Summary

The Baltimore City Council has passed a new inclusionary housing law which will require most new multifamily, market-rate projects to make at least 10% of their units available to households with limited incomes, at reduced rents. The City will provide a property tax credit intended to offset the project’s lost rent.

The Upshot

• The law covers future multifamily, market-rate projects in Baltimore City with 20 or more units that receive City financial assistance or a significant land use authorization.
• For a 30-year compliance period, covered projects will be required to provide 5% of their units to households at or below 50% of area median income (AMI) and 5% to households at or below 60% of AMI, and in some circumstances up to an additional 5% to households at or below 50% and 30% of AMI.
• Because projects will receive reduced rents from inclusionary units, the City will offset the actual lost rent for each calendar year as a property tax credit on the following year’s tax bill.
• The law will take effect 180 days after enactment, with rules and regulations to be drafted before then.

The Bottom Line

Developers planning new multifamily, market-rate projects in Baltimore City will need to understand and plan to comply with this imminent mandate. The law is complex, and Ballard Spahr is prepared to address your questions and concerns.

On December 4, 2023, the Baltimore City Council passed a citywide inclusionary housing bill, which the Mayor is expected to sign into law imminently. The law will replace an expired 2007 inclusionary housing law which was widely criticized for producing very few units because the City failed to adequately fund the program.

The law covers any new multifamily, market-rate project in Baltimore City, with 20 or more units, that receives City financial assistance or significant land use authorization. City financial assistance includes discretionary assistance such as grants, loans, and PILOTs, but also by-right tax credits that are used by nearly all such projects. Significant land use authorizations are City actions that increase the permissible number of dwelling units by 20 or more, such as variances.

For a 30-year compliance period, covered projects will be required to provide 5% of their units to households at or below 50% of area median income (AMI) and 5% to households at or below 60% of AMI, and in some circumstances up to an additional 5% to households at or below 50% and 30% of AMI.

Under a separate bill passed on December 7, the City will offset the actual lost rent for each calendar year as a property tax credit on the ensuing year’s tax bill. Owners will have to underwrite the lost revenue until it is credited against their tax bill as much as a year later.

The law includes significant administrative impositions on developers and owners, including the submission of an Inclusionary Housing Plan at the time of building permit application, and a detailed annual compliance report. Building permits will not be issued until the City’s Housing Commissioner, advised by a new Inclusionary Housing Board, approves a project’s Inclusionary Housing Plan.

Inclusionary units must be comparable to market-rate units in overall quality and unit mix, and must be dispersed throughout the project.

The City or housing providers designated by the City will have the right to master lease and manage certain inclusionary units during the 30-year compliance period, and also the right of first refusal to lease all inclusionary units at the end of the compliance period to continue affordability.

The law will take effect 180 days after the Mayor’s expected signature on both bills, with rules and regulations to be drafted in advance by the City’s Department of Housing and Community Development.