred to the Planning Housing and Economic Development Committee (PHED) for legislative review. This would not be the first time the Council has put existing development approvals at risk. The Council used its first formal voting session of the term to repeal a series of zoning text amendments and continues to create uncertainty for developers.
   
   
3. Montgomery County Recordation Tax Increase Proposal. Introduced last month, Bill 17-23 would increase Montgomery County recordation tax rates on documents recorded in the land records by 32% on real estate sales and mortgage amounts up to $500,000 and by 38% for amounts over $500,000. On April 11, 2023, the Council heard testimony from officials from Montgomery County Public Schools, who argued in favor of the tax increase to increase the school facilities' budget. Several representatives from the business community testified against the measure, arguing that raising recordation taxes will impact affordability in an already capital constrained environment. Click here to watch a video of the hearing. Bill 17-23 was referred to the Government Operations & Fiscal Policy (GO) Committee. The GO Committee work session is currently scheduled for April 24, 2023, at 9:30am.
   
   
4. Montgomery County Rent Control. As reported in our prior Alert, on March 28, 2023, two rent control bills were considered in public hearings in Montgomery County. The HOME Act, would cap rent increases at the lesser of (i) 3% and (ii) the local residential rent component under a regional Consumer Price Index (CPI). The Anti Rent Gouging legislation would limit rent increases to CPI plus 8%. The County Council referred both bills to the Planning, Housing & Parks (PHP) Committee for a work session tentatively scheduled for June 15, 2023. The PHP Committee will be accepting input until June 8, 2023.
   
   
5. DC Rent Control. On April 3, 2023, District of Columbia Councilmember Robert White introduced legislation to limit rent increases set to take effect on or after May 1, 2023, to the rate of inflation, not to exceed 10%. This would have reduced the maximum rent increases that are currently permitted, which is inflation plus 2%, not to exceed 10%. Since the legislation was introduced as emergency (B25-210), temporary (B25-0211), and declaratory (PR25-0154) legislation, the restriction would have bypassed the standard District of Columbia Council review process. However, in its Fiscal Impact Statement, the Office of the Director concluded that funds are insufficient to implement the proposal on an emergency basis because the change would have required additional personnel to capture defective filings, send notices, and review and adjudicate the expected increase in housing provider petitions. Accordingly, the legislation did not pass and rent controlled units will continue to be governed by existing law.
   
   
6. DC Inclusionary Zoning Update. At its public meeting on March 30, 2023, the District of Columbia Zoning Commission (Commission) rejected the District of Columbia Office of Attorney General (OAG) text amendment, Z.C. Case No. 21-23, which sought to extend inclusionary zoning restrictions (IZ) to the D-Zones of the District (the downtown area), an area that was historically exempt from such requirements. In the Office of Planning (OP)’s March 20, 2023 pre-hearing report recommending this action, OP provided that the application of IZ to the downtown zones would be inconsistent with the District’s Comprehensive Plan, discourage new residential use, and hamper the economic recovery of the downtown area. For the time being, the downtown area will remain free from IZ requirements.  

Should you have any questions regarding any of these matters, please let us know.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.