Local Bill Aims to Close “Teardown Loophole” in Montgomery County

Montgomery County Council Member Evan Glass yesterday introduced the Housing Impact Fairness Act –– legislation aimed at raising money for affordable housing and school construction –– by closing the “teardown loophole.”

The bill would create an excise tax on the demolition or partial demolition (i.e., “teardown”) of single-family homes and expand the applicability of the development impact tax for public school improvements. Council Member Glass says the proposal would raise $100 million over the next decade.

“The Housing Impact Fairness Act ensures that all newly rebuilt single-family homes contribute fairly to Montgomery County’s infrastructure needs,” Council Member Glass said. “This legislation closes a loophole so that the impact fees collected from newly rebuilt homes contribute to increasing school capacity and provide more resources for affordable housing programs.”

Currently, teardowns of older existing single-family homes are not subject to County impact taxes. Comparable newer developments, however, are subject to transportation and school impact taxes under existing law.

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Under the bill, teardowns of individual older single-family homes would be subject to the local impact tax for school improvements. Furthermore, teardowns resulting in larger single-family homes would be subject to a separate excise tax, the revenues of which would be dedicated solely to local affordable housing initiatives.

While affordable housing advocates have praised the proposal, representatives from the building industry say it will discourage redevelopment and therefore deprive the County of a reliable source of revenue.

According to WAMU:

The bill has support from the affordable housing nonprofit Montgomery Housing Partnership, SEIU Local 500 and the Montgomery County Education Association, among others.

Supporters of the legislation say teardown homes come with costs that aren’t accounted for when just looking at the tax revenue they generate.

Replacement homes in existing neighborhoods don’t exact the same toll on infrastructure and services as new homes in undeveloped areas do, says Graf, CEO of the Maryland Building Industry Association. Plus, she says, governments should want to encourage redevelopment because it revitalizes aging neighborhoods.

“Ever since impact fees were introduced in the 1980s, it was always pretty clear that it was designed to apply to new homes on vacant lots and not to replacement homes,” says Graf.

The bill, co-sponsored by Council Member Will Jawando, has been assigned to the Council’s Government Operations and Fiscal Policy Committee.

Stay tuned to Conduit Street for more information.

Useful Links

WAMU: Is It Time To Tax ‘Teardown’ Homes In Montgomery County?

Council Member Glass’s Comments on the Housing Impact Fairness Act