After Tuesday’s County Council hearing, landlords, property managers and tenants find themselves mired in debate over one question surrounding affordable housing in Montgomery County: Should rent stabilization, at least on a temporary basis, be part of the solution?
The council decided not to vote on a bill that would have capped rental increases at 4.4% for six months, a proposal introduced by council President Gabe Albornoz on behalf of County Executive Marc Elrich. The decision to postpone means that a vote on the proposal will have to wait until September, when the council returns from its summer recess that starts next week.
In April 2020, the County Council approved a measure setting the rental cap at 2.6%, which were the voluntary rent guidelines at the time (and made mandatory by the bill). The bill was set to expire 90 days after Gov. Larry Hogan’s state of emergency, enacted because of the coronavirus pandemic, ended.
But County Council Member Will Jawando and others decided in October 2021 to extend those renter protections until May 15, 2022. The voluntary rent guidelines — otherwise known as the rental cap under the bills — were 1.4% in 2021, and 0.4% in 2022. The 0.4% cap expired May 15 of this year, and landlords must give a 90-day notice to tenants if they plan to increase rents by more than that, per county law.
During Tuesday’s meeting — and in the weeks and months preceding it — tenant organizations have argued that some form of rent stabilization is needed to prevent price gouging by landlords who currently don’t face restrictions on how high they can raise rents.
But landlords, property owners and management companies contend that they need the ability to be flexibile when determining what types of rent increases are required in order to pay for higher capital costs, and to deal with other increases in expenses resulting from inflation.
Brian Alford is president of Grady Management, a third-party property management agency that oversees 11 communities in the county with more than 3,000 units total. Alford said in an interview that management companies and property owners throughout the county have had to deal with county-imposed rental caps throughout the coronavirus pandemic — including the most recent cap of 0.4%, which ended in mid-May.
Alford said his agency was working with tenants to help them pay their rent, through reducing rents or setting up payment plans, even before Montgomery County introduced legislation that capped rents and prevented late fees from being charged.
“We want to provide quality homes. It does us no good to have vacant homes or have the turnover [in tenants],” Alford said. “And we knew residents that were gravely impacted by the pandemic itself.”
But tenant organizations and others have argued that 4.4% is a fair increase that should allow property owners and management companies to pay for repairs.
Matt Losak, executive director of the Montgomery County Renters Alliance, told reporters during a news briefing Wednesday that the alliance has heard from local renters who have experienced rent increases of up to 90%.
Renters will not be able to stay in their homes if they face those types of increases, Losak said. And Elrich’s proposal was a compromise between helping tenants manage life costs and proviiding landlords with the income needed to make repairs and still make a profit.
“It was a balanced bill with an intention to allow landlords to keep up with these rising inflation expenses, but also not allowing [price] gouging to take place, which is what we’re seeing everywhere,” Losak said.
Recent data provided by the Apartment and Office Building Association (AOBA) of Metropolitan Washington shows that rent increases vary widely depending on the community, and whether a lease is being renewed or a new one is starting. The data is compiled by RealPage, a software company that tracks rental and leasing rates in apartment communities nationwide.
For example, as of May, the cost of a new lease for all apartment types in the Bethesda-Chevy Chase area increased by an average of 8.3% over last year, while a lease renewal was at 2.8%. In downtown Silver Spring, new leases commanded an increase of 12.2% over previous rents last year, while lease renewals averaged 1.8% increases.
In North Bethesda and Rockville, prices for new leases went up about 13.9% versus a year ago. Lease renewals stood at a 4.4% increase, according to the RealPage data.
Losak contended that the reports of high rent increases that have come to the attention of the renters alliance are not anecdotal, and the alliance has heard of many instances of landlords increasing rents far beyond what the data shows.
“They are the tip of the iceberg,” Losak said. “If you receive a rent increase in a large corporate building of 50% or 20% or 10%, all of which are not sustainable — we are confident that it’s not singled out to one tenant, but it’s actually probably happening systematically throughout the building.”
Public hearing draws debate
During Tuesday’s public hearing on the proposed bill, nine people testified — five opponents and four supporters. Written testimony submitted to the council included more than 20 letters of support and six letters stating opposition.
Opponents of the legislation included property owners, management companies and representatives of those parties who argued that a 4.4% cap wouldn’t provide the income needed to pay for necessary repairs and capital improvements at apartment complexes.
Supporters consisted of residents who say that instituting the proposed cap would help them remain in their homes as they deal with other rising costs, such as medical bills, while not receiving an increase in pay.
Some argue that county officials need to take a more comprehensive approach to providing affordable housing versus small Band-Aid-style fixes like temporary rent stabilization efforts. Mary Kolar, director of the Montgomery Housing Alliance (MHA) — a coalition of organizations aiming to preserve and increase the supply of affordable housing countywide — wrote that nonprofit affordable housing developers should be considered along with tenants and their needs.
“MHA urges the Council to explore a policy of anti-rent gouging, paired with targeted subsidies to support low-income households … . Such a policy would restrict landlords from imposing exorbitant increases, while allowing them to adjust rents within a reasonable margin in order to ensure enough rental income to remain fiscally solvent and properly manage and maintain properties,” Kolar wrote. “California and Oregon have recently pursued this model, limiting rent increases to 5 and 7 percentage points above the consumer price index, respectively.”
Tuesday’s hearing also saw a policy debate between a senior government official and a former staffer to the County Council.
Aseem Nigam, director of the county’s Department of Housing and Community Affairs, testified that the proposed 4.4% cap was devised by using the housing component of the regional consumer price index. Without a cap, residents at risk of high rent increases face housing, food, and health insecurity, Nigam said.
But Mark Hessel, a staff attorney to the County Council during the 1980s, argued during the public hearing that the 4.4% figure was a random number, and that if the bill passes, landlords will face economic pressures and demand to raise rents six to nine months after it takes effect.
“Will the bill encourage small landlords to get out of the business of being small landlords?” Hessel asked. “And then what happens to the supply of rental houses in the county?”
Ultimately, many opponents of the bill, including Alford, argued the bill took an overly broad approach to solving a complex problem.
“The thing that needs to be looked at, if [the county does] this, is there’s something in place, [like] means testing or financial qualifications, or some proof that the tenant has been impacted … versus a broad brush of a percentage,” Alford said.
Alford said he doesn’t believe the county should set a cap that applies to all rents. “Each community, or each individual household might be in a different situation,” he said. “Maybe somebody moved into an apartment at an extremely low rate for some reason, and they should get a larger [rent] increase than a person who moved in at a higher rental range.”
But Elrich, referencing his days as a former elementary school teacher, urged those who oppose the proposed bill to consider the impact on children who may be forced to change schools if families need to keep moving because of increasing rental costs.
“I know that some of the council members feel that they had an agreement that the last time … they extended the time frame [for rent caps], it was going to be the last time they extended the time frame,” Elrich said during Wednesday’s news briefing. “And I would just ask them to consider that circumstances change. None of us were looking at hyperinflation … inflation had been relatively tame for a very long period of time. And suddenly that has changed and it’s having an immediate impact … on the tenants.”
The council is scheduled to next meet on Sept. 13 after its summer recess — the earliest it could vote on the bill.
Steve Bohnel can be reached at email@example.com