Montgomery County Council committees on Wednesday advanced Bill 2-25E, a pilot program that would exempt converted high-vacancy commercial properties from county real property tax for a fixed period to encourage conversion to residential housing.

The joint session of the Government Operations and Fiscal Policy Committee and the Economic Development Committee recommended the amended bill to the full Council after adopting several committee amendments: raising the minimum MPDU requirement to 17.5% (from 15%), limiting the abatement term to 20 years (reduced from 25), and adding a 10‑year sunset and review provision. The committee also approved a transition amendment to allow certain projects already at the planning stage to qualify and a technical clarification to ensure projects that do not require planning site plan review remain eligible under the intended timelines.

Why it matters: Montgomery County faces elevated office vacancy and a housing shortage. The pilot is intended to convert underused commercial inventory into housing supply by offsetting some of the development cost through forgone property tax revenue in exchange for guaranteed affordable units. Committee members framed the package as an incentive tradeoff: short-term foregone property tax revenue in return for new housing, later higher tax receipts and other revenues, and removal of vacant, nuisance properties from the market.

What the bill would do and who qualifies
- As introduced, expedited Bill 2-25E would require the director of finance to offer a payment-in-lieu-of-taxes (PILOT) pilot for residential development that converts a property designated for commercial use to residential use if the property had at least 50% vacancy at the time of the qualifying application. The conversion must comply with the expedited approval provisions in the companion zoning text amendment ZTA 25-03 and related Chapter 59 provisions cited by staff.
- Eligibility requirements discussed in committee include: a minimum of 17.5% MPDUs (moderately priced dwelling units) affordable to households at or below 60% of area median income (AMI) for a period of 25 years; converted properties generally must be at least two stories tall; and the exemption was tied to issuance of the certificate of use and occupancy (UNO) under the bill as introduced. Committee action changed some of these parameters as noted below.

Committee changes and votes
- MPDU share: Committee members adopted an amendment changing the required MPDU share from 15% to 17.5%. The committee reported that the amendment passed unanimously among members present.
- Abatement term: Members voted to reduce the abatement period from 25 years to 20 years; that amendment passed, with one recorded abstention later noted by the clerk (Council Member Sales).
- Sunset/review: The committee adopted a separate amendment establishing a 10-year sunset/review requirement so the pilot’s effectiveness must be evaluated after 10 years. That amendment passed unanimously.
- Transition/retroactivity amendment: The committee adopted an amendment allowing properties that had already obtained planning board site plan approval by the bill’s effective date to be eligible if they meet other conditions and meet DPS deadlines (apply for a building permit that includes core and shell within two years, and obtain the building permit within two years of DPS acceptance). That amendment was seconded and adopted unanimously.
- Technical clarification: Staff’s technical amendment clarified which milestone (application to Planning vs. DPS) governs the 50% vacancy test and ensured projects that do not require planning site plan review are not inadvertently excluded; the committee approved that clarification unanimously.
- Proposed exclusions and larger change attempts: A motion to exclude neighborhood retail (NR/GR/CRN/CRT/LSE zones) from eligibility as proposed by one member was introduced but received no second and was not adopted. A separate proposal to raise MPDU to 30% did not receive a second and did not proceed.

How the pilot would operate (per staff explanation to committee)
- The pilot as amended would exempt 100% of real property tax normally levied on eligible converted properties for the abatement term (20 years as amended). The exemption’s calculation and eligibility are tied to local County Code (section cited by staff: 52-24(c)) and to the companion zoning provisions in Chapter 59 (ZTA 25-03) that set expedited review timelines.
- Timing and milestones: For properties requiring planning board review under ZTA 25-03, the 50% vacancy test is measured at the time of application to planning board; the expedited ZTA contemplates a 60-day resolution timeline from planning and a two-year window from planning resolution to application to the Department of Permitting Services (DPS), then two years from DPS acceptance of a building-permit application that includes core and shell to obtain the building permit.

Arguments and concerns raised in committee
- Supporters said the pilot is modeled after programs elsewhere and can unlock conversions that would otherwise not occur without incentives. One sponsor said the pilot is “modeled in many ways after what other jurisdictions around the region and around the country have done.”
- Several members emphasized the pilot’s longer‑term fiscal rationale: short-term foregone property tax revenue could yield higher property tax, income tax and impact tax revenue after the abatement expires and would address blight and public-safety concerns tied to vacant buildings.
- Concerns centered on depth of affordability and distributional effects. Council Member Sales said, “Converting underutilized commercial buildings into residential spaces is essential, but it must be done responsibly given current budget constraints,” and argued the package could benefit landlords or higher-income residents if affordability requirements are too weak. She proposed deeper affordability options (including a 30% MPDU alternative and a split requiring some units deeper than 60% AMI), which did not advance.
- Staff cautioned that deeper affordability requirements or a significantly shorter abatement term could make some projects financially infeasible and therefore blunt the pilot’s ability to generate conversions.

Next steps and caveats
- The joint committees forwarded their recommendation to the full County Council. The final committee vote to advance the amended bill recorded one abstention (Council Member Sales); the clerk noted the joint committee recommendation will go to full Council for final consideration.
- Staff noted legal and administrative constraints: the county’s pilot relies on state enabling language that, staff said, references rental projects; staff observed that adding a for‑sale (homeownership) option would be legally and administratively complex and might be ineffective until corresponding state authorization is clarified or changed.

Ending note: The committee’s action changes parameters of Bill 2-25E to emphasize somewhat higher MPDU set‑asides, a shorter abatement term and an automatic review after 10 years. The measure remains tied to companion zoning changes (ZTA 25-03) that define the expedited approval process; the full Council will take up the committee recommendation next.