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Montgomery’s Elrich vetoes tax incentive for high-rise buildings above Metro

Montgomery County Executive Marc Elrich (D) has found himself at odds with the majority of the county council over a bill exempting property tax on high-rise buildings over Metro stations.
Montgomery County Executive Marc Elrich (D) has found himself at odds with the majority of the county council over a bill exempting property tax on high-rise buildings over Metro stations. (Sarah L. Voisin/The Washington Post)

Montgomery County Executive Marc Elrich (D) has issued his first veto since taking office nearly two years ago, rejecting a bill that would provide tax breaks for developers seeking to build high-rise buildings above Metro stations.

While Elrich said the government “simply cannot afford” the incentive at a time when the coronavirus pandemic is ravaging the economy, advocates and most members of the Montgomery County Council say Friday’s veto would block much-needed development and affordable housing.

The bill passed the County Council 7 to 2 this month, with Vice President Tom Hucker (D-District 5) and member Will Jawando (D-At Large) voting against it.

Lawmakers will need at least six votes to override the veto. Council member Hans Riemer (D-At Large), a frequent critic of Elrich and one of the co-sponsors of the bill, said he expects the lawmakers who supported the proposal to “stick with it” when they vote again next week.

“High-rise development on top of the Metro is the very essence of smart growth,” Riemer said.

Like the rest of the Washington region, Montgomery faces a dire shortage of affordable housing. Regional experts said last year that the county of 1 million and neighboring jurisdictions need to build at least 320,000 new housing units between 2020 and 2030, which is 75,000 more than are currently forecast to be built.

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The bill, Riemer said, would encourage private developers to build housing on top of transit stations by exempting them from having to pay property taxes for 15 years. In return, a developer must ensure that its building is at least 50 percent rental housing and that a quarter of the moderately priced dwelling units required by the county are affordable to households that earn less than 50 percent of the county’s area median income.

The council staff estimates that the proposal could help create up to 8,500 new affordable units at Metro properties.

But Elrich, who was elected in 2018 over opposition from developers and the business community, said the bill “would make no difference at all” in increasing the suburb’s supply of affordable housing, arguing that a vast majority of the units created would be market price. He said in an interview that he thinks housing built over Metro stations would be expensive and that “the idea of subsidizing high-end housing is absurd.”

Jawando agreed that the bill would provide “little public benefit” and said it would set “a dangerous precedent” to give a blanket tax break for all projects without first assessing if it’s necessary.

Elrich said the tax abatement would deprive the county of up to $400 million in potential revenue at a time when it is facing up to $600 million in projected shortfalls. The bill’s supporters on the council called that assertion disingenuous, since there are not currently any properties to be taxed at those locations.

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Private developers have not built high-rise projects above most Metro stations and are unlikely to without a targeted incentive, Riemer said. Projects built at those locations would still have to pay impact taxes under the proposal, he added, and could attract new residents who contribute income taxes to the county.

“If these are developments that were going to happen anyway, there’s no need for this incentive,” Riemer added. “But it’s not.”

The tax abatement had been endorsed by the chair of the Montgomery County Planning Board, Casey Anderson; the Sierra Club environmental group; and the pro-transit groups Action Committee for Transit and the Coalition for Smarter Growth.

“This will incentivize new development ​now, at a time when the county needs economic  development, jobs, and housing,” Jane Lyons of the Coalition for Smarter Growth said in a statement Friday.

Lyons said in an interview that she was disappointed in Elrich’s veto. While the proposal would not be a “silver bullet” to solve housing woes, she said, it would be a step in the right direction.

This is not the first time Elrich has found himself sparring with the County Council over housing. In 2019, he said he would not adopt housing targets set by the Metropolitan Washington Council of Governments and the Urban Institute, placing him at odds with Montgomery lawmakers as well as with other public officials in the region.

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