Housing supply

County hopes tax change will improve housing supply

This story was updated at 3 p.m. Dec. 21, 2021, to clarify that the bill only applies to some developers, not all, who aim to build affordable housing.

Elected officials, county housing staff and nonprofit affordable housing providers are optimistic that a new tax change can help create more affordable housing across the county.

The members of the county council unanimously approved legislation on December 14 that amends a program that grants tax exemptions to developers who build affordable housing.

The law project amends the county’s payment in lieu of taxes (PILOT) program by modifying the method of levying property tax exemptions on certain projects.

The changes are described in a memo for Montgomery County Councilincluding that the changes only apply to housing owned or controlled by the Housing Opportunity Commission (HOC) and nonprofit developers who build affordable housing.

The HOC is an organization that works with the county government to provide and maintain affordable housing throughout the county.

Proponents of the bill said it allowed those developers and their lending banks to know exactly how much property tax could be exempt. Previously, the amount differed on a case-by-case basis, depending on agreements between the developer and the county Department of Housing and Community Affairs.

In general, the exemption depends on the amount of restricted income housing and the area’s median income levels for residents living in such housing.

The bill also removes the maximum annual limit for the total dollar amount of all approved PILOT projects.

The bill still needs the signature of County Executive Marc Elrich. Scott Peterson, a spokesman for Elrich, wrote in a text message that Elrich’s office was reviewing the bill.

PILOT programs are incentives offered by municipalities or county governments. They can be offered to developers to stimulate affordable housing projects, as well as other general infrastructure or public needs. They defer all or part of property taxes for a specified period in exchange for the economic and social benefits of the project.

Frank Demarais, deputy director of the county’s housing and community affairs department, said in an interview Friday that after working with council members Hans Riemer and Andrew Friedson — co-sponsors of the legislation — and other partners , he was “very satisfied”. with the final invoice.

The PILOT idea is just one approach to help with affordable housing, but it’s an important approach, Demarais said.

He called it a “technical improvement” that gives certainty to non-profit affordable housing developers and others who want to preserve and build affordable housing.

“If you’re a real estate developer calculating cash flow and trying to convince your lender that this property will have this cash flow…it’s an absolute improvement and simplification that will give them greater certainty,” Demarais said. .

Demarais and Riemer said it’s unclear how many units might remain affordable or how many projects that might encourage.

“It allows the bank to be more comfortable lending money to projects. … It’s a powerful tool, that’s for sure, Riemer said in an interview.

Robert Goldman, president of the Montgomery Housing Partnership – a nonprofit that provides affordable housing – agreed that the legislation provides certainty.

In an interview on Friday, he said developers such as the Montgomery Housing Partnership need as much information as possible when going to banks to borrow money for projects.

Goldman said knowing how much tax relief will be given through PILOT allows developers of affordable housing to see how much they can borrow and decide whether projects are financially viable.

“You need to know what the rules of the game are in advance, so you can run your numbers and see if you can get ahead,” Goldman said.

Regarding tax abatements for PILOT projects, Demarais said county officials and developers have never been close to approaching the cap — in the most recent year, the cap was approximately $20 million in county real estate tax abatements.

“It’s a very important tool,” Demarais said. “It is used consistently and effectively across all of our affordable housing developments and helps reduce building operating costs…to reduce costs for tenants.”

Lisa Govoni, housing planner with the Montgomery County Planning Department, said that because the bill automates the PILOT program, it removes uncertainty for banks about how much tax relief developers could receive. in the program.

Govoni said the bill has the greatest potential to build more affordable housing across the county than to help preserve existing units.

“It probably has a bigger impact on new builds, just because it’s something you can go to your bank when you’re looking for a loan and say, ‘Hey, that’s something I can now offer to ensure that this project can be built,” she said in an interview.

Steve Bohnel can be contacted at steve.bohnel@bethesdamagazine.com