# Montgomery County Code — Part II. Local Laws, Ordinances, Resolutions, Etc. ## Chapter 25B. Housing Policy. ### Article I. Policy Implementation. **Sec. 25B-1. Legislative findings.** (a) The County Executive and County Council adopted on October 20, 1981, Joint Resolution No. 9-1503, "A Housing Policy for Montgomery County, Maryland in the 1980's." That policy made certain findings which are incorporated by reference herein. (b) The need for housing in the County for moderate- and low-income households has become more severe since 1973, when Chapter 25A, "Housing, Moderately Priced," was adopted. Even though the private sector, the County government, the Housing Opportunities Commission, and nonprofit sponsors of housing projects have made substantial progress in financing and constructing affordable homes, and in the full use of federal and state programs, there remains a severe shortage of homes that are within the means of families of low and moderate incomes. Given economic trends and conditions projected through the year 2000, land and construction costs, inflation, diminished federal tax incentives, and high interest rates will increase rents to a level that will cause the problem to intensify, particularly for newly formed households, older people, handicapped individuals, those living in substandard housing, those subject to discrimination, and those with low or moderate incomes. These trends and conditions, if unabated, will frustrate the County's goal of a full range of housing choices, conveniently located throughout the County. The County should devote special attention to the provision of assisted-family housing and identify actions that the County may take to provide or stimulate production of additional units of assisted-family housing. (c) Rising costs, when combined with the changes in the size and age of households in the County, compel a higher priority than has heretofore been given on planning for, zoning for, and constructing a larger proportion of smaller, less costly and more energy efficient homes located in more compactly formed communities and, where possible, capable of being served by public or shared transportation. Where feasible, energy and transportation conservation can be better advanced by mixed use development which closely relates housing, employment and other activities in well-planned communities. (d) Notwithstanding the clear evidence of this present and future need, there is concern among the public over the effect on established neighborhoods, communities and services of any increase in the densities and supply of housing. However, these community concerns can be addressed in a variety of ways. Smaller, energy-efficient homes can be attractively designed and developed to be compatible with their environment from the perspectives of density, appearance and use of services and facilities, so long as reasonable standards are followed. Well-designed elderly housing, low- and moderate-income housing and group homes can enrich the overall quality of community life, making it possible for people to remain in their home community throughout the entire cycle of life. Similarly, the elimination of unlawful discrimination in housing has the effect of enriching community life while promoting broader opportunities and better personal relations. (e) Wide distribution of affordable, including assisted-family, housing throughout the County is a desirable objective of public policy in order to provide for a balance of housing choices in any one community to avoid over concentration of assisted-family housing in any community, and because communities that are racially, ethnically, chronologically, and economically heterogeneous are preferable to those which do not reflect the broad diversity of people who live in the County. (f) The County has well-developed processes for determining the need for facilities and amenities. These processes, which provide for extensive public participation, include the capital improvements program process, the master plan and sector plan processes, zoning, the development approval process, including subdivision regulation, adequate public facilities ordinance, growth policy, site plan review, and special exception and variance procedures. Nevertheless, stimulating public advocacy and participation in the development of affordable and assisted-family housing can have a beneficial effect on public understanding and support for such housing. **Sec. 25B-2. Definitions.** (a) Affordable housing: Any dwelling unit or other form of housing constructed for sale or rent at a price equal to or less than that provided in Chapter 25A, and any assisted elderly housing. (b) Agency: The Department of Housing and Community Affairs or any other governmental entity which receives any part of its funding or other resources from or through the County government. (c) Assisted-family housing: Those units of affordable housing which consist of privately or governmentally owned rental units for which the owners receive subsidies from the federal, state or local government in the form of rent supplements or mortgage interest subsidies, except (1) units designated for occupancy by persons 62 years old or older; and (2) units which benefit from tax-exempt financing but receive no other government subsidy. (d) Person: Any individual, partnership, corporation, joint stock association, or any city or state or any subdivision thereof; and any trustee, receiver, assignee or personal representative thereof. (e) Scattered site unit: A single-family detached or attached dwelling acquired by an agency for assisted-family rental housing, but which is not in a subdivision or development that is primarily assisted-family housing. **Sec. 25B-3. Housing policy implementation.