More than three-quarters of short-term residential rentals offered in Montgomery County, Maryland, are unregistered, according to a report from the county inspector general’s office.

Findings from Inspector General Megan Davey Limarzi’s latest report show that more than 85 percent of the more than 1,400 short-term residential rentals operating in Montgomery County are unlicensed.

Despite creating licensing regulations for short-term residential rentals (STRR) in 2017, the IG report says Montgomery County lost fees and taxes it could have collected and has been “lax” in administering the regulations it has put in place. .

The report estimates that if licensing fees had been levied on unregistered STRRs in 2024, more than $196,000 in revenue would have been generated. If the county had set the maximum penalty for illegally operating a STRR, the IG report said, the county could have collected $659,000 in penalties in 2023.

Not only did the county not collect fees related to allowing short-term rentals, the IG report states: “The county is unable to reconcile tax payments received by rental brokers to short term with what has been collected. »

When the regulations were initially put in place in 2017, the Department of Health and Human Services was responsible for enforcing them.

According to the IG report, “DHHS made little effort to enforce the provisions of the STRR Code, leading to unlicensed and ineligible STRRs and thousands of dollars in missed revenue.”

The report also found that there were “insufficient staffing and no formal policies or procedures to administer the STRR program.”

Ken Hartman-Espada, Montgomery County’s deputy chief administrative officer, told WTOP that County Executive Marc Elrich worked to address the problem when he submitted a bill to the County Council in April 2023.

This bill was signed into law in November 2023 and took effect on July 1 of this year, according to Hartman-Espada.

“The legislation increased county accountability, transferred the function from the Department of Health to the Department of Housing, and we provided additional staff in the budget” to administer the short-term rental program, Hartman said- Sword.

The IG report says the county has hired four people to oversee enforcement of the regulations, and a fifth staff member is expected to begin work soon.

The OIG office made a series of recommendations, including asking the county Department of Finance to conduct audits to verify the amount of taxes paid by short-term rental brokers and to assess interest and penalties when county code justifies it.

Other recommendations include that the Department of Housing and Community Affairs enforce compliance, maintain a list of all short-term residential rentals in the county and communicate program requirements to hosts, residents and potential guests.

The responses from Richard Madaleno, the county’s chief administrative officer, are part of the IG’s report.

In the report’s appendix, Madaleno said his office “agrees” with most of the findings, but in one case, where the IG calls for “routine audits of overall transition tax payments” , he said the county didn’t have enough staff. to achieve this.

However, Madaleno said the Ministry of Finance will report on how to resolve this issue by September 30, 2025.

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