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Should newly rebuilt homes pay impact fees? This Montgomery official thinks so.

A house built from a teardown in Bethesda in 2015.
A house built from a teardown in Bethesda in 2015. (John McDonnell/The Washington Post)

Maryland’s largest jurisdiction has an affordable housing shortage — and according to one local official, a segment of the population has not been contributing its fair share to address it.

Montgomery County Council member Evan Glass (D-At Large) will introduce legislation Tuesday that aims to charge an impact fee on all newly rebuilt single-family homes — also known as “teardowns.”

Glass estimates those fees — which already exist for all newly constructed homes and apartments — will generate $10 million a year, $4.3 million of which he wants to funnel toward affordable housing. The other $5.7 million would go toward school construction.

The Housing Impact Fairness Act has drawn strong support from affordable housing advocates, and equally strong opposition from leaders of the home-building industry, who say it will discourage redevelopment and, in the long run, hurt the county’s finances more than help.

“I don’t think it’s fair that [newly built] studio apartments, one-bedrooms and townhouses pay impact fees to support our infrastructure, but newly rebuilt homes do not,” Glass said in an interview. “We have to make sure that our system is fairly applied.”

Impact fees on teardowns are rare. A spokesman for the Metropolitan Washington Council of Governments said experts with the organization were not aware of any other jurisdiction in the Washington area that has them. And a proposal for a similar “demolition tax” in Portland was shot down by local officials in 2016, the Oregonian reported.

Under Glass’s proposal, Montgomery would charge any home that undergoes full or partial demolition $9 per square foot for any additional floor area created by the project. The rebuilt home would also be charged school impact taxes, which are currently only assessed for new construction.

Lauded by some as creative and criticized by others as misinformed, the bill marks the latest example of officials trying to generate new funding to address the region’s shortage of affordable housing. Alexandria raised its meal tax, Arlington raised its property tax, and the District is considering raising taxes on commercial property transactions.

According to COG, Washington and its surrounding suburbs need to add 320,000 housing units between 2020 and 2030, at least 75 percent of which should be affordable. A separate report from the Urban Institute found that Montgomery, which is grappling simultaneously with the problem of school overcrowding, has to add 23,100 low-cost housing units, the highest of any jurisdiction.

Glass said he sees the bill as simply “closing a loophole.” Montgomery started collecting impact fees on new construction in 1986, but about two-thirds of the 390,000 housing units in the county were built before that time and have not contributed to its impact fund.

Lori Graf, chief executive of the Maryland Building Industry Association, said she sees the bill as “creating a whole new tax.” Existing properties have already been paying years of property taxes to the county, she said, and they incur other fees when they undergo major renovations.

Graf disputed the argument that redeveloped houses exert an additional strain on county resources, though according to research supplied by Glass’s office, newly rebuilt homes generate 20 percent more students than existing single-family homes.

She also warned that an additional fee could act as a disincentive for development.

“It’s just basic economics: The more expensive you make things, the less it happens,” Graf said, adding that the association is prepared to campaign against the bill.

Glass disagreed. “Demand to live in Montgomery County is strong,” he said. “Closing this loophole will not deter people from moving here.”

Jane Lyons, the Maryland advocacy manager for the Coalition for Smarter Growth, said the bill could discourage “mansionization” — the phenomenon of remodeling single-family homes into massive structures. She does not see this potential effect as a bad thing.

“Impact taxes are a big tool that we have in incentivizing the development we want to see, and what we want to move away from,” she said. “We desperately need new money. And ultimately, the funding [for affordable housing] has to come from somewhere.”

Glass is far from the first official to raise the issue of fairness with regard to affordable housing.

At a panel last month, for example, D.C. Mayor Muriel E. Bowser (D) said she believes that neighborhoods west of Rock Creek Park — known to be among the wealthiest in the District — have not done enough to address the region’s housing crisis.

Region’s elected officials urge their governments to commit to affordable-housing targets

Officials call it a common-sense zoning change. These homeowners say it’s a ‘betrayal.’

Despite recent efforts, many obstacles to fixing the affordable housing problem

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