** The following measures are intended to implement, in part, the housing policy of Montgomery County as that policy is amended from time to time, and to increase the number and proportion of affordable, including assisted-family, housing in the total housing supply of the County in order to provide a full range of housing choices, conveniently located throughout the County. (a) The County Executive must: (1) Review public land declared surplus to determine its suitability for affordable, including assisted-family, housing; (2) Review and implement opportunities for use of publicly owned land by the County, acting alone or jointly with others, in central business districts, transit station development areas, and other locations which meet the standards established under this Chapter for affordable, including assisted-family, housing; determine where joint development including such housing is feasible; and develop programs to produce such housing where feasible; (3) Encourage and assist production of affordable rental and sales housing, including market rate rental developments with a small percentage of assisted-family housing units; (4) Use state and County funding sources to provide short- and long-term financing for site acquisition or construction of additional affordable, including assisted-family, housing; (5) Revise or recommend revisions, under method (2), to regulations which add unnecessarily to the cost or delay of housing construction; (6) Use available County resources and programs to encourage the retention, including the rehabilitation, of the county's stock of moderately and lower priced rental and owner-occupied units; (7) Encourage the establishment of tenant cooperatives or other forms of tenant ownership where such action is likely to maintain a supply of affordable, including assisted-family, housing that otherwise would be lost; (8) Provide through County programs for the maintenance and extension of needed community facilities, including all elements of the neighborhood infrastructure required to sustain a desirable living environment in low- and moderate-income communities; (9) Develop incentives to encourage the private sector to provide affordable ownership and rental housing for the citizens of Montgomery County; (10) Give due consideration to the contribution that the provision of a public facility would make toward the provision of additional affordable housing; (11) Plan for the provision of public facilities and amenities adequate to serve the needs of communities which receive affordable housing; (12) Develop a coordinated program to implement the standards in the housing policy for the production, occupancy and maintenance of assisted housing; (13) Investigate creative financing plans available in the private sector and provide official encouragement for the use of those plans deemed most suitable for making housing more affordable in Montgomery County; (14) Report on the distribution of affordable housing units throughout the County and the programs and activities that the County has engaged in to enhance the stock of affordable housing; and (15) Explore the potential for private developers of employment centers and employers to play a more active role in producing affordable housing. (b) Local area master plans or amendments to them should: (1) provide all reasonable opportunity for the use or reuse of land in ways that can facilitate the development of affordable, including assisted-family, housing by planning for suitable densities, mixed uses and public facilities, and (2) plan for sufficient developable land to permit development of mid-rise or garden apartments, attached units and smaller detached units, while striving to maintain the character of existing neighborhoods. (c) Montgomery County and each relevant agency should use available resources to ensure that the County receives and uses the maximum possible amount of housing assistance funding from federal and state sources consistent with good governmental practices and financial management. (d) The County must take steps each year to increase the supply of affordable housing in those areas where the proportion of affordable housing in the entire housing stock is below the County-wide average proportion of affordable housing. To help achieve that goal, the Council, the Executive, the Planning Board, and other appropriate agencies must give the policy of locating a fair share of affordable housing units in each area of the County high priority in all planning, zoning, and land use decisions. As each of these bodies reviews changes in the County's general, master, and sector plans, it must attempt to increase the number of suitable locations for affordable housing. **Sec. 25B-4. Executive's housing report.** (a) The County Executive, after consulting with each relevant agency, must periodically submit a consolidated report to the County Council, describing the state of the County's demand for and supply of affordable, including assisted-family, housing. (b) The report must include: (1) the number of sales and rental units produced, and units converted to other patterns of ownership or lost by demolition, since the last report; (2) activities undertaken since the last report to achieve the goals and purposes of this Chapter, and an evaluation of the extent to which goals have been achieved; (3) recommendations for actions or programs to be pursued to enable the County government and other agencies to meet or exceed housing goals, including financial planning requirements; (4) an evaluation of existing laws and public policies affecting the availability and price of housing and developable land; and (5) amendments to the housing goals the Executive finds to be appropriate, and specific goals for the forthcoming ten-year period. (c) The report must recommend a goal for the number of affordable, including assisted- family, housing units to be constructed in forthcoming years. (d) Each relevant agency concerned with housing should cooperate with the County Executive in the development of information and studies relating to this report. **Sec. 25B-5. Standards and procedures for approval of assisted-family housing; applicability of section.