Legal Alert

Multifamily Update

by Roger D. Winston, Katherine M. Noonan, and Shanice McClelland
July 7, 2023

Below is an update to our recent Multifamily Alerts. The July 18 Montgomery County work session may be of critical importance.

Montgomery County

Rent Control Update - As noted previously, there were two rent control bills pending in Montgomery County. Until just recently, Bill 15-23 was considered the most reasonable of the two and it had the most support by members of the County Council. However, this has now changed.

On June 27, the County Council’s Planning, Housing & Parks (PHP) Committee significantly amended and then voted in favor of Bill 15-23. The Bill now moves to the full Council. The Bill is currently scheduled for a work session and final vote on July 18, 2023.

The PHP committee, composed of Andrew Friedson (chair), Natali Fani-Gonzalez and Will Jawando, added the following four amendments to Bill 15-23 before approving it. 

  1. Capital improvements qualifying for a rent surcharge were defined as including those required by federal, state or county law. This was adopted unanimously.
  2. Fani-Gonzalez wanted to replace the exemption for single family homes and condos with an exemption for units owned by people or corporations who own just one rental unit. Friedson preferred to trigger an exemption at two units. Jawando preferred no exemption. Fani-Gonzalez ultimately agreed with Jawando and they stripped the exemption for single family homes and condos, with Friedson voting against.
  3. The exemption for “financial hardship” was replaced with a provision allowing landlords to petition the County for a “fair return.” The definition of fair return and any implementing formula would be subject to County regulation to be approved by the Council. This was adopted unanimously.
  4. Most importantly, Fani-Gonzalez proposed changing the allowable increase from CPI plus 8% to CPI plus 3% with a cap of 6%. Jawando countered with 2% plus 2%.  Fani-Gonzalez replied, “I compromised, Will. Don’t push it.” Jawando ultimately agreed to vote for Fani-Gonzalez’s motion but said he would try to get the rate lowered at the full Council. This amendment passed, with Friedson voting against. 

Natali Fani-Gonzalez’s amendments fundamentally shifted the direction of the rent control debate. Bill 15-23, rather than Bill 16-23, is now the vehicle for rent control; its rent control requirements have become much more onerous. Friedson noted, “We essentially amended the anti-gouging bill to look very similarly to the HOME Act.”

As currently drafted, the rent control requirements do not apply to vacant or turnover units. Jawando made a motion to cover vacant units with rent control, but Friedson and Fani-Gonzalez opposed it and Jawando withdrew it. Jawando made a motion to address troubled properties through regulations, which passed unanimously.

The current draft of Bill 15-23 includes an exemption for multifamily buildings built within the past 15 years. This is not a full exemption but rather an exemption for 15 years. Thus a building completed in 2013 would be exempt from rent control for 5 more years.

A critical item to be considered at the work session on July 18 is the cap on renewals. The following council members appear to be important swing votes:

Kate Stewart 240-777-7968

Evan Glass 240-777-7966

Sidney Katz 240-777-7906

Recordation Tax Increase - On May 9, 2023, the Council voted 7-4 in favor of increasing its real estate recordation tax by enacting Bill 17-23. Councilmember Kristin Mink was the lead sponsor of the bill, and councilmember Will Jawando was a co-sponsor. As a result of this legislation, the recordation tax beginning October 1, 2023 will increase by approximately .92%.

Prince George’s County

Rent Control Update - As noted in a prior Alert, Prince George’s County imposed a 3% limit on rent increases until April 2024. The County established a Rent Stabilization Workgroup to explore various issues including future rent limit percentages, exemptions, parameters (such as utility fees, added fees, and set-asides), enforcement, and penalties. The Workgroup will host open sessions on July 12 and 13 to inform the public about the potential impact of rent stabilization in the County. The tenant impact session will take place on Wednesday, July 12 from 5:30-7pm (Click here to RSVP). The session on landlord and developer impact will take place on Thursday, July 13, from 5:30-7pm (Click here to RSVP).     

Security Mandate - The County Council recently introduced CB-066-2023. This bill is in response to the increase in criminal activity in the County. A hearing on the bill was held Thursday, July 6, 2023, by the Planning, Housing and Economic Development Committee of the Council. Further details from this hearing will be forthcoming. As a result of testimony and deliberations at this hearing, the scope and content of this bill may change from that described below.

As originally drafted, the bill required that any High Occupancy Apartment (defined as a building or group of buildings with the same name comprising more than 100 dwelling units) have 24-hour security cameras located on each building with a 180-degree view of areas designated for ingress and egress, and parking lots, garages or parking facilities. There are a number of other technical requirements relating to cameras that can be found here.

The bill also provides that each Age Restricted Senior Housing property (defined as a facility and/or building for which leasing is restricted to tenants age 55 years old or older) must have at least one 12-hour security guard on duty each day of the week. This requirement is applicable to all Age Restricted Senior Housing properties, regardless of size. 

At the hearing on July 6, the Planning, Housing and Economic Development Committee of the Council opted to defer any action on this bill until the fall.

Please consider contacting the legislative sponsors Vice Chair Wala Blegay, Esq., Council Member Krystal Oriadha, and Council Member Edward Burroughs III, to provide your input on this legislation. 

District of Columbia

D.C. Housing In Downtown Program (HID). We previously reported on the Housing In Downtown (HID) program aimed at incentivizing new residential development in the downtown area (the Northwest central business district bordered by Massachusetts Ave NW and Constitution Ave NW). After feedback from the public and debate, the D.C. Council approved the following: an exemption of the First Source Agreement requirement for construction, a 10-year exemption from the Tenant Opportunity to Purchase Act (TOPA) for the first sale within that 10-year period, and a minimum affordable housing requirement of (a) at least 10% of units affordable to households earning 60% or less of MFI or (b) at least 18% of units affordable to households earning 80% or less of MFI. The Deputy Mayor of Planning and Economic Development (DMPED) is expected to issue regulations for this program around October 1, 2023, when the HID becomes effective. 

D.C. Deed and Recordation Tax Decrease. A few years ago, the D.C. Council voted to increase the deed transfer and recordation tax rates to the 5% rate that currently exists, with an expiration of the increase to take effect on September 30, 2023. Though an extension of the rate increase was introduced earlier this year, the D.C. Council elected not to extend. Accordingly, the 5% deed transfer and recordation tax rates will revert to 2.9% as of October 1, 2023.

Should you have any questions about any of these matters, please let us know.

Subscribe to Ballard Spahr Mailing Lists

Get the latest significant legal alerts, news, webinars, and insights that affect your industry. 

Copyright © 2024 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

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.