How a "teardown tax" could help fund affordable housing in Montgomery County

Supporters call it an innovative approach to the affordable housing crisis in Montgomery County: a bill that aims to bring in millions of dollars for low-income housing by taxing newly rebuilt homes known as "teardowns".

A public hearing on the Housing Impact Fairness Act was held Tuesday night inside council chambers. Council Member Evan Glass, who is sponsoring the legislation, gathered with supporters just before that hearing.

"The Housing Impact Fairness Act closes a teardown loophole," said Glass, referring to situations in which a smaller, older home is demolished and a new home is built in its place. "When a studio apartment is built, an impact fee is assessed. The same for a one bedroom apartment or a townhome. But a newly rebuilt home is currently exempt. I don't think that's fair and I don't think that's equitable."

According to the Montgomery County Planning Department, the average home that is torn down was built in 1948, is about 1700 square feet, and is sold for $700,000. Glass said that teardowns allow for a new home to be built on that lot that's as big as 4200 square feet and valued at $1.75 million, yet no impact fees are currently required.

"These are new homes with new pipes, new roofs, and new foundations," said Glass. "This legislation simply creates a more fair system where new homes are assessed an impact fee to support our growing infrastructure."

Montgomery County resident Bob Jones joined Glass on Tuesday night to show his support for the proposal. Jones shared the story of his 30-year-old daughter, who is living with Down syndrome and currently works three jobs just to make ends meet.

"Because she has an affordable unit and a housing voucher, with those three jobs and minimum wage, she can afford to live in this community," said Jones. "What affordable housing gives her is independence. And that's what everyone needs, the ability to live on your own."

Based on the number of teardowns on file with the county over the last few years, Glass estimates his teardown tax would generate $100 million over the next decade. That comes out to about $10 million a year: Glass says $5.7 million of it would go towards school construction and the remaining $4.3 million would go to the county's affordable housing program.

But the Housing Impact Fairness Act is not without opposition.

The Maryland Building Industry Association has said Glass' proposed legislation will hurt the real estate market and possibly drive wealthy residents to other jurisdictions like Fairfax and Howard Counties.

Several people who work in the homebuilding industry spoke out against the bill during Tuesday's public hearing.

"I disagree that this is correcting a loophole in the original legislation," one woman testified. "The intent was always clear that replacing an older home with a new one does not increase the impact on transportation or schools. The family in the original home had cars and children, many new home buyers use Metro, have fewer children, and many are built for empty nesters."

Others said Glass's revenue estimates would be proven wrong, because they believe the teardown tax will result in far fewer teardowns in Montgomery County.

Tuesday's hearing was mainly a chance for council members to listen to concerns from people on both sides of the issue. A full council vote on the Housing Impact Fairness Act is not expected until sometime next year.