** (a) Before approving a proposal to sponsor the development of a site for assisted-family housing or to acquire a developed assisted-family housing facility, except scattered site units and moderately priced dwelling units acquired for assisted-family housing, an agency must hold a legislative, not an adjudicatory, hearing. Notice of the public hearing must be given by at least one publication in one newspaper of general circulation in Montgomery County not less than 15 days before the public hearing. The notice must contain the date, time and location of the hearing, and the location and description of the proposed site and facility. In addition, the approving body must make reasonable efforts to give similar notice by mail to civic bodies or associations within the area in which the facility is to be located. The approving body may use the list of civic associations maintained by the Planning Board as a basis for providing this notice. (b) After considering the hearing record and all other information before it, the agency must approve the proposal, as submitted or with modifications, if it finds that the nature and location of the housing are consistent with the policy adopted under this Chapter and not inconsistent with other applicable laws and regulations, and must disapprove the proposal if it finds that the nature and location of the housing are inconsistent with the policy adopted under this Chapter or with other applicable laws and regulations. However, the lack of sufficient affordable housing at another location is not a reason to disapprove a proposal. (c) Nothing in this Chapter prohibits an agency from taking title or control of the site before the public hearing. (d) Applicability. The requirements of this Section do not apply to the Housing Opportunities Commission. **Sec. 25B-6. Administrative rules; regulations.** The County Executive and each relevant agency may adopt regulations under method (2) necessary to administer this Chapter and to implement the County's adopted housing policy. **Sec. 25B-7. Affordable housing feasibility study and assessment.** (a) Definitions. As used in this Section: Affordable housing feasibility study means an analysis of applicable capital projects that includes an evaluation of affordable housing at a library, recreation center, police station, fire station, or any other general services building. Applicable capital project means any proposed building project administered by the Department of General Services or the Parking Management Division of the Department of Transportation. Department means the Department of General Services. (b) Affordable housing feasibility study. For an applicable capital project, prior to the completion of facility planning, the program of requirements, site selection, or land acquisition, the Department must prepare and submit an affordable housing feasibility study to the Council. (c) Contents of the feasibility study. The study must include the following: (1) a description of the proposed capital project; (2) outreach efforts and stakeholder input; (3) proposed program of requirements, if available; (4) site and environmental constraints; (5) programmatic elements or efficiencies associated with colocation; (6) the projected total cost for construction, including, if available, costs of colocation of affordable housing; (7) a statement of whether colocation is feasible and potential impacts to the proposed capital project; and (8) any other related components used for consideration to determine project feasibility. (d) County Council review. (1) Within 30 days after the Council receives the affordable housing feasibility study under subsection (b), the Council must: (A) review the feasibility study; and (B) determine by a vote whether to approve or disapprove the analysis provided in the feasibility study. (2) An analysis approved by the Council under subparagraph (1)(B) permits the project to proceed in its normal course of planning, design, and construction. (3) Capital project plan. If the Council disapproves of the analysis under subparagraph (1)(B) and determines that colocation of affordable housing is feasible, the Department must, within a reasonable timeframe, develop and transmit to the Council a plan where the capital project identified in the study includes colocation of affordable housing. (e) Review of the capital project plan. Before appropriation in the Capital Improvements Program, the Council must review and approve the capital project plan submitted by the Department under subsection (d)(3). A plan that does not include colocation must contain a written explanation describing the circumstances as to why the requirements for colocation could not be fulfilled and the reasons for a waiver. (f) Waiver. The Council may waive any requirement under this Section if the Council determines the project would: (1) result in a loss of a site; (2) require emergency appropriation; or (3) may experience further delay not in the best interest of the public. (g) Affordable housing assessment. For each applicable capital project in the Capital Improvements Program during facility planning, the Office of