By Adam Pagnucco.
Council Member Kristin Mink is planning to introduce a tax on single family home demolitions to fund the county’s affordable housing program.
Earlier this month, Mink indicated her interest in this in her statement on attainable housing. Back then, she wrote:
We should be prioritizing high-yield strategies that can earn the support of our communities.
For example, we could increase our support for the relatively new and wildly successful Housing Production Fund (HPF). The HPF is already helping to fund mixed-income projects across the county, like District 5’s Hillandale Gateway — 496 units, nearly a third senior housing, being sustainably built to some of the highest above-code building standards in the world.
Establishing a modest new excise tax on residential tear-downs could generate a meaningful increase in funding available for the HPF, while disincentivizing construction of enormous new single-family homes that are typically sold at more than double their pre-tear-down value.
In accordance with this sentiment, Mink is planning to introduce legislation to create such a tax. Her concept appears similar to Bill 34-19, which was introduced by Council Member Evan Glass and co-sponsored by Council Member Will Jawando back in 2019. That bill expired without a vote.
I don’t have the text of Mink’s legislation but I do have a memo from her office explaining what she would like to do. I don’t have a list of co-sponsors yet. The memo is reprinted below.
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Demolition Tax for Affordable Housing Production
Lead Sponsor: Councilmember Mink
WHAT IT DOES:
Establish an excise tax on the demolition of single family homes to generate funding for the production of affordable housing through the Housing Initiative Fund.
WHY A DEMOLITION TAX:
When single family homes are demolished in Montgomery County, their replacements are typically sold for more than double their pre-demolition price. This transition to more expensive housing can and should be used to fund the construction of affordable housing.
HOW MUCH IS THE TAX?
The tax will initially be $20,000 per demolition permit and will adjust annually, pegged to inflation. This is the same as the demolition tax in Evanston, IL. We have been advised that using a flat rate, as opposed to one based on increased size or value, is cleaner, legally.
WHAT WILL IT FUND?
Revenues will go into the Montgomery Housing Initiative Fund (HIF), earmarked for the construction of affordable housing projects.
The HIF funds affordable housing production through HOC’s Housing Production Fund (HPF). The HPF allows the County to leverage its bonding authority via HOC to capitalize $100 million in funds for less than $2 million/year in direct costs to the county.
At the HPF’s current level of funding, over the next 20 years, we expect to produce over 6,000 units of mixed income housing owned by HOC, and as the funds revolve we will continue to help finance construction in perpetuity.
HOW MUCH WILL IT RAISE?
Over the 10 years leading up to 2019, DPS issued an average of 219 single family detached home demolition permits per year. Over the last two years, the average was 207 permits per year (2023: 202 permits; 2024: 2012 permits).
At a conservative estimate of 207 permits per year, we would raise around $4,140,000 annually for the HIF, before accounting for increases in CPI. (The demolition tax does not seem to have acted as a deterrent in Evanston or elsewhere.)