Business Law News
By Victor Zapana (Washington Post) – Originally posted HERE
Montgomery County officials released a sobering analysis this week of a bill intended to spur affordable housing, saying that the county could lose $60 million in tax revenue in the short term, and developers would lose millions in the long run.
The bill, introduced last month by council member Nancy Floreen (D-At Large), would waive taxes that developers must pay if they build twice the amount of affordable housing required by law.
According to county budget officials, the bill would cost the county as much as $60 million in transportation and school construction funding over the next few years, according to the officials.
But that depends only on whether developers build the additional affordable housing. County officials seem skeptical that the incentive is enough.
“A number of developers have indicated it is unlikely that the credit provides them with a sufficient incentive to build additional [affordable housing],” budget director Jennifer Hughes wrote in the analysis. “If that is the case, then it is unlikely this bill will result in a significant fiscal impact, as it will not achieve the stated goal of the legislation.”
Floreen said that affordable housing development always lead to some costs.
“Somebody is going to make less money. That is of course the object of the game, to make it affordable. You can’t have it both ways,” she said. “The question is what price will we pay to create a community of mixed-income [residents] can live?”
She added that tax exemptions are already in place for some developments in Silver Spring and Wheaton, so the bill would simply be an extension of that.
Council member Marc Elrich (D-At Large) said that the “county can’t afford to lose $60 million in revenues. It’s an enormously high price and it’s an extraordinarily expensive way to pay for affordable housing, and I will not support this.”
In a separate legislative analysis, the county’s finance department tried to determine how much developers would gain or lose because of the bill. According to its data, developers would save money initially but would be losing money in the long run, about 12 years after residents move in, because the affordable housing units would charge less rent.
Finance officials determined that the developers could lose $7.5 million per building after three decades. A public hearing on the bill is scheduled Jan. 24, and Floreen said county legislators will start discussing it shortly after.
Floreen’s bill is part of a countywide effort to spur affordable housing. County planning and housing officials are preparing to propose broad policy changes in tended to improve the local housing market.