Rent Stabilization

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General Information 

Bill No. 15-23, Landlord-Tenant Relations- Rent Stabilization, was enacted by the Montgomery County Council on July 18, 2023, and signed into law by the Montgomery County Executive on July 24, 2023. The law went into effect on October 23, 2023. The Department of Housing and Community Affairs (DHCA) will not enforce the law until the Montgomery County Council approves regulations via the Method (2) process.  DHCA published proposed Rent Stabilization Regulations in the County Register on January 31, 2024, and the public comment period ended on March 1, 2024.  DHCA received over 150 pages of recommendations for changes to the proposed regulations.  DHCA is in the process of evaluating these recommendations and revising the proposed regulations. Once DHCA finishes these revisions, the County Executive will submit the regulations to the Council. The Planning Housing and Parks (PHP) Committee will then schedule a work session for a preliminary review and to allow the public to testify. The PHP Committee may recommend approval to the Council, recommend approval to the Council if specific amendments are adopted, or recommend disapproval to the Council. The Council will then review and decide whether to approve the regulations at a subsequent public hearing. The Council, by majority, may approve or disapprove the proposed regulation within 60 days after receiving it; however, the 60-day deadline may be extended by the Council. If the Council approves the regulations, they will take effect upon adoption of the resolution approving it or on a later date specified in the regulation.

As of April 8, 2024, all nine staff members hired to implement and administer the Rent Stabilization Program have joined DHCA.  The public comment period for the proposed Rent Stabilization regulations closed on March 1, 2024.

Additionally, DHCA staff have been working with the County’s Technology Enterprise Business Solutions (TEBS) department to develop a new rental housing portal for landlords, tenants, and the public. The new DHCA Rental Housing Portal and supplemental education and training for using the portal will be launched soon after the County Council approves the final regulations. 

On July 1 of every year, DHCA will issue and publish the annual rent increase and allowance for regulated units in the County Register and on the County website. The allowable rent increase will be the Consumer Price Index for All Urban Consumers for the Washington-Arlington-Alexandria (CPI-U)+ 3%, capped at 6%. This yearly allowable increase will be applicable for 12 months, from July 1 – June 30 of the following year.

Rent Stabilization Timeline

Will the rent stabilization law apply to rent increase notices issued prior to the implementation of the law?

Yes, so long as the rent increase is effective after the regulations are implemented.

Example: The regulations are implemented on May 1, 2024. All rent increase notices must be provided at least 90 days in advance of the rent increase. Therefore, if you received a rent increase notice on March 1, 2024, with an implementation date of June 1, 2024, then the rent stabilization law will apply to your rent notice and must be limited to the allowable rent increase. The landlord must then notify you in writing that the notice is void or that it has been amended to reflect the allowable rent increase of CPI-U + 3% or 6%. If the landlord does not do so, you will be able to file a complaint with the Rent Stabilization Office to review your case.

What properties are exempt from the rent stabilization law?

The following properties are exempt from the rent stabilization law:

• A newly constructed unit that has been offered for rent for less than 23 years (to check when your property was built go to the Maryland State Department of Assessments and Taxation website);
• A unit in a licensed facility, the primary purpose of which is the diagnosis, cure, mitigation, and treatment of illnesses;
• A unit in a facility owned or leased by an organization exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, if the primary purpose of the organization is to provide temporary shelter for qualified clients;
• An owner-occupied group house;
• A religious facility, including a church, synagogue, parsonage, rectory, convent, and parish home;
• A transient lodging facility subject to Chapter 54; 
• A school dormitory;
• A licensed assisted living facility or nursing home;
• A building originally designed and constructed to contain only 2 dwelling units, one of which the owner currently occupies as a principal residence;
• An accessory dwelling unit;
• A unit subject to a regulatory agreement with a governmental agency that restricts occupancy of the unit to low- and moderate-income tenants;
• A unit located within a substantially renovated building if the substantial renovation occurred within the prior 23 years and the building is not in violation of Chapter 8 Building Code, Chapter 26 Housing and Maintenance Standards, or Chapter 29 Landlord-Tenant Relations; and
• A rental unit owned by a landlord who owns 2 or fewer rental units within the County; and is either a natural person, or the trust or estate of a decedent.

What is the criteria for applying for a Substantial Renovation Petition?

A landlord may petition DHCA for a 23-year exemption from rent stabilization for an existing building if they conduct substantial, permanent renovations that enhance the value of a building and cost an amount equal to at least 40% of the value of the building, as assessed by the State Department of Assessments and Taxation. 

If I rent a single-family home, townhome, or a condominium or cooperative unit, will the rent stabilization law apply to me?

If the owner of your unit owns 2 or less rental units and is a natural person or a trust or estate of a decedent, these units are exempt from rent stabilization.

Can an exemption expire?

Yes. An exemption expires when the condition entitling the unit or facility to an exemption no longer exists.

Will the rent stabilization law regulate fees?

Yes. The rent stabilization law will regulate the creation and increase of new and existing fees on rental units. DHCA is developing regulations via Method (2).

If a tenant believes that a landlord is violating the rent allowance or other terms of the rent stabilization law, what should they do?

