Montgomery County committee advances rent‑stabilization regulations after detailed review of fees, inspections and fair‑return rules

Council President Friedson’s Planning, Housing and Parks Committee recommended approval on July 17 of executive regulations designed to implement Montgomery County’s new rent‑stabilization law, following detailed briefings from the Department of Housing and Community Affairs (DHCA) and lengthy questions from committee members.

DHCA Director Scott Bruton told the committee the department spent a year drafting the regulations, consulting tenant advocates and landlord groups and working closely with the Office of the County Attorney. The department published the draft in the county register for a 30‑day comment period and received hundreds of pages of feedback that led to multiple revisions, Bruton said.

Why it matters: the regulations define how core features of the law will work in practice — who may raise rents, by how much, when increases can be banked and applied, and how certain exemptions and petitions will be handled. The committee recommended forwarding the regulations to the full council for final action before the August recess.

Banking and multiyear leases: Committee members pressed DHCA on how increases are handled when tenants sign multiyear leases. Bruton and the chair clarified that rent may not increase during an active two‑year lease; the regulation allows landlords to "bank" the allowance (calculated under the law as CPI plus 3% with a listed maximum) that accrues during the lease and apply it when the tenant’s lease is renewed. Bruton used a $1,000 example to show a $50 banked increase midlease that could be used at renewal, subject to statutory caps.

Troubled or at‑risk properties and inspections: Staff asked how the department would handle properties designated "troubled" or "at risk." Bruton said the regulation aligns with existing troubled‑property law and makes reinspection mandatory (not discretionary) when a landlord submits a corrective action plan and maintenance logs and meets specified requirements, so that compliant properties can regain a nontroubled designation sooner. DHCA acknowledged a current inventory of about 77 troubled/at‑risk properties and said typical inspections range from a few weeks to six weeks depending on size; the department will monitor workload, use recently added inspectors and request additional staff if necessary.

Fair‑return petitions and formula choice: The committee sought clarity about how DHCA will assess requests for a fair return. Bruton said landlords will be able to choose between an operating‑income offset method or a simplified return‑on‑investment formula. The latter uses assessed value (as of July 1, 2023) adjusted by CPI, plus the annual yield of a 10‑year Treasury note and a 3% risk premium — a standard approach used in other jurisdictions, Bruton said.

Vacancies, concessions and non‑arm’s‑length rents: The regulations distinguish units vacant before the rules take effect (landlords may set a market rent when re‑leasing) from units that become vacant after the regs are effective (the base rent is derived from the last lawful rent plus allowable banked increases, with specific limits such as a 10% cap in a single increase year). Bruton explained that rent concessions (temporary discounts) do not change base rent; the base rent remains the pre‑concession amount and any foregone amounts can be banked.

Fees and the rental‑housing portal: Bruton described a research effort by the new Office of Rent Stabilization (led by Miss Melvin) that called hundreds of properties to survey fees. The department used that data to set fee parameters (examples discussed included a $25 monthly pet fee and a roughly $300 average refundable pet deposit) and said many fees will be allowed to increase annually by CPI. To improve transparency, DHCA is building a rental‑housing portal that will publish unit‑level base rents, banked amounts and active petitions; DHCA cautioned it will take several months to a year for landlords to populate the database.

Capital‑improvement surcharges and substantial renovations: Staff asked for clarity about what qualifies as "good cause" to continue a capital‑improvement surcharge period; Bruton explained the statute limits surcharges to five or eight years depending on scope and that overlapping petitions or disaster recovery can justify continuation. On "substantial renovation" exemptions (which require spending roughly 40% of assessed value), DHCA resisted allowing phased implementation for subsection approvals, citing assessment and clawback complexity and saying a law change would likely be required to permit phasing.

Timelines, notifications and reporting: DHCA said it will follow an iterative completeness review (about 30 days) when petitions are filed, require landlords to notify tenants by mail/email at prescribed steps and will publish both monthly internal tracking spreadsheets and quarterly public pipeline reports to the council on enforcement and petition timelines. The committee agreed to discuss whether to add a reporting requirement to the regulation at full council.

What’s next: the committee voted to forward both regulations to the full council with a committee recommendation of approval. The full council will consider final action before the August recess, at which point the regulations could take effect unless council action extends the 60‑day method‑2 window.