Council Overrides Veto of the PILOT Bill Which Speeds Up and Reduces Costs for Office-to-Housing Conversions
For Immediate Release: Tuesday, April 29, 2025
From the Offices of Councilmembers Andrew Friedson and Natali Fani-González
Expedited Bill 2-25, a key component of More Housing N.O.W., establishes a 20-year Payment in Lieu of Taxes (PILOT) for qualifying office to housing conversions with affordable housing options
Today the Montgomery County Council voted to re-enact Expedited Bill 2-25, Taxation – Payments in Lieu of Taxes – Affordable Housing, which was originally passed on April 8 and vetoed by the County Executive on April 21. This bill, led by Councilmembers Natali Fani-González and Andrew Friedson, incentivizes the conversion of highly vacant office buildings into housing to help address Montgomery County’s housing crisis.
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Under County Charter, the Council may override the Executive’s veto if seven Councilmembers vote to re-enact the bill within 60 days after the Executive’s disapproval.
“Today’s vote reaffirms the Council’s commitment to growing our local economy and fostering safe, vibrant communities,” said Councilmember Friedson, who chairs the Planning, Housing and Parks Committee. “We know that in addition to their detrimental effects upon communities and adjacent businesses, vacant buildings result in reduced resources for the County. Repurposing them into residential opportunities will ultimately generate more revenue, not less, and that’s a win-win for the County.”
“Since September 2023, the Economic Development Committee has been carefully examining the challenges in the market for office space with stakeholders, experts and the community,” said Economic Development Committee Chair Fani-González. “The end result of nearly two years of work was, first, the expansion of the highly successful MOVE (Make Office Vacancies Extinct) program. The second was approving a narrowly tailored office to residential PILOT that will help convert vacant, obsolete buildings into much more productive housing. These buildings are a drain on the community, and we desperately need more housing. This legislation is mutually beneficial for housing creation and community reactivation.”
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 erodes community vibrancy.
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.
“ Montgomery County is facing dual crises – housing and vacant commercial buildings ,” Council President Kate Stewart said. “ In the face of these challenges as well as the uncertainty and chaos in our economy being caused by actions by the White House, we need to take action. Today, we are reaffirming the process we worked through as a Council and the policy that by design will bring more stability to our local economy, expand affordable housing opportunities and bring vibrancy back to our communities facing high vacancies. ”
Expedited Bill 2-25, which is part of the More Housing N.O.W. (New Options for Workers) package, addresses 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.
The expedited legislation would require the director of the Department of Finance to offer a payment in lieu of taxes (PILOT) for a residential development resulting from the conversion of a property that was designated for office use but had at least a 50 percent vacancy rate at the time of the development application.
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To be eligible for the PILOT, the conversion of the property must comply with the requirements set forth in companion Zoning Text Amendment (ZTA) 25-03 and Subdivision Regulation Amendment (SRA) 25-01, and provide for a certain percentage of affordable housing units. There are currently 16 office properties with more than a 50 percent vacancy rate that may benefit from a PILOT located in Bethesda, Germantown, and Silver Spring.
The bill would require that the PILOT exempt 100 percent of the real property tax that would otherwise be levied for a period of 20 years. Additionally, 17.5 percent of the dwelling units must remain restricted to households earning 60 percent or less of the area median income.
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.
Councilmember Dawn Luedtke, Council President Stewart, and Councilmembers Marilyn Balcombe and Laurie-Anne Sayles are cosponsors.
View the Council staff report .
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Release ID: 25-143
Media Contact: Cindy Gibson 240-620-8571, Tommy Heyboer 240-777-7867
For updates and link to press release, see here: http://www2.montgomerycountymd.gov/mcgportalapps/Press_Detail.aspx?Item_ID=46945