Montgomery County has a collection of tools and policies that help produce and preserve affordable housing in Montgomery County. This page explores the various terms, policies, and programs that involve building and preserving affordable housing in Montgomery County.
Key terms
- Area Median Income (AMI): Each year, HUD calculates the area median income (AMI) for every geographic region in the country by using data from the US Census based American Community Survey. The area median income is the midpoint of a region’s income distribution, meaning that half of households in a region earn more than the median and half earn less than the median. You can find the Area Median Income using this query tool from HUD.
- Income-Restricted Affordable Housing: Generally refers to housing that is available at reduced or subsidized rents or sales prices. These housing units have income caps that determine eligibility, helping low-and-moderate income families find affordable housing.
Key local housing policies, programs and funding mechanisms
- HOC Production Fund: Using appropriated funds over a period of 20 years, Montgomery County is able to create a permanent, revolving production fund that helps accelerate Montgomery County’s public housing authority, the Housing Opportunities Commission’s (HOC), mixed-income housing development pipeline.
- Housing Choice Voucher Program: The main vehicle in providing rental assistance in the county is the Housing Choice Voucher (HCV) program. The HCV program provides a rent subsidy to customers, based on a payment standard set by HOC and customers’ household information, so that customers pay no more than 40% of total household income on housing at the start of the initial lease term.
- Housing Initiative Fund: The Housing Initiative Fund (HIF) is a locally funded affordable housing tool that provides flexible loans and grants to help create and preserve affordable housing in Montgomery County. Administered by the County’s Department of Housing and Community Affairs, the HIF is used in a number of strategic and significant ways to advance virtually all of the County’s affordable housing priorities.
- Moderately Priced Dwelling Unit Ordinance: Montgomery County’s moderately priced dwelling unit (MPDU) program is one of the nation’s first mandatory, inclusionary zoning laws. It was implemented in 1973 to help meet the goal of providing a full range of housing choices in the county for all incomes, ages, and household sizes.
- An MPDU is a county government-regulated unit that is required to be affordable to households earning 65% of area median income (AMI) for garden-style apartments and 70% for high-rise apartments.
- The program requires 12.5%-15% of units to be set aside in new developments over twenty units as affordable to moderate-income households.
- Nonprofit Preservation Fund (NPF): The NPF is a newly established funding program that provides low-interest interim loans to experienced nonprofit developers and local public housing authorities to acquire and preserve affordable housing throughout the County.
- Payment in Lieu of Taxes (PILOT): A PILOT lowers, or in some circumstances completely abates, for a period of time, the County’s real property taxes on rental housing projects in return for a property owner’s commitment to provide affordable housing. Montgomery County has three types of PILOTs, Standard PILOT, By-Right PILOT, and the WMATA PILOT, the terms of which are all outlined on the county’s PILOT website.
- Rent Stabilization: In 2024, rent stabilization went into effect in Montgomery County. The annual rent increase allowance is the lesser of the Consumer Price Index for All Urban Consumers for the Washington-Arlington-Alexandria (CPI-U) plus 3% or a hard cap of 6%. View DHCA’s rent stabilization webpage for more details about the regulations, including exemptions.
- Right of First Refusal: Montgomery County enacted its Right of First Refusal (RoFR) law help to preserve affordable housing and to prevent tenant displacement. The county, HOC, or any certified tenant organization must be offered the opportunity to buy any multifamily rental housing development of 4 or more units before the owner sells to another party.
- Workforce Housing Program: The Workforce Housing (WFH) Program makes affordable housing available for rent and purchase to households who live and work in Montgomery County, who have incomes too high to participate in the county’s MPDU program. Households with incomes between 70-120% of the AMI can participate in the WFH program.
Frequently Asked Questions
The recommendations in the Attainable Housing Strategies initiative support the housing recommendations in the update to the county’s General Plan, known as Thrive Montgomery 2050. As mentioned in the Third Place Blog on the topic, while much has been said about Thrive Montgomery 2050’s proposal to encourage more Missing Middle Housing types, this recommendation is one of many in the plan. Thrive Montgomery 2050 contains wide-ranging policies that address both income-restricted and naturally occurring affordable housing and attainable housing. These policies involve the refinement or creation of new financial, zoning, and or policy tools.
- The program’s implementation involves both the public and private sectors, with the local government performing regulatory and administrative functions, and the building industry producing the housing.
- Between 12.5 and 15% of the total number of units in every subdivision or high-rise building of 20 or more units must be moderately priced, according to the MPDU regulation.
- Effective October 31, 2018, developments with less than 20 but more than 10 units are required to make a payment to the Housing Initiative Fund in lieu of an MPDU requirement on-site. For more information, contact the Montgomery County Department of Housing and Community Affairs.
- Three agencies within Montgomery County are key to the implementation of the MPDU program:
Montgomery County Planning Department
Department of Housing and Community Affairs (DHCA)
Housing Opportunities Commission (HOC).
- The Montgomery County Department of Housing and Community Affairs lists the income eligibility for the MPDU programs on its website. The agency categorizes eligibility by for-sale dwellings and rentals (generally 65% of area median income for garden-style, 70% of area median income for high-rise apartments) and for workforce housing (80 to 120% of AMI).
- Income limits are based on the area median income set by the United States Department of Housing and Urban Development (HUD) for a particular fiscal year.
The Department of Housing and Community Affairs tracks the number of MPDUs produced.
In 2004, the Montgomery County Council amended the MPDU control period governing for-sale MPDUs from 10 years to 30 years and for rental MPDUs from 20 years to 99 years.
- Bonus Density: The most commonly used incentive is bonus density. Chapter 59 (the Zoning Code) has a three-tiered bonus density system for going above 12.5% MPDUs.
- Additional Height: If a project exceeds 12.5% MPDUs, the height limit of the applicable zone and master plan does not apply to the extent required to provide the MPDUs.
- If a project provides 25% MPDUs, the applicable school and transportation impact taxes are discounted by an amount equivalent to the lowest standard impact tax in the county for the applicable dwelling type.
- As an example, impact taxes are generally the lowest in the infill impact areas (schools), and red policy areas (transportation). Projects with 25% MPDUs built in those areas will have all their impact taxes waived. Projects built in the turnover impact areas (schools) and orange, yellow, and green policy areas (transportation) would have school impact tax discounted by the amount of impact tax charged in infill impact areas and the transportation impact tax discounted by the amount of impact tax charged in red policy areas.
- 15% is mandatory in the Bethesda Downtown Sector Plan area through the Bethesda Overlay Zone, the Silver Spring Downtown and Adjacent Communities Plan, the Great Seneca Plan, and the Takoma Park Minor Master Plan Amendment.
- Effective on October 31, 2018, planning areas where 45% of the United States Census tracts have a median income of 150% of Montgomery County’s median income will have a legal requirement to provide 15% MPDUs.
- View a map of the planning areas with a legal requirement for 15%.
The Planning Department’s Research and Strategic Projects team completed a study of housing for older adults that includes a summary of the housing supply and residential projects for seniors in the development pipeline. View the housing for older adults report.
A web map associated with the study includes the following facilities: senior projects in review, senior housing pipeline (divided by type), existing senior housing and group quarters, independent living and active adult homeownership.
View a detailed PowerPoint about the changes made to the MPDU law in 2018.
View the amended Chapter 25A through Bill 34-17 and Bill 38-17.
View the Revised Bonus Density Chart.