New Prince George’s County Affordability Goals Impact ROFRs
Recently we advised our readers of the uptick by the Prince George’s County Department of Housing and Community Development (DHCD) in exercising and assigning of rights of first refusal (ROFR). A link to that alert can be found here. We have now had a series of conversations with representatives of DHCD about alternatives to meet their new affordability objectives without adversely impacting the sale of multifamily properties. The DHCD representatives appear to be willing to allow sellers and buyers to bypass the ROFR process if some common ground can be reached regarding affordability. The representatives emphasized that each deal has different attributes, but that they are open to discussing affordability agreements (including PILOTs) that may be mutually beneficial to DHCD and owners. We would be happy to explore these options with you.
DC – TOPA Time Periods Tolled (Again)
On February 3, 2022, Mayor Muriel Bowser approved legislation which tolled timelines under the DC Tenant Opportunity to Purchase Act (TOPA). Registration and negotiation time periods under TOPA were tolled retroactively from January 5, 2022, through February 15, 2022. This unanticipated extension caused confusion and consternation for all. We can hope this will be the last time we’ll have to deal with TOPA extensions.
Montgomery County – Rent Control
In February each year, the Montgomery County Executive establishes Voluntary Rent Guidelines (VRG). The VRG generally have represented the maximum recommended rent increase for existing residential leases in the County. In other words, the VRG were previously voluntary guidelines for landlords. However, due to prior emergency legislation, the VRG currently are mandatory for all lease renewals effective prior to August 15, 2022.
The County Executive just established the 2022 VRG limit of 0.4 percent and residential rent increases are limited to once every 12 months. This new VRG limit represents a 1 percent decrease from the 2021 VRG limit of 1.4 percent, despite the increase in costs and in the demand for rental units in the County. Landlords negatively impacted by the resulting rent control measures are evaluating their options, including potentially challenges to these limitations. If you would like to learn more about these efforts, let us know.
Montgomery County – New PILOT Opportunities
Multifamily owners participating in the DHCA payment in lieu of taxes (PILOT) program receive a tax abatement in exchange for providing affordable units at their property. Historically, the County set an annual limit for the PILOT program ($19 million in FY 2021) and that significantly limited the availability of this tool to support affordability objectives.
The Montgomery County Council recently passed legislation to eliminate the cap on new PILOTs. We are in the process of discussing with DHCA the scope of affordable regulatory agreements DHCA may require in return for a PILOT. Regulatory agreements also may have other material benefits for owners. For example, since the PILOT covenants run with the land, there may be less incentive for the County or Housing Opportunities Commission to exercise or assign ROFRs on properties with PILOT agreements.
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