Tenants and prospective tenants will be able to file complaints with DHCA’s new Rent Stabilization Office if they believe their current or prospective landlord is not in compliance with the rent stabilization law and regulations.

How can a landlord or tenant find out if a property qualifies as Troubled or At-Risk?

This information can be found on DHCA’s Troubled and At-Risk properties webpage.

What is the allowable rent increase for units in Troubled or At-Risk properties?

The allowable rent increase for units in Troubled or At-Risk properties must not exceed the amount necessary for habitability improvement costs. DHCA is developing Method (2) regulations to determine allowable rent increases for properties that qualify as Troubled or At-Risk.

How does the rent stabilization law apply to vacant units?

Are there any reporting requirements for landlords under the rent stabilization law?

If a property is subject to the rent stabilization law, under what circumstances can a landlord increase rent by more than the CPI-U + 3% or 6%?

A landlord can increase the rent past the allowable amount by either banking, or the approval of a Capital Improvement or Fair Return Petition.

Banking

A landlord may choose not to increase the rent every year up to the allowable amount. If they do so, they can “bank” the dollar amount of the allowable rent increase not utilized and use it in the future with their current or future tenant. Banking is capped at 10%.

Example: The allowable rent increase for July 2025 - July 2026 is 5%. Rent is currently $1,000 per month. Tenant received a rent increase notice informing that rent will increase 5%.  Tenant asks the landlord to reduce the rent increase to 3% because they are on a fixed income and cannot afford the full increase, however next year they will receive supplemental income. The landlord agrees and only increases the rent by 3%. Therefore, instead of increasing the rent to $1,050, the rent is only increased to $1,030. The landlord can "bank” the $20 difference to use in a future annual rent increase.  The following year, allowable rent increase for July 2026 – July 2027 is 4%. The rent is $1,030 per month. The landlord can now lawfully increase the rent $41.20 (4%) + $20 for a total of $61.20.

Capital Improvements

A landlord may increase rents above CPI-U + 3% or 6% if they have incurred expenses to enhance the value of their unit. These expenses do not include ordinary repair or maintenance. To do so, the landlord must file a Capital Improvement Petition with DHCA and have the petition approved.  If the unit is subject to a surcharge for capital improvements, the tenant has the right to request copies of all plans, contracts, specifications and permits related to the capital improvements. In addition, if the tenant was displaced during the improvements, they will be allowed to return to their unit upon completion of improvements.

Fair Return

A landlord may increase rents above CPI-U + 3% or 6% if DHCA approves a Fair Return Petition submitted by the landlord. The landlord must prove that the increase rent is required to offset operating expenses and is comparable to return on investments in other enterprises with similar risks. DHCA is developing Method (2) regulations to establish the processes and requirements for a Fair Return Petition.

What are the primary requirements for granting a Capital Improvement Petition?

The primary requirements for granting a Capital Improvement Petition are as follows:

• the proposed surcharge must be limited to the amount necessary to cover the costs of capital improvements to the unit;
• capital improvements must be completed before implementing the proposed surcharge;
• if the capital improvements are for all units within the building, the proposed surcharge cannot exceed 20% of the base rent; 
• if the capital improvements are for a subset of rental units within the building, the proposed surcharge cannot exceed 15% of the base rent;
• the capital improvements must protect or enhance the health, safety, and security of the tenants or the habitability of the rental housing;
• if the capital improvements result in energy cost savings, the savings must be passed onto the tenant, and the improvements must result in a net savings in building energy usage or be intended to comply with applicable law; 
• the capital improvement must be depreciable under the Federal Internal Revenue Code;
• all capital improvements costs, including any interest and service charge must be included; and
• all governmental permits and approvals must have been approved for the work.

How will a capital improvement surcharge for a rental property be distributed among the units?

If a Capital Improvement Petition for all rental units at the property is granted by DHCA, the surcharge must be divided equally among the units and prorated over at least 96 months, and the surcharge cannot exceed 20% of the base rent.  If a petition for Capital Improvements for a subset of rental units within the building is granted, the surcharge must be divided equally among the affected units and prorated over at least 60 months, and the surcharge cannot exceed 15% of the base rent.  The surcharge ends once the costs of the capital improvements, including any interest and service charges, have been recovered by the landlord.  DHCA is developing regulations via Method (2) to establish processes and requirements for the Capital Improvement Petition.

What obligations does a landlord have to tenants if a Capital Improvement Petition is approved?

If the unit is subject to a surcharge for capital improvements, upon request of the tenants, the landlord is obliged to provide copies of all plans, contracts, specifications, and permits related to the capital improvements.  In addition, if tenants are displaced during the improvements, the landlord must allow the tenant to return to their unit upon completion of improvements.  If the capital improvement results in energy savings, the savings must be passed on to the tenant.

What is the process for a landlord to file a Fair Return Petition and what are the requirements for approval?

Landlords may increase rents above CPI-U + 3% or 6% if DHCA approves a Fair Return Petition submitted by the landlord. The landlord must prove that the increase rent is required to offset operating expenses and is comparable to return on investments in other enterprises with similar risks. DHCA is developing Method (2) regulations to establish the processes and requirements for the Fair Return Petition.