Multifamily June 2025 Alert

As spring begins to give way to summer, legislative activity shows no signs of cooling off. Our May TOPA Alert generated many questions and comments and a further update on the pending TOPA reform legislation is included below. This Alert also includes updates on recent proposals impacting multifamily properties in Maryland, the District of Columbia, and Washington State, and recent additions to the real estate development and transactions team in our DC office.

DC Tenant Opportunity to Purchase Act (TOPA) Reform Legislation Update. As noted in our TOPA Reform Alert, the DC Council Committee on Housing (COH) recently held a public hearing regarding TOPA reforms and other housing-related legislation. Interested parties can watch the 13-hour long COH hearing (in two parts) on the DC Council website. The COH Hearing focused on two TOPA reform proposals: (1) the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act introduced by DC Council Chairman Phil Mendelson, and (2) the Common Sense TOPA Reform Amendment (CSTRA) Act introduced by DC Councilmember Brianne Nadeau. The RENTAL Act was included in the Fiscal Year 2026 Budget Support Act of 2025 (BSA) introduced by Mayor Bowser on May 27, 2025, and includes (among other things) a TOPA exemption for sales of buildings constructed in the last 25 years, if at least 51 percent of the units have rents at or above 80 percent of the area median income. The CSTRA Act includes a shorter (three-year) exemption for newly constructed buildings, but largely focuses on improvements to administration and transparency in the TOPA process. No additional hearings have been scheduled specifically for TOPA reform legislation but the DC Council will continue to have hearings on the BSA, which must be approved before the beginning of the next fiscal year on October 1, 2025. Although it is not included in the BSA, the CSTRA Act may be relevant to TOPA reform discussions during BSA hearings, since DC Councilmember and COH Chair Robert White has proposed combining elements from the RENTAL Act and the CSTRA Act. For example, during the May 28 COH hearing, Councilmember White indicated that he believes the exemption period should be 15 (vs. 25) years. Councilmember White has also indicated that he intends to introduce comprehensive TOPA reform legislation before the summer recess which may provide the DC Council an opportunity to vote before the BSA is final. If not, the RENTAL Act may still be approved as part of the BSA. Regardless, as was also noted during the COH hearing, the TOPA exemptions proposed in the RENTAL Act would only benefit approximately 8 percent of the apartment buildings in DC. This means that the vast majority of rental properties would still remain subject to the costs, delays, and abuses the TOPA reforms are intended to correct. Recent polling by the DC Policy Center shows that 67 percent of voters want to fix TOPA so it does what it was meant to do—protect vulnerable tenants from being pushed out—without driving away the investment needed to build more housing. One thing is certain, the status quo is not working. In his opening remarks to a COH Budget Oversight on June 9, 2025, Councilmember White said the current housing crisis is even more urgent since the first budget deficit in over 30 years means that DC has less resources to invest in solutions. The Committee of the Whole will hold a BSA hearing on June 18, 2025. You can sign up to participate in the June 18 hearing here.

Prince George’s County Rent Control. Our prior Alerts (e.g., August 2024 Alert and October 2024 Alert) provided details on the Permanent Rent Stabilization Act (PRSA) requirements in Prince George’s County, including the fact that the rent and fee increase allowances for rent controlled properties change annually. This April, the Department of Permitting, Inspections, and Enforcement (DPIE) published the 2025 rent increase allowance for rent controlled properties (i.e., properties built prior to 2000) and in May DPIE solicited public comment on the draft rental housing fee policy on its new PRSA Policies and Procedures Comment Page. Under the PRSA, the maximum allowable annual rent increase rate for non-age-restricted units is the lower of either (i) Consumer Price Index for the Washington-Arlington-Alexandria Area (CPI-U) plus three percent, or (ii) six percent. The maximum allowable rent increase for rental units in age-restricted senior housing facilities is the lesser of CPI-U or 4.5 percent. The CPI-U of 3.3 percent remains in effect until July 1, 2025, when a CPI-U of 2.7 percent will take effect, meaning rents cannot be raised more than 5.7 percent for non-age-restricted units or by more than 2.7 percent for age-restricted units. Click here for the County webpage with the current rent increase details. As noted in our prior Alerts, these rent increase caps are unit based and not tenant based, which means that the limits apply to new leases, renewals, and vacant units. If a tenant vacates a unit and it is rented to a new tenant, the rent for the unit cannot exceed the then applicable rent increase allowance.

