Productivity Housing


The following summary of Montgomery County's Productivity Housing program is intended for informational purposes only.  You must read the law (Section 25B of the Montgomery County Code), the regulations (Executive Regulation 19-98), and the zoning ordinance (Section 59 of the Montgomery County Code) in order to understand and fully comply with the program.  The Montgomery County code and regulations may be found on the American Legal Publishing website.

What is the Productivity Housing Program?

The Montgomery County Council created the Productivity Housing program on September 17, 1996; under this program, affordable housing (both rental and for sale) may be approved as an eligible use in certain commercial and industrial zones in Montgomery County through the special exception process.  The housing produced is designed and priced to be affordable to households earning 75 percent of County median income, adjusted for family size (see below).

Where can Productivity Housing be Developed?

The Productivity Housing Program allows housing to be built in commercial and industrial zones where residential uses are not normally allowed.  Productivity Housing projects may be approved through a special exception granted by the by the Montgomery County Board of Appeals

The program establishes a base residential density of six (6) units per acre for the relevant zones and permits an increase to 21.5 units per acre if at least 35 percent of the units are affordable to households with incomes at or below the County median income. Except through this program, most of the relevant zones do not permit residential development. The developer must apply for a Special Exception and be approved by the Board of Appeals.

The development standards of the applicable zone apply to residential projects with additional requirements regarding access and parking to accommodate residential use. No more than 25 percent of the land zoned for commercial and industrial use in each master plan area can be used for multifamily housing.

The eligible commercial and industrial in which the Productivity Housing may be permitted through a Special Exception are:

  • C-1 Convenience Commercial
  • C-2 General Commercial
  • C-3 Highway Commercial
  • C-4 Limited Commercail
  • O-M Office Building. Moderate Intensity
  • I-1 Light Industrial
  • I-3 Technology and Business Park
  • I-4 Low Intensity, Light Industrial

What is the approval process for a Productivity Housing Project?

  1. The developer must apply for a Special Exception, which must be approved by the Board of Appeals.  The zoning ordinance provides specific requirements for the approval process in Section G-2.36.2.
  2. Before a building permit may be issued, the developer must execute a written agreement to provide Productivity Housing units (PHUs) with the Director of the Department of Housing and Community Affairs (DHCA).  The agreement must contain the name of the subdivision, the marketing name of the subdivision or apartment building, and a plan for the staging of construction of all dwelling units.  The staging plan must be sequenced so that the PHUs are building along with or before other swelling units.  The written agreement will require the developer to execute and record covenants prior to the sale or lease of any PHUs.
  3. The developer must record the productivity housing agreement in the Land Records of the County promptly upon its execution.  The developer must provide the County with a copy of the recorded agreement immediately after it is recorded.  The agreement will be released from the Land Records by the County when all required PHU covenants have been recorded in the Land Records.
  4. A copy of the executed productivity housing agreement must be submitted to the Department of Permitting Services (DPS) with the first building permit application in the subdivision.  DPS must not issue building permits in a subdivision having a productivity housing requirement unless the PHUS are part of the staging plan in the signed agreement.

What are the Specific Requirements for Productivity Housing Units (PHUs)?

  • In a single-family dwelling unit, PHUs must have at two or more bedrooms.
  • In a multi-family dwelling unit productivity housing project, the ratio of all efficiency and one-bedroom PHUs to all PHUs must not exceed the ratio of all market-rate efficiency and one-bedroom units to the total number of market-rate units in the development.
  • In a subdivision containing both single-family and multi-family dwellings:
    • the ratio of rental single-family PHUs to all single family PHUs must not exceed the ratio of rental market rate, single-family PHUs to all multifamily units; and
    • the ratio of rental, multi-family PHUs to all multi-family PHUs must not exceed the ratio of rental market rate, multi-family units to all market rate, multi-family units.
  • The maximum sales prices for PHUs must not exceed 175% of the sale price for a comparable Moderately Priced Dwelling Unit (MPDU) in effect at the time the unit is offered for sale by the developer.  For information on the MPDU program, including information on rent levels and sales prices are determined, please refer to the MPDU web page.
  • PHU Rental rates will be set based on the affordability at 75 percent of the area wide median income for a four (4) person family adjusted for family size by the factors indicated below:
    Family Size Adjustment Factor
    1 0.7
    2 0.8
    3 0.9
    4 1.0
    5 1.1

    Maximum allowable rents, including tenant paid utilities, must not exceed 30% of the calculated gross household income.  Household size will be estimated based on 1.5 persons per bedroom.
    # of Bedrooms Adjustment Factor
    Efficiency 1 person - 0.70 or area median income
    1 1.5 person - 0.75 or area median income
    2 3 person - 0.90 or area median income
    3 4.5 person - 1.05 or area median income

The Executive Regulation provides detailed guidelines on calculating the maximum income and rents.

What are the requirements for persons owning or renting Productivity Housing Units?

  • PHUs that are sold must be occupied by the owner as his or her primary residence during the control period.
  • Rental units may not be sublet during the control period, unless permitted by the developer, and unless sublet to an income qualified household approved by the Department.
  • During the control period, a PHU may not be resold or refinanced for an amount great than an amount as determined by DHCA.  The regulations provide detailed information on the calculation of the maximum resale price.
  • An owner may sell a PHU on the open market for a fair market price once the applicable control period has expired.  However, the owner must pay one-half of the excess profit into Montgomery County's Housing Initiative Fund (HIF) in order to provide affordable housing units in the future.  The regulations provide detailed information on the calculation of excess profit.
  • For-sale units are controlled for ten (10) years; rental units are controlled for twenty (20) years.