Montgomery County Wonders How Rent Stabilization Will Actually Work – Greater Greater Washington

Rent stabilization will return to Montgomery County for the first time in 40 years. But first, the Montgomery County Council must approve legislation on how it will actually work. It’s not perfect, but advocates want to see it move forward with what’s on the table now.

Montgomery County Department of Housing and Community Affairs (DHCA), which will enforce the rent stabilization law passed last year, wrote the rules and sent it to the County Council in June. This followed a public comment period in which industry representatives, activist groups, and individual advocates (including myself) submitted proposals for changes to the regulations. Council members cannot make any changes: they must 60 days to approve or reject amendments or extend the deadline, or they will become law automatically.

These are good recipes

Just like the county law itself regarding rent stabilizationI think these bylaws are good and the council should approve them. Together, they provide a reasonable path forward, balancing the need to make new housing construction financially viable while preventing large, rapid rent shocks. For example, the law exempts new construction for 23 years, which mitigates the impact on project financing by allowing property owners to raise rent without restriction during the period when investors are most interested in making a profit. In the meantime, the law provides reasonable accommodations for fees and other charges beyond rent while limiting how much property owners can raise them.

DHCA Director Scott Bruton and his team also deserve recognition for taking this seriously. comments, suggestions and concerns they were informed when the original recipes were published. They did so significant changes in reserves about distressed or at-risk properties, the fair return process and exemptions for owners undertaking major renovations.

Another big change concerns parking fees. Initial regulations limited parking fees to 2% of base rent (e.g., $40 for a $2,000-per-month apartment) for an uncovered parking space and 4% of the base rent for a “secure, covered parking space.” Many commenters worried that this was too low, made it harder to fund projects, effectively subsidized residents who owned cars, and created another incentive for landlords to raise rents as much as possible because their ability to collect fees was so limited. The law now limits parking fee increases by tying them to inflation and sets more stringent limits on the creation of new parking fees. I could suggest more improvements, such as making the “fair return” exception, under which landlords can apply for rent increases above the limit, less dependent on a case-by-case analysis. But it is not enough to require us to start the process over again.

Rent stabilization is not enough

As rent stabilization approaches the brink of becoming a reality, it’s important to consider what comes next. We talked earlier about how important signals areand how after the tenant protection regulations were passed, the county had to send other signals more friendly to development. To its credit, the County Council has taken many actions on this front, including the abolition minimum parking requirements near public transport and adoption of an amendment to the zoning text that allows nonprofit organizations have a lot of flexibility in building affordable housing on their land.

Still, challenges remain. Developers have given mixed signals about the feasibility of rental housing in the county since the law passed. At the Montgomery County Affordable Housing Conference in May, Matt Hopkins of real estate investment firm Aimco said that cap rates—basically the premium investors demand for investing in a project—rose sharply after the law passed. While they have started to decline, they remain elevated. That may have as much to do with sentiment and signaling as the law’s content. The county still needs to make reforms that both make it significantly easier to build housing and send signals to builders and investors that we want to make it easier to build housing.

One example is Affordable Housing StrategiesPlanning Board recommendation to ease single-family zoning in most of Montgomery County, which is currently before the County Council. Other reforms the county could implement include streamlining the permitting process and reducing setback requirements, which would allow more land to be used for housing development instead of leaving expensive land vacant. Reducing minimum lot sizes and allowing property owners to subdivide lots would allow for smaller, less expensive lots on which smaller, less expensive single-family homes could be built.

Vibrations matter

Every housing proposal in Montgomery County competes with other housing developments or projects in other jurisdictions for investor support. Market and investor sentiment matter. We can’t pretend we can force an endless series of concessions from developers and assume they will continue to build everything we want. Responsible rent stabilization can provide tenants with protection and leverage, but they also have leverage and protection when landlords compete for rent. That will only happen if we address our ongoing housing shortage.

Montgomery County’s rent stabilization laws are sound and respond to the suggestions of many stakeholders. Both tenants and landlords are missing out on the uncertainty that comes with a lack of a firm policy, and the delay prevents tenants from taking advantage of the protections the council voted to enact. It is time for the county council to pass these laws as soon as possible.