Montgomery County shows us how to develop more housing, faster, without overtaxing our schools

Photo of apartments in Bethesda, MD with trees in front

Apartments in Bethesda, Md. by Maryland Apts / Bainbridge Bethesda licensed under Creative Commons /

This column was first published by Greater Greater Washington on Aug. 7. (

On July 30, the Montgomery Planning Board voted on a new growth policy known as the Subdivision Staging Policy. If approved by the County Council, the county would — with one exception — no longer ban new housing in areas with overcrowded schools. This shift would pave the way for more housing, especially near transit.

Back in June, the Montgomery Planning staff published its recommendations for the growth policy’s quadrennial update, and I wrote a post explaining the top five recommendations. All of the recommendations were embraced, but slightly altered.

So long, moratorium (basically)

The Planning Board’s recommendations acknowledge that banning new development does not stop school overcrowding — in fact, over 70% of school enrollment growth can be attributed to “neighborhood turnover,” or single-family homes without school-aged children being sold to young families.

However, there are still parts of the county (see: Clarksburg) where new development is the driving force behind enrollment growth. These areas would be classified as “Greenfield Impact Areas.” The new approach would apply an automatic housing moratorium to greenfield areas and raise the moratorium threshold from 120% to 125% projected school utilization.

The Planning Board recommended an exception to the moratorium if a nearby school is significantly less utilized. Although the Planning Board cannot change school boundaries, this exemption puts pressure on the Board of Education to alter boundaries in order to better balance capacity in greenfield areas.

In all other areas of the county, developers would be required to pay a Utilization Premium Payment — an extra charge on top of the regular tax that developers must pay for school impacts — to move forward with a project in an overcrowded area that would otherwise have been under moratorium.

The new Utilization Premium Payments would be counterbalanced by lowering the school impact taxes from 120% to 100% of the cost of a school seat in Infill and Turnover areas, and to 60% for townhouses and multifamily developments in desired growth and investment areas.

Desired growth and investment areas are defined as:

  1. All activity centers located within Infill and Turnover Impact Areas — except those that are overly large, already experiencing high levels of growth, and/or not projects for large amounts of growth
  2. Land located within 500 feet of an existing bus rapid transit (BRT) line or a BRT line with appropriated construction funding

This means school impact taxes would be lowered by as much as 88% for multifamily construction in desired growth areas.

In addition, any development located in an Opportunity Zone would be exempt from both school and transportation impact taxes — this includes: downtown Silver Spring, Wheaton, Long Branch, White Oak, Gaithersburg, Montgomery Village, Germantown, and part of Rockville Pike.

Building homes and funding schools

Lower taxes and fees will potentially translate to lower rents needed to cover development costs. Without the moratorium stalling projects for a year or more, the development process will also be more reliable. These changes could go a long way toward delivering more housing faster and at slightly cheaper rates in a county that desperately needs more housing at all income levels, especially in desirable neighborhoods.

But the county still needs to fund additional school capacity projects. Utilization Premium Payments and increased recordation taxes — a fee on the sale of a property, paid by the buyer — would make up for the potential decrease in school impact taxes.

Recordation taxes already fund nearly 25% of the schools capital budget, making them a more effective source of revenue, as compared with impact taxes, which only fund approximately 8% of school capital projects. The increased fees will largely be levied on homes over $1 million.

One more hurdle to go

The County Council will review the Planning Board’s proposal after its August recess. The process will include a public hearing on September 15, and several work sessions to review the full document before the final vote, which is required by November 15, 2020.

Multiple councilmembers, notably Hans Riemer and Andrew Friedson, have publicly questioned the merits of the housing moratoria policy. The council has also expressed a desire for more housing, in general — including through a unanimously signed resolution based on the Metropolitan Washington Council of Governments’ new regional housing targets.

Meeting the county’s housing targets will be an even greater challenge if intermittent development moratoria continue to block much needed housing in key transit and job centers. The Planning Board has offered a different way forward.

Jane Lyons is the Maryland Advocacy Manager at the Coalition for Smarter Growth, where she works to build coalitions that support smart growth policies in Montgomery and Prince George’s Counties. This article is reprinted from Greater Greater Washington.

Issues |DC Budget|Education|Housing

Region |Maryland|Montgomery County|Washington DC

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