January 2025 Multifamily Alert

With the New Year under way, we wanted to provide updates on legislative activity and other developments affecting multifamily properties in the region and across the country, including Maryland Building Energy Performance Standards (BEPS) final regulations, new legislation and a lawsuit relating to BEPS; modifications to the Prince George’s County security camera mandate and the failure of the Anti-Gouging Bill in Prince George’s County. We also discuss changes to the Montgomery County impact tax requirements, amendments to Gaithersburg’s landlord-tenant law, DC’s “Office To Anything” Conversion Tax Incentive, and federal agencies’ actions against housing providers. In case you missed it, our last Alert also covered Montgomery County terms limits and Troubled Properties regulations (new regulations are now expected by February), a DC tax break for vacant and blighted properties, and a the defeated rent control measure in California. With the Maryland and Virginia legislative bodies now in session, we expect many new bills that may impact multifamily properties and we will report on these developments in future Alerts.

Maryland BEPS Regulations Take Effect. On November 13, 2024, the Notice of Final Action for State’s new BEPS regulations was printed in the Maryland Register. The BEPS regulations are effective and final as of December 23, 2024. Comments received during the public hearing held on October 9, 2024 can be viewed here. The Climate Solutions Now Act of 2022 directed the Maryland Department of the Environment (MDOE) to develop BEPS as a key part of fulfilling the state’s required greenhouse gas (GHG) reduction goals – i.e., to achieve a 60 percent reduction of statewide GHG by 2031 (as compared to 2006 levels) and net-zero emissions by 2040. Certain buildings are exempt from BEPS requirements, including historic buildings, schools, manufacturing buildings, agricultural buildings, and federal buildings. BEPS regulations require owners of non-exempt buildings that are 35,000 square feet or larger (excluding the parking garage area) to measure and report data to the MDOE. BEPS regulations further require that non-exempt building owners meet specific net direct GHG emissions, which may entail significant investment and improvements. Benchmarking will begin in 2025, with the first benchmarking report due September 1, 2025 (MDOE recently extended the reporting deadline from June 1, 2025). Compliance with direct GHG emissions will begin in 2030. Owners of non-exempt buildings must meet interim standards for 2030 through 2039 and final standards starting in 2040, or pay an alternative compliance fee.

Maryland BEPS Bill. On January 8, 2025, the BEPS-Compliance and Reporting Bill (SB 256), was introduced in the Maryland General Assembly. The current proposal would amend the Climate Solutions Now Act of 2022 to give building owners (i) an alternative compliance payment path for energy use intensity targets, (ii) an alternative compliance timeline option between 2030 and 2040, (iii) a dedicated fund for building improvement projects, and (iv) an increase in administrative support to help building owners comply with BEPS. SB 256 is still in the early stages of consideration by both chambers of the Maryland General Assembly and we will provide updates in future Alerts.

Maryland BEPS Lawsuit. On January 13, 2025, a group of building owners, business associations, and Washington Gas Light Company filed a lawsuit against the Secretary of MDOE in the U.S. District Court for the District of Maryland (Case No. 1:25-cv-00113-JRR). Similar to the gas appliance ban lawsuit we reported on in our prior Alert, the plaintiffs in this lawsuit are seeking relief from BEPS requirements claiming that certain BEPS provisions are preempted by the federal Energy Policy Conservation Act because BEPS regulates the use and efficiency of gas appliances, which Congress expressly required the U.S. Department of Energy to regulate through the creation of national standards. Unlike the gas appliance ban lawsuit, a similar BEPS lawsuit does not appear to have been filed in DC at this time. The BEPS lawsuit in Maryland could result in challenges of the DC BEPS requirements and impact the implementation of BEPS at the state and local level.

U.S. Federal Trade Commission (FTC) and Department of Justice (DOJ) Actions. On January 13, 2025, several media outlets reported that the FTC is preparing to sue Greystar Real Estate Partners, one of the largest apartment landlords in the U.S. The FTC purportedly claims that Greystar violated consumer protection laws by failing to disclose mandatory fees for services like pest control, trash pickup and background checks. Although it is possible Greystar and the FTC will reach a settlement before a lawsuit is filed, the case follows similar actions against companies in the housing sector as part of a broader push by the Biden administration to address what the administration sees as unfair business practices. Greystar is also a named defendant in a lawsuit filed by the DOJ and ten state attorneys general alleging six of the nation’s largest landlords participated in an algorithmic price fixing scheme that harmed renters. Click here to learn more about algorithmic pricing – the new frontier of antitrust law.

Wall Street Landlords Loved DC Suburbs – Rent Control Ended That. This was the title of an in depth article published recently by the Wall Street Journal (WSJ). This article (paywall) detailed the many adverse consequences of rent control. Thanks to the many stakeholders who took the time to discuss their personal experiences with rent control with this WSJ reporter. Will this article serve as a wake-up call to public officials?

Prince George’s Anti-Gouging Bill Fails. On the heels of the new rent control law which included exemptions for newer properties, Councilmember Krystal Oriadha introduced CB-97-2024 as a measure to cap rent increases for units otherwise exempt from the County rent control law. The so-called “anti-gouging” bill proposed restricting rent increases for all units in the County to a maximum rent increase during any 12-month period of 15 percent from the previous base rent, including fees. On October 22, 2024, the Committee of the Whole (COW) met to discuss the memorandum circulated by the County Office of Law, which noted the possibility of legal challenges to CB-97-2024 for the potential violation of constitutional rights. It was further noted that the Department of Housing and Community Development and the Department of Permitting, Inspections and Enforcement did not support the bill. At the November 19, 2024, County Council meeting, the motion to enact the bill failed by a vote of five against and one in favor, with two abstentions.

