Montgomery County Council approves pilot to incentivize converting vacant offices to housing with affordability requirements

The Montgomery County Council on April 8 approved a countywide pilot to encourage the conversion of underused office buildings into housing, voting to adopt an expedited tax-abatement and review package after a daylong debate.

The program, advanced by the council’s joint committees, creates a payment-in-lieu-of-taxes (PILOT) pilot that would reduce or eliminate annual property tax bills for qualifying conversions and demolitions that produce residential units. Under the version the council adopted, projects must set aside 17.5 percent of units as Moderately Priced Dwelling Units for households at or below 60 percent of area median income and would be eligible for an abatement that the legislation ties to a 20‑year benefit term; the legislative package also includes a 10‑year sunset of the pilot program itself.

Supporters said the subsidy is necessary to make conversion projects financially feasible. “If we want these conversions to happen, we have to incentivize them,” Planning, Housing and Parks Chair Andrew Friedson said during debate, urging a consistent, fast and clear process so developers will act.

Opponents and skeptics warned the council to move more cautiously and proposed a range of fiscal guardrails. Council Vice President Will Jawando proposed a competitive model with annual dollar caps and director-of-finance discretion—similar to a District of Columbia program—but that amendment failed on the floor after members said it would blunt the incentive the pilot is designed to create. Jawando said the cap approach would impose necessary fiscal discipline: “We need some level of fiscal constraint and not even fiscal constraint, some level of understanding of what is needed.”

Other amendments seeking to boost the affordable-unit share (one proposal sought 25 percent at 60% AMI) or to require prevailing wages for construction also failed to gain majority support. Councilmember Lorianne Sales and others repeatedly argued that raising the affordability floor or layering additional conditions risks making projects economically infeasible. “Fifteen percent of something is a lot more than twenty-five percent of nothing,” Councilmember Katz said in opposition to deeper increases.

County finance staff walked the council through different fiscal scenarios, explaining that the earlier fiscal-impact statement assumed a much larger, longer program and that the committee-edited bill’s inclusion of a 10‑year sunset materially reduces long-run exposure. Todd Folley of the Department of Finance cautioned that the most extreme long-term modelling could produce very large price tags if the program were taken to scale without limits, but also said the committee’s changes and the sunset substantially lower that risk.

The final roll call showed broad support; a handful of council members voted no on specific amendments over the course of the day but the overall package passed (recorded vote on the final package: majority yes, at least one no recorded). Staff said the county executive and multiple departments will need to draft implementation rules and administrative procedures, and the pilot includes a provision making projects that already had site-plan approvals eligible to participate under certain conditions.

What happens next: implementation and regulations. The council approved the legal framework and some policy parameters; council staff and executive agencies will draft implementing regulations and application procedures. The county said applicants will have to provide pro formas and other financial data as part of any discretionary components; the director of finance will have the administrative role for processing pilot applications for discretionary components the legislation allows.

Why it matters: Montgomery County faces roughly a 19 percent office vacancy rate; council leaders framed the pilot as a tool to turn underused commercial stock into housing and to preserve county tax revenues by stimulating redevelopment. Supporters describe it as an opportunity to add housing supply and some affordable units without expanding the county footprint; critics warned of potential fiscal risk, the need for stronger affordability guarantees, and the risk of subsidizing projects that would have proceeded without public help.

Key quotes

• Councilmember Andrew Friedson, PHP chair: “This minor master plan builds on that success of Downtown Bethesda … and it prioritizes important public amenities.”

• Council Vice President Will Jawando: “We can be in favor of conversion but also want some level of analysis and some level of negotiation and not just say, here, take everything.”

• Todd Folley, Department of Finance: “Our assumption was that developers facing a complete abatement of taxes would choose to target properties that could get them that pilot … and we used the past ten years as a proxy for future development.”

Article provenance

Topic intro: SEG 2186 (introduction of expedited bill) Topic finish: SEG 4411 (roll‑call vote adopting package)