Rent Control Debate Fuels Uncertainty In Prince George’s County’s Multifamily Market
Rent control is top of mind for Prince George’s County's real estate industry, as the county's one-year program is more than halfway done and time is running out to determine a permanent policy.
The county council passed a yearlong law in February capping rent growth on older, privately owned properties to 3%, set to expire in March 2024. At the same time, it established a working group to decide on possibilities for a longer-term measure.
The question loomed large last week at Bisnow’s Future of Prince George’s County event, held at The Hotel at The University of Maryland.
Near the start of the event, when moderator Brad Frome of Rise Investment Partners asked a question about the law for the first time, he was interrupted by an audience member.
Frome had referred to the policy as both “rent control” and “rent stabilization,” in his question to two top county officials, and an audience member shouted out, “call it what it is — rent control!” The room chuckled as Frome came back with, “I actually did — thank you.”
Prince George's County Deputy Chief Administrative Officer for Economic Development Angie Rodgers said the details of the policy still need to be ironed out before a long-term measure is enacted.
“I think it’s clear, given the way we started the conversation, that there is going to be some policy. Where it lands depends on how we come to the table and how we engage on it,” Rodgers said.
“We're going to have to figure out how to land somewhere in the middle on this that provides some predictability for tenants but also doesn't gouge our real estate development industry and our property management industry,” she added.
Prince George’s County’s policy is part of a trio of local rent stabilization measures passed this year. The District in June passed a law capping rent increases to 6% for the next two years. One month later, Montgomery County capped rent increases at 3% plus inflation and 6% maximum.
In Prince George’s County, in addition to passing the temporary 3% cap, the council established a workgroup that would look at options for passing a permanent measure in 2024. That 21-person team consists of local organizers and nonprofits, real estate industry professionals and county officials who hold bimonthly meetings.
But the ongoing uncertainty about where that policy will land makes it hard for investors to know what to do, commercial real estate professionals said at the event.
“There’s been more concern and reluctancy from private capital and institutional investors to invest in the jurisdiction, facing uncertainty over what that will look like,” Transwestern Mid-Atlantic Multifamily Group Vice President and co-Director Robin Williams said.
“I think all the investors, like anybody else, [are] desiring is an understanding of what the playing field is,” he added.
To illustrate this concern, Williams pointed to a 97% decrease in transaction sales between this year and last. There were 20 sales totaling $1.3B in the county last year. So far this year, there have been only two for a total of $35M, he said.
Greg Reaves, founder and co-owner of Philadelphia-based Mosaic Development Partners, also said private firms looking at where to deploy investment may be wary of Prince George's County's rent restrictions.
“If there’s something that’s in place, any type of hurdle that gives them the sense they can’t make their money fungible or removable at a point that’s convenient to them, they’re just not going to invest it,” Reaves said.
But as it seems inevitable that the county will enact some type of long-term rent control policy, Williams expressed appreciation for the middle-ground approach Rogers alluded to at the beginning of the event.
“I really value Angie’s comment on the previous panel about the need to really sit down and collectively get together and work through how that is a balance for all parts,” Williams said. “I think that the invitation to be involved in the conversation and how that looks will be critically important.”
At the same time as the rent cap debate, the county is also raising the issue of how much new residential developments to allow, especially outside the beltway.
At the end of last month, Prince George's County Council Chair Tom Dernoga, along with three other members, introduced a resolution that would limit the number of building permits the county would issue on an annual basis from 2024 through 2029. As proposed, next year it could issue 2,800 residential building permits countywide, distributed disproportionately across three major geographic sections.
Prince George's County Executive Angela Alsobrooks expressed caution about the proposal.
“I think we have to be very careful about caps,” she said. “We do not want sprawl but we also have to come up with something that is intelligent and has the intended effect. We need housing. I don't think we should do anything that will halt it or will harm our county's growth going forward.”