Federal Bureau of Labor Statistics data and market factors led Montgomery County to lower its rent cap guideline to 0.4% last week — the lowest since it was established in 1983.
Council members passed a bill in November that prevents landlords countywide from raising rent more than the cap through mid-May. It’s a protection that has existed throughout the coronavirus pandemic.
Previously, the guideline was voluntary. The county established it to give tenants and landlords an estimated fair limit for any increases. Montgomery County has not had any rent control laws since its establishment.
Previously, before Feb. 4, the guideline was set at 1.4%.
The lead sponsor of the bill that turned the voluntary limit into a prohibition was Council Member Will Jawando.
Jawando said in an interview that his original bill had the prohibition extending through August, but the end point was changed to May after tweaks through the legislative process.
Frank Damarais, the deputy director of the county’s Department of Housing and Community Affairs, said in an interview that the voluntary rent guideline changes annually, and is based on a regional rent survey completed by the Bureau of Labor Statistics.
The guideline can change dramatically based on multiple factors in the rental market, but 0.4% is an all-time low for the metric, Damarais said.
On Tuesday, the County Council is scheduled to review rental assistance funds to tenants and landlords, and the overall rental housing landscape.
County Council Vice President Evan Glass, the council’s lead on issues involving homelessness and vulnerable communities, told reporters during a weekly briefing on Monday that he still wants to hear more details about the overall rental situation in the county.
Glass said it’s “premature” to say whether he would support extending Jawando’s bill on renters protections, after the guideline dropped to 0.4% last week.
Jawando said the council is not currently considering a proposed extension and he didn’t want to speculate what might happen if economic conditions worsen.
“Hopefully, we’re not hit with the new variant, and we could start figuring out what the new normal will be,” Jawando said. “But we know that there will be lagging indicators … as far as the economic recovery, mental health and people’s physical health, as well. So, we have to be looking at all those things. But right now, there’s no plans to extend [the bill].”
Matt Losak, executive director of the Montgomery County Renters Alliance, said the drop in the voluntary guideline is “momentary relief” for renters who have struggled during the pandemic. He encouraged tenants who want to stay at their homes long-term to lock in their leases for a year or two while the guideline is low.
Losak said landlords have a right to raise rents to keep up with “genuine overhead costs,” but should be transparent about that in their initial lease agreements.
The Renters Alliance is concerned that once the protections in Jawando’s bill expire in mid-May, thousands of renters will be at risk of being evicted, Losak said.
“Lower-income renters have a much higher mountain to climb when it comes to getting back on their feet,” he said. He supports extending Jawando’s bill limiting rent increases on tenants or some other rent stabilization law.
But Alex Rossello, director of policy communications for the Apartment and Office Building Association of Metropolitan Washington, said extending Jawando’s bill would place a burden on property owners in the region.
In an interview, he said that property owners and managers have had to deal with increases to the cost of water and electricity, along with material and labor costs if a building needs extensive upgrades.
The 0.4% guideline is quite low, given inflation and supply chain problems, Rossello wrote in a separate email.
“Approximately 91% of rent collected goes toward the cost of maintaining, managing, and operating the property and paying real estate taxes,” Rossello wrote. “Unlike other types of businesses, housing providers cannot balance losses with other revenue categories. Unexpected cost increases (including lost rent for that matter) may only be managed through an increase in rent, a reduction in services to residents, or deferring planned capital improvements.”
Doug McKeever, a co-owner of Halpine View Apartments near North Bethesda, agreed that landlords have had to deal with rising costs during the pandemic.
He appreciated that some of the county’s rental assistance money — from the state and federal government — has gone directly to landlords. But he added that a 1.4% voluntary rent guideline was already low — and that 0.4%, the current rate, only creates more budgetary problems for property owners.
“Landlords have a mortgage, [and] if the county thinks that the landlords aren’t important, well, the banks that have our mortgages think it’s important [that we pay them],” McKeever said.
The protections in Jawando’s bill, including the rent increase cap, expire May 15.
Steve Bohnel can be reached at email@example.com