September Rent Control and ROFR Update

As a follow-up to our recent alert, here are some updates on rent control and other activities in the region impacting multifamily properties:

1. Howard County Rent Control. Not to be outdone by its sister jurisdictions, Howard County may be entering the fray on rent control. We understand that tenant advocacy groups that were involved in rental control campaigns in Montgomery County and Prince George’s County have formed a Howard County Rent Stabilization Coalition (HCRSC). HCRSC issued a press release demanding rent increases be capped at the lesser of 3 percent or inflation, with vacancy control, and without exemptions. We understand that Howard County Executive Calvin Ball intends to introduce a housing package in the coming weeks which will include a 6-percent rent control cap, as well as changes to expand the scope of the County’s right of first refusal (ROFR) law. We will provide more details when available.

2. Montgomery County Rent Control. As noted in our prior Alerts, Bill 15-23 was passed by the Montgomery County Council on July 18, 2023, and signed into law by Montgomery County Executive Marc Elrich. Bill 15-23 provides that new rent control requirements “must not apply, and must not be enforced,” until enabling regulations are adopted. However, Bill 15-23 also requires landlords to amend rent increase notices sent before the regulations take effect, if the increase will occur after the regulations take effect. Not knowing when the regulations will apply—or what they will say—has created some uncertainty as to the interpretation and implementation of the new law. We understand that the Department of Housing and Community Affairs (DHCA) intends to publish regulations by the end of the year, but there may still be opportunities for stakeholders to meet with DHCA to provide input on these regulations. Please contact us if you would like our assistance in facilitating a meeting with DHCA.

   In anticipation of the implementation of the new rent control law, County Executive Marc Elrich intends to establish a Rent Stabilization Office. Elrich has requested a special annual allocation of $1.34 million to create the new Rent Stabilization Office within DHCA, which would investigate noncompliance, manage appeals, and enforce remedies.

3. Montgomery County ROFR. County Executive Marc Elrich said that he also intends to make changes to the County’s ROFR law, which provides the DHCA and the Housing Opportunities Commission with the right to purchase multifamily properties. ROFR rights are not currently assignable. However, the County Executive’s proposal would allow for the assignment of ROFR rights to “qualified entities” —as is currently the case in Prince George’s County.

4. Prince George’s County Rent Control Extension. Passed by the County Council in March 2023, the Rent Stabilization Act (Act) limits residential rent increases to 3 percent for existing tenants over a 12-month period. A Rent Stabilization Work Group chaired by Councilmember Krystal Oriadha has been holding monthly meetings to study and make recommendations for subsequent rent stabilization legislation when the Act sunsets in April 2024. Five subcommittees have been created to focus on: (1) rent increases, (2) regulated units, (3) exceptions, (4) vacancy decontrol, and (5) tenant protections.  Current speculation is that the Act may be replaced with permanent rent control, perhaps similar to that recently enacted by Montgomery County..

5. Maryland. At the state level, we are not aware of any efforts to enact statewide rent control, but there has been some discussion of state legislation to enable counties to enact “just cause eviction” protections, whereby landlords would be prohibited from terminating a tenancy, including at the end of the term of the lease, unless the tenant failed to pay the rent or violated a material term of the lease.

6. Federal. In January, the Biden administration released its “Blueprint for a Renters Bill of Rights” (Blueprint). Although the Blueprint is only guidance, it directed various federal agencies to take actions in order to “create a shared baseline for fairness for renters in the housing market”, including the Federal Housing Finance Agency (FHFA). FHFA’s request for public input generated thousands of comments, including a letter from 17 Democratic Senators asking the Federal Housing Finance Agency to condition mortgages backed by Fannie Mae and Freddie Mac on certain tenant protections, including limits on “egregious rent hikes.”

In response to this recent wave of rent control measures, Ballard Spahr has convened a large group of stakeholders (see below) to evaluate the validity of these rent control laws. Please let us know if you are interested in participating in this effort.

Coalition Members
8711 Georgia Apartment Owner LLC
AION Partners
Anonymous
Bernstein Management
Bozzuto
Carter Funds
CBRE
Commodore Management Co./Gingery Development Group
Corner Lot Advisors LLC
Donaldson Group
EastSky
Elm Street
Equity Residential
Grosvenor
Hampshire Properties/Rose Valley Cap
Kay Apartments
Kettler
MidCity
Morgan Properties
Newmark
NRP
Polinger Company
Quest Management Group
Rakusin & Becker Management
Ross Investments
Sage Ventures
Southern Management
Stellar Advisors
Tower Companies
Washington Property Company

As noted above, rent control continues to be a significant and growing trend that is disruptive in many ways. We are in the process of putting together a rent control program for ULI Washington. The tentative date is January 17, 2024. If you have any suggestions for panelists or topics, please let us know. We plan to include stakeholders with varying perspectives (e.g., a public official, multifamily owners/investor, economist) to encourage an engaging and thoughtful discussion that will form the basis for continued mutually beneficial dialogue.

Should you have any questions or suggestions regarding any of these matters, please contact us at CondoMultifamilyTeam@ballardspahr.com.

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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.