Every time someone buys a home or piece of land in Maryland, a small portion of that transaction helps preserve the state’s natural beauty and expand community parks. But as real estate markets fluctuate, so too does the funding that counties rely on to protect open spaces and deliver quality outdoor recreation.

For more than half a century, Program Open Space (POS) has been one of Maryland’s most effective tools for preserving land and expanding outdoor recreation opportunities. Funded through the State’s transfer tax, POS directly links real estate development to land conservation and public recreational investments, which is an essential balance for county governments navigating growth and environmental stewardship.

What is the Transfer Tax?

The Maryland State Real Estate Transfer Tax is a 0.5% tax levied on the sale of real property, collected whenever someone purchases a home, building, or land. Unlike property taxes that are ongoing, the transfer tax is a one-time payment made at the time of sale. While often paid by the buyer (though this can vary), the funds are earmarked for specific uses, with a significant portion designated for Program Open Space.

This structure was intentionally designed to tie development activity to conservation funding, helping offset the effects of new construction or land conversion by reinvesting in open space preservation and recreational facilities.

Why Does It Matter to Counties?

The transfer tax is a critical funding source for counties, supporting the development and preservation of local parks, playgrounds, and open spaces through Program Open Space–Local. This funding enables counties to plan, acquire, and build recreational areas that directly benefit residents and enhance quality of life. According to the Department of Natural Resources, these funds have enabled local governments to complete over 6,900 local park and conservation projects, serving as vital green infrastructure for residents. However, because POS funding is tied to real estate activity, counties are particularly vulnerable to market downturns. When home sales slow or interest rates rise, transfer tax revenues decline, forcing counties to delay or scale back projects. This volatility can complicate local budgets, planning efforts, and long-term commitments to outdoor access and conservation. Despite these challenges, POS remains one of the most valuable tools for counties to balance development with preservation.

How Does Program Open Space Work?

Program Open Space operates under the Maryland Department of Natural Resources and consists of two main components: POS–State and POS–Local. POS–State focuses on acquiring large tracts of land for parks, wildlife areas, and conservation. POS–Local provides grants to counties and municipalities for community parks, playgrounds, and recreational facilities. Transfer tax revenues are split between the State and counties through a formula established in statute. Counties receive a dedicated share of the POS allocation annually to fund local projects. Program Open Space also funds the Maryland Agricultural Land Preservation Program and the Rural Legacy Program. Heritage Areas Authority also receive some funding.

From a Department of Legislative Services (DLS) fiscal note:

Current Law: The State imposes a 0.5% transfer tax rate on the consideration payable for an instrument of writing. However, in the case of a first-time Maryland homebuyer purchasing a principal residence, the transfer tax rate is 0.25% (which is paid by the seller).

The statutory allocation of State transfer tax revenue is shown below:

• 75.15% to Program Open Space (POS) within the Department of Natural Resources (DNR) for purposes under the program, including land acquisition;
• 1.0% to POS only for land acquisition;
• 17.05% to the Maryland Agricultural Land Preservation Fund within the Maryland Department of Agriculture;
• 5.0% to the Rural Legacy Program within DNR; and
• 1.8% to the Heritage Conservation Fund within DNR.

Since its inception in 1969, Program Open Space has played a significant role in Maryland’s conservation efforts. According to the Department of Natural Resources, POS has helped prevent the commercial development of more than 415,000 acres of land statewide. Over 353,000 acres have been acquired by the State for parks and natural resource areas. Local governments have preserved more than 50,000 acres and completed thousands of park and conservation projects with POS–Local grants. These efforts represent a long-term commitment to protecting the environment and enhancing outdoor recreation for Marylanders across every jurisdiction. Counties play an important role in conservation efforts and many counties have met State land acquisition goals. For example, in 2016, Caroline County met its land acquisition goals, helping Maryland exceed its goal of conserving 30% of the state’s land by 2030.

Legislative Risk: A History of Diversions

While POS is a cornerstone of Maryland’s conservation efforts, its funding history has been riddled with diversions. According to a Maryland Matters article, between 2002–2006 and 2009–2016, substantial amounts of transfer tax revenues were redirected to the General Fund during lean budget years. Despite legislation mandating eventual reimbursement, those diversions hindered progress on local and State preservation goals and created long-term backlogs. This history has raised ongoing concerns about the reliability of POS funding and the potential consequences of future budgetary decisions.

In the 2007 special session, $21 million was diverted from local POS funds to cover the operating costs of state parks and forests. This change reduced the amount of POS funding available to local governments, making counties’ share dependent on what remains after the State takes its portion. According to the 2007 DLS fiscal note:

Beginning in FY 2009, local government revenues from Program Open Space would decrease by at least $21.0 million annually.

The bill alters the distribution of Program Open Space (POS) funds. Beginning in fiscal 2009, after the initial distribution of POS funds to the Maryland Heritage Areas Authority Financing Fund, the greater of $21.0 million or 20% of remaining POS funds must be used each year to operate State forests and parks within the Department of Natural Resources (DNR). The POS funding that is appropriated to local governments each year would be determined after this distribution.

From a 2021 Maryland Matters article:

For the last several years, a share of state transfer tax that would have gone to Program Open Space has been the “centerpiece” used to fund state parks, said Michael Sanderson, executive director of the Maryland Association of Counties. But state transfer tax revenue ebbs and flows depending on the economy, so basing parks funding on it is “poor public policy,” he said. Sanderson said he thinks the right way to fund state parks is through an annual budget process that takes into account increased demand, as happened during the pandemic.

The 2025 legislative session was defined by one of the most challenging budget environments in state history, with a $3.3 billion shortfall driving proposals for aggressive cost shifts, spending cuts, and tax changes. As previously covered by MACo, counties successfully pushed back against some of the most harmful budget cut proposals, including cuts to local Program Open Space (POS) funding. The Department of Legislative Services (DLS) initially recommended a BRFA provision be adopted to modify the transfer tax allocation for fiscal 2026 through 2029 to provide a base amount of funding to the Maryland Park Service that would inflate each year and transfer funding for land preservation programs including program open space local to the General Fund.

Legislation to Watch:

Over the years, the State transfer tax and Program Open Space have been frequent targets of legislative and budget proposals. According to Partners for Open Space, these efforts have ranged from attempts to eliminate Program Open Space to capping or zeroing out its funding, to transferring POS revenues to unrelated programs, and even narrowing the scope of what POS is allowed to fund. Each of these proposals, if enacted, would have had significant consequences for county governments that rely on this funding to support parks, recreation, and land preservation.

In the 2025 legislative session, HB 1410 proposed a State transfer tax exemption for first-time homebuyers, a policy goal with understandable appeal. However, such a change would come at a steep cost. Because the transfer tax directly supports Program Open Space, any broad exemption would mean a significant decrease in state funding for local land preservation programs. MACo will continue to monitor proposals to ensure county flexibility and sustainability remain central to any reform.

Conclusion:

Program Open Space is not just a state-level environmental program; it’s a foundational county resource, helping local governments respond to growth, meet resident needs, and preserve Maryland’s natural legacy. But with volatile revenue streams and a history of legislative diversions, counties must remain vigilant and engaged. By understanding the mechanics and policy dynamics of the transfer tax, counties can better advocate for stable, sufficient, and protected funding.

This article is part of MACo’s Deep Dive series, where expert analysts explore and explain the top county issues of the day. A new article is added each week – read all of MACo’s Deep Dives.