Lenox Park Apartments near Downtown Silver Spring, Maryland by Farragutful licensed under Creative Commons.

This week, the Montgomery County Council officially and unanimously voted to eliminate the county’s housing moratorium and updated a suite of other growth policies. The county updates these policies every four years in what was formerly known as the Subdivision Staging Policy and will now be known as the Growth & Infrastructure Policy.

The county had formerly banned new housing approvals in areas with schools at 120% capacity. However, research showed that the moratorium was not successful at stopping school overcrowding. It turns out that over 70% of school enrollment growth is attributable to turnover of single-family homes to young families.

The death of the housing moratorium comes after more than a year of advocacy efforts led by the Coalition for Smarter Growth, and supported by organizations like Sierra Club and Montgomery Housing Alliance. Montgomery was the only jurisdiction in the Washington region to have a moratorium policy.

The moratorium prevented new development in transit-oriented areas of the county, such as Silver Spring, North Bethesda, and Wheaton, that are best poised to sustainably solve the county’s housing shortage. Montgomery County’s population is expected to grow by 200,000 over the next 30 years and needs to build 10,000 additional homes above the current regional housing forecast in order to meet existing and future demand for walkable neighborhoods with accessibility to the region’s job centers.

FY20 housing moratorium by Montgomery Planning.

The council rejected the Planning Board’s recommendation to keep the housing moratorium in areas with high student enrollment growth due largely to high housing growth in predominately new single-family units. Instead, the council opted for a blanket approach removing the moratorium throughout the entire county.

Major updates to impact fees for schools and transportation

The County Council supported most of the major policies recommended by the Planning Board. The council opted to keep the new impact area approach. The School Impact Area categorizations include Turnover Impact Areas and Infill Impact Areas — recommended Greenfield Impact Areas were nixed. School impact fees will now be scaled based on the impact areas’ impact on schools, with the lowest impact fees generally in Infill Impact Areas and higher fees in Turnover Impact Areas This is calculated based on data detailing how many students are typically generated by certain housing types in different areas of the county.

2020 School Impact Areas by Montgomery Planning.

Another major change was to reduce the rate of the school impact tax from 120% of the cost of a student seat to 100%. This brings Montgomery more in line with school impact fees charged by other jurisdictions in the region. The council rejected a recommendation to further lower school impact fees in desired growth areas, but embraced an exemption for Opportunity Zones. Qualified Opportunity Zones include Germantown, Montgomery Village, Gaithersburg, Rockville Pike, downtown Wheaton, White Oak, downtown Silver Spring, Long Branch, and Takoma Park near Langley Crossroads.

Development impact tax rates for public school improvements effective February 26, 2021 by Montgomery County Council.

In areas with overcrowded schools, the county will charge developers a Utilization Premium Payment (UPP). When an area’s elementary, middle, and high schools are all collectively at 105% capacity, a 40% UPP will be applied. At 120% capacity, an 80% UPP will go into effect, and at 135% capacity, a 120% UPP. A public hearing and council action are scheduled for December 8.

Developers are also required to pay transportation impact taxes, which are similarly set depending on the land use context, with the lowest taxes paid in Red Policy Areas with high-capacity transportation infrastructure, like Metro stations.

The council voted to lower transportation impact taxes in desired growth areas and to categorize the areas around future Purple Line stations as Red Policy Areas. This means that new development around Purple Line stations will pay lower transportation fees, and development approvals will allow for longer crossing times for pedestrians and slower vehicle speeds.

2020 Transportation Impact Areas by Montgomery Planning.

One major tax issue was excluded: recordation taxes, the tax paid by homebuyers at closing. The Planning Board had proposed a progressive increase to the recordation tax, which would have a nexus to the new student generation from the turnover of single-family homes. The proposed increase would have raised $20 million in additional revenue if enacted in 2019.

Councilmembers decided to return to the issue at a later date — likely during the spring budget cycle — to get a better understanding of the entire fiscal picture. Given that transit-oriented development generates a higher tax yield per acre, sparking additional TOD has the potential to increase the county’s revenues to support services including schools.

Turning a new page on growth

Home builders, particularly those seeking to provide transit-oriented multifamily housing, no longer have to worry about getting stuck in a housing moratorium. This has the potential to boost the housing development pipeline and change the perception of doing business in Montgomery in an era plagued by slow housing and job growth.

To that point, Councilmember Hans Riemer argued in an opinion piece published by Maryland Matters that removing the housing moratorium is a key component to embracing the growth that Montgomery needs to revamp its economy and tax base.

County Executive Marc Elrich, who has opposed most changes to the growth policy, cannot veto these updates in the same way that he recently vetoed legislation to incentivize high-rise construction at Metro stations. The update to the growth policy cannot be vetoed, although the policy’s two companion bills could be vetoed, including one amending impact taxes.

In the end, county councilmembers unanimously made major moves toward policies that encourage and take steps to prepare for expected growth in Montgomery County.