Prince George’s County Security Camera Mandate Modifications. On November 12, 2024, the Prince George’s County Council adopted Bill 71-2024, which amended provisions of the Prince George’s County Code to reduce the security camera requirements for garden style apartments and delayed the compliance date of the security camera law to June 1, 2025. As noted in our previous Alert, the County Code requires 24-hour security cameras in multifamily buildings of 100 or more units. Additional requirements include installing cameras that have a minimum 1080p resolution and a 180 degree field of view at all entrances, exits, and common areas, such as parking lots; provided, however, Bill 71-2024 allows one camera to cover multiple entrances and exits at garden style apartments. The amendments will become effective on January 27, 2025.

Prince George’s County Council Changes. The County Council’s Exchange of the Gavel is an annual affair that usually proceeds without much fanfare and ends with the appointment of a new County Council Chair. However, no Councilmember was able to command the 6-vote majority for appointment. As a result, Councilmember Jolene Ivey will serve as acting County Council Chair on an interim basis. Councilmembers Ivey and Hawkins are also both candidates for the County Executive position. If either wins, another special election would be required to fill the vacant County Council seat. With leadership in transition, it remains to be seen whether the “People’s Council” will continue to wield the gavel, or if the Council will assume a more business-friendly posture in the coming year.

Montgomery County Impact Taxes. On November 12, 2024, the Montgomery County Council enacted Expedited Bill 16-24, which amended the development impact tax law for new developments in the County. The bill was vetoed by County Executive Marc Elrich, but the County Council voted to override the veto on December 10, 2024. As of January 1, 2025, all office-to-residential conversions, bioscience facilities, and multifamily dwelling units with 3 or more bedrooms in a multifamily structure are exempt from transportation impact taxes. Multifamily dwelling units with 3 or more bedrooms in a multifamily structure will also receive reduced school impact taxes in locations identified as “Infill areas.” On December 3, 2024, the Council held a public hearing to discuss Expedited Bill 22-24, which would further amend the County impact tax law to require payment of impact taxes only after final inspection of the building by the Department of Permitting Services (DPS). Currently, payment of impact taxes is required at the earlier occurrence of either (i) 6 months after a building permit is issued for single-family residential buildings or 12 months after a building permit is issued for multifamily residential, or (ii) final inspection by DPS. The goal for shifting the time in payment of impact taxes is to help developers by lowering up-front project costs. The County Council Government Operations and Fiscal Policy Committee is scheduled to meet on January 30, 2025, for a work session to further discuss the bill.

City of Gaithersburg Amends Landlord Tenant Ordinance. On November 4, 2024, the City of Gaithersburg (City) adopted new amendments to the City’s Landlord Tenant Relations Ordinance. The updated ordinance is available here. The amendments are effective as of January 1, 2025, and require (among other things):

• leases to contain a plain language summary of tenant rights and responsibilities, with rent details, tenant obligations, and City resources for tenants;
• leases to notify tenants about whether landlord insurance covers tenant belongings and whether renter’s insurance is required;
• leases to disclose whether a building is equipped with automatic sprinkler systems;
• landlords to notify the City immediately after scheduling an eviction with the Montgomery County Sheriff’s Office, including the date and time of the eviction;
• emergency contact information for landlords or property managers to be readily accessible to tenants and that landlords respond to the City about defective tenancy issues within 48 hours for emergencies and 72 hours for non-emergencies;
• landlords to notify the City within 30 days of any changes to the landlord’s or tenant’s contact information, tenant names and addresses, and lease amendments;
• landlords mailing address provided for contact purposes be distinct from the address of the rental property; and
• a minimum of 90-days’ notice for rent increases, which are limited to one per 12-month period, and a minimum of 60-days’ notice for any lease non-renewal.

The amendments to the Landlord Tenant Relations Ordinance also include items such as relocation assistance requirements and utility billing transparency requirements. City staff confirmed that these amendments apply to landlords of multifamily and single-family rental properties.

DC “Office To Anything” Conversion Tax Incentive. The Office to Anything program, officially known as the Central Washington Activation Project Temporary Tax Abatement of 2024, is now accepting applications. The program intends to support the repositioning of office space into new retail spaces, hotels, world-class office space, restaurants, and other non-residential uses by offering a 15-year temporary property tax abatement. Properties eligible for the tax freeze must be located in the Central Washington Planning Area, which covers all Downtown DC and includes portions of NoMa and Southwest. This new incentive compliments the existing Housing In Downtown (HID) tax abatement program, which provides a 20-year tax abatement for qualifying projects that result in the creation of at least 10 housing units (See our prior Alerts for additional details on the HID program). If you would like to learn more about Office to Anything, the HID program and other DC development incentives, we are hosting an Urban Land Institute Washington (ULIW) Executive Conversation with DC Deputy Mayor for Planning and Economic Development Nina Albert on March 20, 2025, in our DC office. Please contact Roger Winston at winstonr@ballardspahr.com for more information about ULIW Executive Conversations.

As always, we invite you to contact us with any questions or comments regarding the above items 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.