Subject
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Special Presentation - Preservation of Affordable Housing in Rockville
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Department
Housing and Community Development
Recommendation
Staff recommend that the Mayor and Council read graduate researcher Thomas Garda’s report and hear his presentation on affordable housing preservation in Rockville with the expectation of later hearing from the Department of Housing and Community Development on implementation of these recommendations and others to further the goal of affordable housing preservation.
Discussion
Background
The overarching goal of the research was to analyze the current state of subsidized and naturally occurring affordable housing preservation in the City of Rockville. To do this, the graduate researcher conducted stakeholder interviews to better understand the policies supporting or impeding preservation, identify gaps in policy support, and collect best practices from around the country that are most applicable to the city. In addition, the researcher reviewed existing data.
When discussing affordable housing preservation, the report includes both naturally occurring affordable housing (NOAH) and subsidized affordable housing. NOAH is defined as housing that has relatively low rents compared to the regional housing market, but is not income-restricted, deed-restricted, or receiving a subsidy. NOAH is often older and may be ripe for redevelopment if not preserved through intervention strategies. In subsidized affordable housing, the property receives a subsidy either from public, private, and/or non-profit entities, resulting in the homes being income- or deed-restricted. For purposes of this report, the umbrella term of “affordable housing” refers to both NOAH and subsidized housing.
Findings
Preservation Strengths
Rockville has its own affordable housing fund, the Housing Opportunities Fund (HOF). Additionally, projects within the city are eligible to apply for funds from Montgomery County’s Housing Initiative Fund and the Nonprofit Preservation Fund. The funding for affordable housing preservation can equip developers with much-needed capital to carry out projects to rehabilitate and preserve affordable housing.
Additionally, the county’s recently amended Right of First Refusal policy allows the City of Rockville to directly exercise this right rather than having to go through the county, giving the city more leverage to preserve affordable housing.
One of the most significant strengths in Rockville is the area’s nonprofit network. The substantial nonprofit sector includes a large number of affordable housing developers, which greatly strengthens support for housing production and preservation.
Preservation Weaknesses
While financing is a strength, especially when compared with peer jurisdictions, the city and county still lack adequate funding for the level of rehabilitation and preservation needed. Existing funding is also often not dedicated specifically to the purposes of rehabilitation and preservation. For example, Maryland’s Qualified Allocation Plan for Low-Income Housing Tax Credits (LIHTC), the largest source of affordable housing funding, does not have any incentives or set-asides specifically for preservation.
Another significant weakness is the lack of adequate data collection. Best practices have underscored the importance of adequate property-level data collection to identify properties in need of preservation. While both the city and county have separately conducted analyses, stakeholders highlighted the lack of a centralized database to make the process smoother.
Housing Stock and Risk Analysis
The researcher analyzed which subsidized properties in the city may need to be prioritized for preservation based on four factors: years until rental covenant expiration, owner type, total affordable units, and proximity to transit. Reviewed properties included Moderately Priced Dwelling Unit (MPDU), LIHTC, and NOAH properties. With existing data, the researcher was only able to assign a risk priority level to the MPDU properties. More data and information on these properties will be collected and analyzed as part of the upcoming housing needs assessment.
Recommendations
1. Subsidized Housing Preservation Database and Market Assessment
Based on national best practices, the researcher recommends creating a database of subsidized housing preservation and market assessments. This database should include factors that indicate a property’s need to be preserved, such as subsidy expiration date, proximity to transit, owner type, and building size, among other factors. This would equip developers and city officials to identify what buildings are at risk of affordability loss and better target those with the greatest need. Additionally, an assessment of market factors such as areas of high/low investment, areas with higher/lower rents, and market drivers will help to indicate where NOAH is located and what is needed to preserve those units.
2. Revive Rehabilitation Loan Program with Montgomery County
Several stakeholders mentioned that sometimes it makes more sense to demolish a building and construct it new rather than rehabilitate the existing structure. They noted that this is because of the lack of financing for rehabilitation and that there was previously a program from Montgomery County called the Small Landlord Rehab Program. This program provided funding for landlords with a small number of properties to rehabilitate their units. The researcher recommends that the city advocate for and collaborate with Montgomery County to revive this program and better support owners with properties in need of rehabilitation.
3. Build Upon County Affordable Housing Preservation Networks
Collaboration among stakeholders is one of the most effective and important strategies for affordable housing preservation. A preservation network would allow public officials, developers, and other stakeholders to work together to identify properties in need of preservation, share helpful information and resources, and efficiently preserve at-risk properties. Examples of effective preservation networks include the Chicago Preservation Compact, the Denver Mile High Connects Program, and the Purple Line Corridor Coalition.
This would be best paired with adequate financing and data to access which properties need funds. Once these tools are in place, communication and support across stakeholders become an incredibly powerful tool in preserving affordable housing. Preservation is most effective when done through a systematic approach, which engages all relevant stakeholders, tracks property data across the city, and works to ensure that properties in need of preservation are connected with adequate funds.
Mayor and Council History
Housing is one of the Mayor and Council’s five focus areas. In June 2024, a high-level briefing was presented outlining the city's housing crisis and policy landscape. Later in 2024, there were three work sessions on the city’s housing strategies, during which staff recommended the following in support of affordable housing preservation:
1. Developing an affordable housing preservation plan, informed by graduate student research and a housing needs assessment.
2. Offer payments-in-lieu-of-taxes.
3. Establish stable, dedicated sources of funding for the Housing Opportunities Fund (HOF).
4. Develop a HOF deployment strategy.
5. Explore ways to bring down construction costs.
Next Steps
Staff will take the findings and recommendations of the graduate researcher and the report from the upcoming housing needs assessment, and create a detailed affordable housing preservation plan.