Council Approves Legislation to Speed Up and Reduce Costs for Office-to-Housing Conversions
For Immediate Release: Tuesday, April 8, 2025
From the Offices of Councilmembers Andrew Friedson and Natali Fani-González
Led by Councilmembers Friedson and Fani-González, these legislative and zoning measures are key components of More Housing N.O.W.
Today, the Montgomery County Council approved legislation and two zoning measures to incentivize the conversion of highly vacant office buildings into housing. Zoning Text Amendment (ZTA) 25-03 and Subdivision Regulation Amendment (SRA) 25-01 create an expedited approval process, and Bill 2-25 establishes a 20-year Payment in Lieu of Taxes (PILOT) for qualifying office to housing conversions that provide at least 17.5 percent affordable housing. Councilmembers Andrew Friedson and Natali Fani-González spearheaded the legislation and zoning measures, with support from cosponsors Council President Kate Stewart and Councilmembers Dawn Luedtke, Marilyn Balcombe and Laurie-Anne Sayles.
“As government, we must use every tool possible to build more housing. That responsibility certainly includes zoning reform and incentivizing half-vacant office buildings to create homes for people to thrive,” stated Natali Fani-González, chair of the Economic Development Committee. “I’m proud to be part of a Council that understand the urgency of moving forward more housing solutions.”
“Our county’s lack of housing supply and excess office vacancies are a scourge on our communities and a drain on our local economy,” Planning, Housing, and Parks Committee Chair Andrew Friedson said. “Transforming vacant buildings into housing is a win for our residents and our businesses, and a strategic investment that will ultimately yield more housing, more revenue, and more opportunities to live and work in Montgomery County.”
Like many jurisdictions, Montgomery County has an excess of commercial office space with vacancies. At the end of 2024, the countywide office vacancy rate rose to 18.5 percent with vacancies concentrated in older, functionally obsolete office buildings, which negatively impacts revenues and introduces blight into communities.
Meanwhile, the lack of housing supply drives up costs for residents. According to the most recent data, the median sales price of homes increased by 11.2 percent across all unit types last year, while wages have only increased by 1.7 percent. As a result, working families and young professionals face exorbitant housing costs and must compete with residents at lower income bands for less expensive housing options, or leave the county entirely. From 2013 to 2023, the county’s labor force experienced a loss of 12,133 (or 10 percent) of workers aged 25-34, compared to a five percent loss in the D.C. region as a whole, while the nationwide labor market increased by 10 percent during the same period.
As our neighboring jurisdictions in Northern Virginia and Washington, D.C. have already done, Bill 2-25 and ZTA 25-03 address these interrelated challenges by incentivizing the adaptive reuse and repurposing of highly vacant office buildings to ensure the highest and best use of these properties. These vacant office buildings are currently paying very little in property tax and will be paying even less into the future as they depreciate once they are reassessed, or their tax bills are appealed. For context, the assessed value of office real estate is only six percent of total assessed value in the county, and the highly vacant office buildings represent a mere fraction of that.
With redevelopment into multi-family housing, the County will be receiving new impact taxes for schools and transportation, additional income taxes from the new residents, and revenue from fees, in addition to the spillover benefits of new construction jobs and increased economic activity at local businesses. Moreover, at the end of the PILOT term, the property tax receipts from the redeveloped building will be significantly higher due to a ten-fold increase in value relative to the vacant office building, based on conservative estimates.
Councilmembers Friedson and Fani-González authored unanimously approved amendments to increase the minimum affordable housing requirement to 17.5 percent and reduce the PILOT term to 20 years. Together, these amendments balance the value of the incentive within constrained fiscal environment and further the County’s goal of increasing affordable housing. In comparison, the Downtown D.C. tax abatement program only requires 10 percent affordable units, and their tax abatement programs range from 20 to 40 years.
Zoning Text Amendment (ZTA) 25-03, Expedited Approvals – Commercial to Residential Reconstruction
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ZTA 25-03 creates the Commercial to Residential Reconstruction use, which is defined as a 50 percent vacant commercial building that is converted or demolished and replaced with a residential building. The existing vacant building must be primarily an office use and over two stories high. The new use will be allowed in all Commercial/Residential Zones (CRN, CRT, and CR), Neighborhood Residential Zones (NR), and Employment Office Zones (EOF). The ZTA 25-03 creates an expedited approval process for the new Commercial to Residential Reconstruction Use, similar to the expedited approval process for a Signature Business Headquarters, Biohealth Priority Campus, and Mixed-Income Housing Community. For more information, view the Council staff memorandum .
Bill 2-25, Taxation – Payments in Lieu of Taxes – Affordable Housing – Amendments
Bill 2-25 would require the director of the County’s Department of Finance to offer a PILOT for a residential development resulting from the conversion of a property that was designated for commercial use but had at least a 50 percent vacancy rate at the time of the development application to the Planning Department or Department of Permitting Services. To be eligible for the PILOT, the conversion of the property must comply with the requirements set forth in ZTA 25-03—which allows for the demolition or an adaptive reuse, contemplates multifamily or townhouse developments depending upon the context, and sets applicable timelines for approval—and provide that at least 17.5 percent of units be affordable to households earning 60 percent or less of the area median income. The bill would require a PILOT that would exempt 100 percent of the real property tax that would otherwise be levied for a period of 20 years. For more information, view the Council staff memorandum .
More Housing N.O.W. Package
Councilmembers Friedson and Fani-González spearheaded the More Housing N.O.W. (New Options for Workers) package to increase the supply of housing, drive down costs, and expand homeownership opportunities for Montgomery County residents. The package takes a comprehensive approach by leveraging zoning reforms, financial incentives, and public investment to create more housing. It includes:
- Workforce Housing ZTA: Amendment allows more housing types along key corridors while requiring 15 percent workforce housing (The PHP Committee will continue its review of this zoning measure in June after the Council approves the budget).
- Workforce Housing Opportunity Fund: Supports workforce housing development (status: to be addressed during the budget).
- Office to Housing ZTA and Subdivision Regulation Amendment: Expedites the approval process for conversion of underutilized office space into housing (status: approved today).
- Office to Housing Tax Abatement Bill: Provides incentives to encourage office to housing conversions (status: approved today).
- Doubling the County’s investment in the Homeowner Assistance Program (status: to be addressed during the budget).
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Release ID: 25-123
Media Contact: Cindy Gibson 240-620-8571, Tommy Heyboer 240-777-7867
Categories: Andrew Friedson , Natali Fani-González
For updates and link to press release, see here: http://www2.montgomerycountymd.gov/mcgportalapps/Press_Detail.aspx?Item_ID=46855