Maryland Statewide Payment In Lieu of Taxes (PILOT). On April 22, 2025, a bill expanding Maryland’s PILOT program was signed into law, which provides qualifying multifamily owners a property tax abatement in exchange for providing affordable units at their property. PILOT programs allow a property owner to receive a tax abatement in exchange for meeting certain requirements set by law. Effective as of June 1, 2025, the new law (linked here) allows rental property owners and the governing body of a county (i.e. the county council) to enter into a PILOT agreement if 25 percent of the properties' rental housing units are maintained as affordable for a period of 15 years. The bill allows the governing body of a county to require more than 25 percent of rental housing units to be maintained as affordable; so 25 percent is the minimum percentage of affordable units that may be required to be eligible for a PILOT. Unlike the “by-right” PILOT in Montgomery County, we discussed in our April 2025 Alert, the statewide PILOT is only available if a county also agrees to the PILOT.

Montgomery County Encourages Office to Residential Conversions. On April 8, 2025, the Montgomery County Council passed zoning text amendment (ZTA) 25-03, to expedite the zoning approval process for converting or demolishing office buildings and replacing them with residential buildings. The office building must be at least 50 percent vacant at the time of application to qualify for the expedited zoning approval process. Additionally, the Montgomery County Council passed bill 2-25, which requires the County to offer a PILOT for office to residential conversions if the office is at least 50 percent vacant. The PILOT requires 17.5 percent of the units to be Moderately Priced Dwelling Units for at least 20 years. Montgomery County Executive Marc Elrich vetoed Bill 2-25; however, on April 29, 2025, the Montgomery County Council voted to override the veto and to enact Bill 2-25 into law, effective April 29, 2025.

Montgomery County Troubled and At-Risk Properties Regulations. Among many other requirements, Montgomery County’s new rent control law prohibits any rent increases for units within properties designated by the Department of Housing and Community Affairs (DHCA) as “Troubled” or “At-Risk” – except as necessary to cover costs required to improve habitability. Once a property is designated as Troubled or At-Risk, it can take some time to get off the list, since the County updates its Troubled and At-Risk Properties lists on an annual basis. As noted in our March 2025 Alert, DHCA published draft amendments to the Troubled and At-Risk Properties regulations on February 1, 2025. In collaboration with the Apartment and Office Building Association of Metropolitan Washington (AOBA) and other stakeholders, we provided comments to the regulations to DHCA and we are working with DHCA to ensure that the amendments are compatible with existing law and to provide clear guidance for landlords going forward.

DC Building Energy Performance Standards (BEPS). The BSA also includes a proposal to extend the BEPS compliance deadlines. Currently, the first BEPS compliance cycle is set to end on December 31, 2026, at which point properties that have failed to comply with BEPS can face fines and civil penalties. However, the BSA proposal would push the end date of the first BEPS compliance cycle to December 31, 2032. If the proposed amendments go into effect, property owners would have more time to become compliant with the required BEPS standards for their buildings. The current BEPS cycle start and end dates that are currently in effect are:

1. BEPS Cycle 1 (buildings ≥50,000 square feet) starting January 1, 2021, ending December 31, 2026
2. BEPS Cycle 2 (buildings ≥25,000 square feet) starting January 1, 2028, ending December 31, 2032
3. BEPS Cycle 3 (buildings ≥10,000 square feet) starting January 1, 2034, ending December 31, 2038

If the proposed BEPS compliance cycle changes are implemented, as currently drafted in the BSA, the new BEPS compliance cycles would be:

1. BEPS Cycle 1 (buildings ≥50,000 square feet) starting January 1, 2021, ending December 31, 2032
2. BEPS Cycle 2 (buildings ≥25,000 square feet) starting January 1, 2034, ending December 31, 2038
3. BEPS Cycle 3 (buildings ≥10,000 square feet) starting January 1, 2040, ending December 31, 2045

The BSA also contains a proposal to delay the implementation of the net-zero energy code. The proposal extends the requirement to adopt either (i) a new net-zero energy code, or (ii) the currently voluntary “Appendix Z” of the Clean Energy DC Building Code Amendment Act of 2021, until December 2032. As the DC Council may amend the BSA, we will continue to monitor these proposals.

Energy Choice Act. As we have previously reported, there have been several challenges to BEPS, including a lawsuit against DC and Maryland BEPS gas appliance bans (see our October 2024 Alert). Congress has also introduced legislation that would place limits on state and local BEPS restrictions. On June 4, 2025, the House and Senate introduced the Energy Choice Act, which would block states and local governments from banning the use of gas and gas appliances in homes and buildings. Introduced as H.R. 3699 and S. 1954, the Energy Choice Act specifically restricts state or local governments from enacting any law or regulation that “prohibits or limits, or has the effect of directly or indirectly prohibiting or limiting the connection, reconnection, modification, installation, transportation, distribution, expansion, or access to an energy service based on the type or source of energy that is sold.” Voicing support for the Energy Choice Act, the National Association of Home Builders Chairman, Buddy Hughes, noted that the “U.S. Energy Information Administration recently forecasted that U.S. households using natural gas spent about 42 percent less on heating this winter compared to those using electricity.” We will continue to follow the Energy Choice Act and provide updates.

