Montgomery County Executive Marc Elrich said Monday he’ll veto a rent stabilization bill proposed by six County Council members if it remains unchanged, setting up an upcoming legislative and political battle over how high landlords should be allowed to raise annual rents on residential properties in the county.
On March 2, eight council members announced two separate packages of bills that set rent caps at varying levels countywide. Council members Will Jawando (D-At-large) and Kristin Mink (D-Dist. 5) will introduce one bill, with the support of Elrich.
County Council Vice President Andrew Friedson (D-Dist. 1), along with council members Natali Fani-González (D-Dist. 6), Gabe Albornoz (D-At-large), Marilyn Balcombe (D-Dist. 2), Sidney Katz (D-Dist. 3) and Dawn Luedtke (D-Dist. 7) have proposed the other legislative proposal, which Elrich opposes and said he’ll veto if it remains unchanged.
That bill sets the annual maximum allowable increase at 8% plus the region’s consumer price index (CPI), based on U.S. Bureau of Labor Statistics data, with certain exemptions. Elrich said this number is too high and would not prevent rent gouging by landlords in the county.
“You can do inflation plus 8%. Well, [I] hope for the best that you don’t do that,” Elrich said in an interview. “If they use that as the cap on where [landlords] can take their rents, you will see massive displacement in the county. And if that’s not what they were going to do, then why would you put that kind of number on the table?”
According to Jawando and Mink’s legislation, rent increases would be capped at 3% or the region’s CPI—whichever is lower, with certain exemptions. The latter currently stands at 4.4% over a 12-month period, and the metric changes every two months.
Elrich said landlords should be required to prove why they need to charge rents higher than 3%, by comparing their net operating income to their operating expenses. He declined to say what number would be too high for annual rent increases, but made it clear that the current CPI plus 8% was too much.
The county executive used one example of a $1,000 rental unit in an apartment complex, with a $600 net operating income and $400 in expenses. If expenses increase 4%, that’s $16 added to the original $400, the executive added. Under the proposal led by the six council members, landlords would be allowed to increase rent by $120.
“There is no justification on a $120 rent increase to cover an [expenses] increase of $16,” Elrich said. He added he has other concerns with the bill—namely about the exemptions listed and other provisions—but wouldn’t specify, saying he would do so at a later date.
The six council members who proposed the bill also announced March 2 that they also support $4.5 million in American Rescue Plan Act funds to help with homeownership access, with $3 million to support first-time homebuyers and $1.5 million to help those at risk of losing their homes. They also support $30 million in emergency rental assistance funds, an increase of $18 million from pre-pandemic levels (Councilmembers approved hundreds of millions of dollars in funds during the coronavirus pandemic, thanks to money from the federal and state government).
The council’s Planning, Housing and Parks committee is also working on an annual affordable housing fund, eventually reaching $50 million annually, to help nonprofit affordable housing providers.
Elrich said that his administration would work with council members to meet those goals, but added that it was improper for them propose those budgetary items, so close to when he introduces the operating budget, which is by March 15, per county law.
Shifting tens of millions of dollars around is likely not possible when the budget is already close to being finalized, and adding funds means cutting from other county programs or adding tax increases, the county executive said.
Three council members—Council President Evan Glass (D-At-large), and council members Laurie-Anne Sayles (D-At-large) and Kate Stewart (D-Dist. 4)—have not signed on to either rent stabilization bill. They currently hold considerable power, because the county charter states that seven members are needed to override a county executive’s veto of legislation. If one of them swings to the bill opposed by Elrich, they can override a veto.
In an interview last week, Glass said that neither rent stabilization bill is “perfect,” but added he wanted to see both go through the legislative process and declined to comment further on his position.
Glass, Sayles, and Stewart may also look to how other jurisdictions have handled the issue. Last month, the Prince George’s County Council recently passed legislation that caps annual rent increases at 3% for the next year, with some exemptions. That council needs to revisit the matter when it expires next year. The city of Mount Rainer passed a permanent bill setting rent increases at 60% of the area CPI each year. For this year, that’s roughly 3%.
Takoma Park is the only jurisdiction in Montgomery County with a rent stabilization law. Adopted in 1981, it allows annual increases equal to the area CPI, beginning July 1. Currently, the law allows for annual increases of 7.3%, and provides similar exemptions to the Friedson and Fani-González bill.
Supporters of rent stabilization say a policy is needed to prevent displacement of tenants, who can face annual rent increases of up to 10% or 20%, or even more. CASA, a Latino organization focused on advocating for immigrants nationwide, and the county’s Renters’ Alliance, which advocates on behalf of tenants across the county, are two prominent groups in support.
Opponents state that rent control leads to less new construction of residential units, and that it prevents landlords from making much-needed repairs and renovations to their properties. The Apartment & Office Building Association of Metropolitan Washington (AOBA)—which represents multifamily and office apartment owners across the Washington, D.C. region, including in Montgomery County—and multiple property owners and management companies have opposed such policies.
Both the Jawando/Mink and Friedson/Fani-González bills are scheduled for introduction on Tuesday.