PILOTS and Rental Agreements

PILOTS

The PILOT Program provides County and State real property tax abatements primarily to support affordable housing development and preservation. Following State and County regulations, the County can negotiate an exemption from County real property taxes and a payment in lieu of those taxes.

Standard PILOTs are underwritten and approved by the County on a case-by-case basis. By-right PILOTs, however, are provided to affordable housing projects in two circumstances: 1) if the project is owned or controlled by the Housing Opportunities Commission of Montgomery County or 2) if the property is owned or controlled by a non-profit developer and at least 50% of the units are reserved for households earning 60% or less of AMI for a period of 15 years. Rent levels must be limited accordingly.

Each year, the County Finance Department calculates amounts of County property taxes based on property tax rates and property assessment values provided by the State Department of Assessments and Taxation. If there is a PILOT for a project, the Finance Department will calculate the property tax abatement amounts based on the requirements of the PILOT agreement. The abatement amounts will be credited against the portion of the County property taxes in the property tax bills each year.

The Asset Management team ensures compliance with the affordability terms for these projects after the Multifamily Section negotiates them. Typical monitoring under each PILOT agreement requires that the specified number of units are occupied by income-eligible tenants who are charged an affordable rent. Property owners/managers must file annual financial reports and compliance certificates while following PILOT regulations.

In connection with receiving a PILOT, the owner may be required to pay a PILOT monitoring fee, which would be specified in the PILOT agreement. The monitoring fee is currently set at $40 per unit per year. On an annual basis, DHCA will email or mail a copy of the PILOT monitoring fee coupons to the owners or property managers. The owners/managers must pay the monitoring fee by check in the amount and to the address specified in the coupons. All payments must be made out to Montgomery County, MD, and are due by September 30th in each calendar year.

Rental Agreements

DHCA uses Rental Agreements to preserve and maintain affordable housing by restricting a certain number of units, primarily in multifamily projects, to income and rent limits in return for a per-unit subsidy paid by the County.

The subsidy is generally calculated as the difference between the stipulated affordable rent and the average market rate rent for a comparable unit in the same or an adjacent property. Any rent increases on subsidized units must abide by the County’s Voluntary Rent Guideline (VRG)

Typically, rental agreements arise from expiring MPDU agreements, Right of First Refusal opportunities, or affordable housing development/preservation projects having stand-alone or other financing.

While the Multifamily Section underwrites and negotiates rental agreements, monitoring them is left to the Asset Management team. To receive a subsidy payment, the property owner/manager must

follow the income and rent restrictions specified in the regulatory agreement.
provide regular reporting according to the terms of the agreement to verify that the property has the stipulated number of affordable housing units at the appropriate income and rent levels per the rental agreement. The compliance report must include each tenant’s name, household size, household income, and lease information.

register with the County’s Central Vendor Registration System (CVRS).
select an ACH payment method in the CVRS to receive electronic payments.
submit an invoice with detailed backup documentation supporting the requested subsidy.
ensure that the payee’s name on the invoice matches the owner’s name in the rental agreement exactly unless the payee has written approval from the owner to receive payments on behalf of the owner.
include the date, invoice number, and the total amount requested on the invoice.

In connection with receiving a Rental Agreement, the owner may be required to pay a monitoring fee, which would be specified in the Rental Agreement. The monitoring fee is currently set at $40 per unit per year. On an annual basis, DHCA will email or mail a copy of the Rental Agreement monitoring fee coupons to the owners or property managers. The owners/managers must pay the monitoring fee by check in the amount and to the address specified in the coupons. All payments must be made out to Montgomery County, MD, and are due by September 30 ^th in each calendar year.