Montgomery County Council Passes 6% Cap On New Rent Increases
Story found on DCist.com – by Morgan Baskin
The Montgomery County Council voted 7-4 on Tuesday to implement a sweeping rent stabilization law governing how much most property owners can charge the roughly 35% of county residents who rent their homes – making it among the largest jurisdictions in the country to pass such a law on a permanent basis.
Under the policy, annual rent increases are limited to 3% plus inflation – which currently sits just above 3% – with a hard cap of 6%. The law carves out a number of exemptions, including leased units newly constructed or substantially renovated within the last 23 years, and property owners who rent two or fewer units.
Thanks to an amendment proposed by District 5 Councilmember Kristin Mink, the law will also give broad authority to the county’s Department of Housing and Community Affairs to create a fee schedule limiting extraneous fines and fees charged by property owners on top of base rent.
“I am very happy. I am proud that this council came together on this day to have a permanent solution to protect tenants in Montgomery County, and I think we have the responsibility to walk the talk,” said District 6 Councilmember Natali Fani-Gonzalez, a lead author of the bill. “We love to say that Montgomery County is so progressive, but this is walking the talk.”
The bill passed on Tuesday is the product of two radically different proposals ultimately merged together across work sessions in the council’s housing committee. One, shepherded by Mink and At-Large Councilmember Will Jawando, would have capped all rent increases at 3%; the other, dubbed by lead author Natali Fani-Gonzalez as an anti- rent-gouging bill, would have limited increases to 8% plus inflation.
But in a surprising eleventh-hour amendment to her bill in June, Fani-Gonzalez scrapped her roughly 11% rent cap, proposing the 6% limit the council ultimately passed this week. In the process, she lost the support of four co-authors of her original bill, who removed their names from the legislation and voted against the law on Tuesday. (Initially adamant that a more aggressive rent cap would stifle growth in the county, Fani-Gonzalez conceded Tuesday that while developers might not like the new cap, they “could live with it.”)
Complicating its passage was the full council’s nearly eight-hour marathon session on Tuesday, which saw lawmakers weigh a series of more than a dozen amendments – and amending the proposed amendments – some of which were written on the dais. A debate over whether to allow property owners to “bank” unused rent increases drew particular scrutiny, although the council ultimately voted to include that provision.
The protracted and at times contentious debate over the merits of a permanent rent stabilization law drew testimony this spring from hundreds of people, organizations, and even other lawmakers across the county. Many of them argued that double-digit rent increases are financially unsustainable for families who haven’t seen wages keep pace with inflation.
Gustavo Torres, executive director of community services and organizing group CASA, said in a press release Tuesday that housing “should not be a money-making business that sucks renters dry.”
“Montgomery County stood up to say YES to renters rights in this historic moment,” said Torres, whose organization has led a consortium of legal, political, faith-based and labor organizations in advocating for the bill. After the council vote on Tuesday, dozens of onlookers in the council chamber broke into raucous applause and cheers, many tearfully hugging each other.
The business and real estate community lobbied almost uniformly against an aggressive rent cap, arguing that those controls would disincentivize new development and stymie growth in the county, particularly on the heels of a new budget that will see property taxes rise by about 5%. Executives from firms including Bozzuto, Kettler, and The Donohoe Companies wrote councilmembers a letter in early March implying they would take their business elsewhere should the body pass an aggressive rent stabilization law. “Capital flows [in the D.C. region] align to the subregion where risk to return is lowest,” adding “naturally[,] regulation is a key factor in evaluating risk.”
And in mid-July, Peter and Leigh Henry of HIP Projects LLC, a Montgomery County-based developer, told councilmembers and County Executive Marc Elrich that the company is “shelving” plans for a new project because of the rent stabilization law.
The Apartment and Office Building Association of Metropolitan Washington, an influential trade group representing commercial and residential developers, called the county’s bill “very disappointing.”
“This complicated legislation will force housing providers to jump through a series of regulatory hoops in order to maintain their apartment communities effectively and responsibly,” AOBA’s statement reads. “By severely disincentivizing investment in new and existing residential real estate, the Council has ensured that housing affordability challenges for renters will only continue to grow.”
Those groups, as well as some lawmakers like Gaithersburg Mayor Jud Ashman, have argued that the county’s efforts are better spent expanding access to emergency rental assistance funds that buoy tenants at risk of eviction. (The council lobbied Maryland Gov. Wes Moore and the Maryland General Assembly to pad the county’s budget with additional funds for rental assistance.)
“It’s really important to note that the action that’s taken here today will not decrease rents in any way. It won’t do that,” said councilmember Dawn Luedtke, who voted against the bill alongside councilmembers Gabe Albornoz, Marilyn Balcombe, and Andrew Friedson. “And we won’t be creating more rental units because of the actions we take here today. In fact, we could be exacerbating the supply shortage problem that we have.”
The law passed Tuesday comes as other jurisdictions in the area scramble to address historically high rent increases. Neighboring Prince George’s County passed a temporary measure in February capping new rent increases at 3%, while D.C. passed a bill in June limiting rent increases to 6% per year over the next two years — a temporary, more aggressive iteration of its existing rent stabilization law. Mount Rainier also recently put controls on new rent increases.
Unlike the laws passed in many other jurisdictions, Montgomery County’s is permanent, and its carveouts are much narrower in scope than those in D.C.’s law. While the District’s rent stabilization law applies to buildings constructed before 1976, Montgomery County’s applies to those built within the last 23 years, on a rolling basis; where D.C.’s law exempts property holders owning four or fewer rental units, Montgomery County’s exempts only “natural persons” – ie, no LLCs or corporations – that rent out two or fewer units.
Implementation of the bill is still months away. The county’s Department of Housing and Community Affairs is now tasked with writing the specific regulations that will allow the law to go into effect, which the council will then need to approve after a public comment period. DHCA has said it will likely require eight new staff members to help draft the regulations; at soonest, the county will likely not adopt the law until next April.
Until then, the bill will next head to County Executive Marc Elrich for his signature. In a statement released Tuesday evening, Elrich said he will sign the bill “as soon as it arrives” on his desk.
“This is a proud day,” councilmember Will Jawando said. “It’s a compromise that will provide meaningful protection for our residents, for the 400,000-plus residents who are in rental housing.”