Multifamily Update: Rent Control Coalition Analysis, ROFR Proposals, and Algorithmic Pricing

Our most recent Alert included details and updates on rent control, proposed FTC regulation of rental housing junk fees, security camera mandates, and new ROFR proposals. Here is a link to the November 15 Alert. Below are some further updates and new developments affecting multifamily properties:

1. Rent Control Coalition

As reported previously, Ballard Spahr represents about 35 multifamily stakeholders in connection with a multitude of rent control and other laws recently enacted or proposed. We continue to closely monitor the Supreme Court of the United States to see if it grants certiorari to one or both of the Takings Clause challenges to the New York rent control law. This week, SCOTUS once again declined to grant or deny certiorari for either of these cases. We recently provided our extensive rent control legal analysis to all Coalition members and are scheduled to meet with Coalition members on Thursday morning, December 14, to discuss this analysis, as well as potential strategies moving forward. If you are not currently a Coalition member but would like to join, please contact us.

2. Urban Land Institute (ULI) Washington Executive Conversation on Rent Control

As part of its Executive Conversations series for Full Members of ULI, have scheduled an Executive Conversation program on February 7, 2024, focusing on rent control and other regulation of multifamily housing, including the impact on affordable housing. Our featured guest for this program will be Montgomery County Councilmember, Andrew Friedson. Executive Conversation programs are limited to 40 participants, so watch for upcoming announcements from ULI Washington about registration (limited to ULI Full Members and one guest).

3. Howard County Housing Multifamily Bills

On November 20, 2023, the Howard County Council heard testimony on Bill 43-2023, which would allow the County to assign its statutory right of first refusal (ROFR) to qualified entities. Peter Engel, Executive Director at the Howard County Housing Commission, recommended changes to Bill 43-2023, including to (i) extend the ROFR assignment period (from 25 to 50 days), and (ii) allow the County to enter into partnerships with ROFR assignees. Industry representatives asserted that the new law would create additional costs and delays in a market that is already over-regulated and capital-constrained.

During a subsequent County Council meeting on December 4, 2023, discussions on both Bill 43-2023 and Bill 44-2023 were tabled until the next legislative session – which has yet to be scheduled. Bill 44-2023 would limit rent increases to the lesser of 5% plus inflation, or 10% for approximately 18,000 units (67%) of the multifamily dwellings in Howard County. According to the Fiscal Impact Statement for Bill 44-2023, the Office of Consumer Protection is recommending a new Landlord-Tenant Affairs Division be established to implement and enforce the new law.

4. Montgomery County Expanded ROFR Bill

As discussed in prior Alerts, Expedited Bill 38-23 will expand the County’s ROFR law to permit the assignment of ROFR rights – similar to Bill 43-2023 proposed in Howard County, and the law currently in effect in Prince George’s County. A memorandum submitted to the Planning, Housing, and Parks (PHP) Committee on November 29, 2023, identifies a number of issues for consideration, including the possibility of a seven-business-day initial evaluation deadline (similar to Prince George’s County law) and whether the related regulations should be adopted under Method (2) – which requires County Council approval – as opposed to under Method (3)– which may be adopted by the County Executive without County Council input. The memo also includes several technical and clarifying amendments recommended by the Department of Housing and Community Affairs (DHCA) in response to ongoing discussions with stakeholders, including Ballard Spahr. The PHP Committee, chaired by Andrew Friedson, will hold a work session on Expedited Bill 38-23 on December 11, 2023, and another work session is expected in January. We met with Councilmember Friedson this week and provided him with data to support the changes we are seeking.

5. Montgomery County Zoning Bill

On November 28, 2023, the Montgomery County Council introduced Zoning Text Amendment (ZTA) 23-10, which would significantly reduce parking requirements for new housing developments in close proximity to public transit. Specifically, ZTA 23-10 exempts residential uses from the minimum parking requirements for properties near transit. To qualify as “near transit”, the property must be located within (i) ½ mile of a Metro station, (ii) ½ mile of a Purple Line station, or (iii) ¼ mile of an existing Bus Rapid Transit (BRT) station or a BRT station funded for construction. A public hearing on ZTA 23-10 is tentatively scheduled for January 16, 2024.

6. ULI Washington Review of Prince George’s County Rent Stabilization Act

A ULI Washington panel comprised of various industry stakeholders (including Shanice McClelland of Ballard Spahr) convened earlier this year to analyze policies impacting housing and development in Prince George’s County, particularly the County’s Rent Stabilization Act. (discussed in previous updates, including here). In the recently published Housing Strategy report of its findings, the panel concluded that the Rent Stabilization Act was “not well designed and lacked structure and certainty for the housing market”. Specifically, the panel determined that the 3% rent increase cap was arbitrary, the policy hinders development, and results in lower property values. The panel suggested that the County utilize an objective rent escalator (like the Consumer Price Index), assess the impact on existing and new development, improve the timeline for implementation, and provide more meaningful tenant protections (including a Tenant-Landlord Commission, proactive rental inspections, and eviction rules).

7. Recent Developments in Algorithmic Pricing Antitrust Cases

The multifamily housing industry has become a focal point for antitrust enforcers and class action plaintiffs’ lawyers, who have brought a host of pricing fixing cases based on the use of algorithmic pricing. Nearly 50 cases have been consolidated in federal court in Tennessee in In re: RealPage, Inc. Rental Software Antitrust Litigation, No. 3:23-MD- 3071 (M.D. Tenn. Nov. 15, 2023), and the U.S. Department of Justice has now filed a Statement of Interest in the case. There is also a new lawsuit brought by the District of Columbia Attorney General against RealPage and a series of developers, and pending litigation in federal court in Nevada involving similar allegations against owners of casino hotels on the Las Vegas Strip. To learn more about these developments, click here.

Should you have any questions or wish to provide any input on 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.