Proposed DC Housing In Downtown (HID) Amendment. The HID program provides incentives for property owners in certain downtown areas converting their properties from nonresidential to rental apartments and condominiums. The three incentives are: (i) a 20-year tax abatement, (ii) limited exemptions from TOPA, and (iii) relief from certain First Source Agreement requirements. For more information on the current HID Program see our April 2024 Alert. As part of the BSA, the Mayor has proposed an amendment to the HID program that would expand the boundaries of the HID program to the Central Washington Area, plus 1,750 feet in any direction. The expanded boundaries would include Georgetown and the Dupont Circle Business Improvement District. The BSA amendment would also reduce the funds available for fiscal year 2027 from $6.8 million to $5 million.

DC Zoning Decision Appeals Amendment Act of 2025. Included in the BSA, the Zoning Decision Appeals Amendment Act would amend zoning appeal procedures for matters originating from the Zoning Commission, the Board of Zoning Adjustment, and the Mayor’s Agent for Historic Preservation. The amendment would limit standing to either (i) individuals who were granted party status in the underlying proceedings, or (ii) those who own or occupy property within 200 feet of the subject property. The amendment would also require the qualified individuals making the appeal to (1) demonstrate a particularized harm, and (2) file the appeal within 30 days. The amendment also adds a discretionary bond requirement and the ability to recover attorney’s fees when a court finds the appeal was frivolously filed, or otherwise filed for an improper purpose.

DC Emergency Rental Assistance Program (ERAP). As noted in our prior Alert, the DC Council previously approved temporary reforms to ERAP, which was originally adopted in an attempt to provide renters with relief during COVID. Unfortunately, ERAP led to a backlog of unpaid rent and delayed eviction cases that have made evicting tenants who do not pay rent very difficult for landlords. On May 6, 2025, the DC Council approved legislation making the temporary ERAP reforms permanent. The new law gives judges more discretion over when to delay eviction cases, as it limits stays to one per case for pending ERAP applications and requires a tenant to show that ERAP could cover their outstanding debt or that they have a payment plan agreement with the landlord.

DC Pet Fee Limitations. On January 24, 2025, DC enacted new pet fee restrictions for landlords. The Pets in Housing Amendment Act of 2024 caps up-front monthly pet fees to 1 percent of a tenant’s monthly rent and caps pet security deposits to 15 percent of a tenant’s monthly rent. All other pet fees are prohibited. The limitations on pet security deposits and monthly fees become effective October 1, 2025. Additionally, landlords will be prevented from imposing breed, weight, or size restrictions on pet-friendly rental units, which includes imposing different fees based on breed, weight, or size of the pets. The breed, weight, and size restrictions will become effective on October 1, 2026, giving landlords an additional year to comply with the new breed, weight, and size restrictions.

Washington State Rent Control. In April, Washington State became the third state to enact statewide rent control, following Oregon and California. Washington’s new rent control law caps rents at the lesser of either (i) seven percent plus inflation, or (ii) 10 percent. New buildings are not be subject to rent control the first 12 years of occupancy. Despite failed rent control experiments in jurisdictions across the county, as reported by a 2024 Redfin survey, 82 percent of Americans still support limitations on how much a landlord can raise rents. Continued education and advocacy efforts are clearly required in the court of public opinion. Moreover, elected officials must be provided with alternatives better suited to increase the supply of affordable housing.

Ballard Spahr Adds Real Estate Zoning Ace to DC Office. Ballard Spahr recently added ex-Hunton Andrews Kurth LLP attorney Jill S. Parks to its DC office, expanding its real estate development and transactions group with a robust zoning and land use practice. As a partner in the firm’s real estate department, Jill will represent companies, investors, and developers in matters such as site plan reviews, contract negotiations, dispositions, zoning amendments, entitlements, and easements. She has also guided clients through the development process from site selection to due diligence. Along with Parks, Ballard Spahr brought on Samantha Steketee, a senior land use planner who has worked with Jill for many years. For more information about Jill Parks, please see her bio linked here.

If you have any questions or wish to discuss any of these matters, please do not hesitate to contact us at CondoMultifamilyTeam@ballardspahr.com.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.