Management and Budget must include in or transmit with the CIP an evaluation of: (1) the feasibility of including a significant amount of affordable housing in the project; (2) the effect of the project on the supply of affordable housing in the immediate area; (3) what capital or operating modifications, if any, would promote and maximize affordable housing in the project and the immediate area; and (4) what operating budget modifications, if any, would be needed to build and maintain affordable housing in the project. (h) The affordable housing evaluation submitted by OMB should discuss at least the following issues related to the capital project: (1) compatibility of affordable housing with the underlying project; (2) conformity of affordable housing to applicable zoning and land use plans; (3) proximity to public transit, and availability of other transportation options; and (4) proximity to other community services. (i) In performing its analysis, OMB should consult the Department of Housing and Community Affairs, the Planning Board, the Housing Opportunities Commission, and any other County department or agency with expertise in affordable housing. (j) The Council may in the capital budget resolution, and the County Executive may by Method 1 regulation, exempt from this Section a category of capital projects which by their nature do not require an affordable housing analysis. **Sec. 25B-8. Reserved.** ### Article II. Montgomery Housing Initiative. **Sec. 25B-9. Montgomery Housing Initiative.** (a) The county executive must establish the Montgomery Housing Initiative to promote a broad range of housing opportunities in the county. (b) This initiative must be included in the county capital improvements program and may use appropriated funds and receipts from any source, including any balances transferred from the condominium transfer tax fund under Section 52-21(f). (c) Funds allocated to this initiative may be spent to: (1) Construct or acquire affordable housing units; (2) Buy and rehabilitate existing rental units that would otherwise be removed from the supply of affordable housing; and (3) Participate in housing or mixed-use developments that will include affordable housing. (d) The Director of Housing and Community Affairs administers the initiative under regulations adopted by the County Executive under method (2). ### Article III. Closing Cost Assistance Program. **Sec. 25B-10. Establishment and purpose.** (a) There is a County Closing Cost Assistance Program. (b) The purpose of the program is to provide financing for closing costs to eligible homebuyers who otherwise might lack the resources to purchase homes and help reverse physical decline in neighborhoods with low rates of home ownership by encouraging home ownership. **Sec. 25B-11. Definitions.** In this Article the following words have the meanings indicated: (a) Administering agency means an agency as defined in Section 25B-2(b) that is designated by executive regulation to implement the closing cost assistance program. (b) Closing cost means money that an eligible homebuyer pays in connection with the acquisition of real estate, including: (1) fees or premiums for title examination, title insurance, or similar expenses; (2) fees for preparing or filing a deed, settlement statement, or other documents; (3) payments owed at settlement for property taxes or hazard insurance coverage; (4) escrows for future payments of taxes, hazard insurance, and other expenses; (5) fees for notarizing deeds and other documents; (6) appraisal fees; (7) fees for credit reports; (8) transfer and recordation taxes and fees; (9) fees or premiums for mortgage insurance; (10) loan application fees, discount points and origination fees, prepaid interest; (11) down payments; or (12) any other reasonable and customary fee associated with the acquisition of real property. (c) Eligible homebuyer means a person: (1) who is buying and will hold title to a single family residence in the County; (2) whose income from all adult household members does not exceed the greater of: (A) maximum income limits established by the County Executive for the County Opportunity Housing Program; or (B) an amount adopted by executive regulation under this Article; (3) (A) who has not owned an interest in a personal residence or other residential real property within the preceding 3 years; or (B) who may have owned property jointly with a spouse during the preceding 3 years, but whose personal circumstances have resulted in a need to buy a personal residence without the former spouse because of a legal separation, divorce, or death; and (4) who resides or works in the County. (d) Fund means the Closing Cost Assistance Fund. (e) Loan means a loan of money made by the County under this Article. (f) Program means the Closing Cost Assistance Program. (g) Single family residence means a residential dwelling unit located in the County, including a townhouse, condominium or cooperative apartment unit, that has a sales price that does not exceed the maximum sale price set by executive regulation under this Article, and will be used as the primary residence of the eligible homebuyer. **Sec. 25B-12. Loans.** (a) A loan made under the program must be used to finance closing costs for the purchase of a single family residence by an eligible homebuyer. (b) The maximum loan amount must not exceed the lesser of: (1) 5 percent of the sale price of the single family residence; or (2) $7,500. (c) An eligible homebuyer must sign a promissory note for a loan. The Executive may require other security for a loan. (d) A loan should include terms that the Executive considers necessary to make housing purchases affordable to eligible homebuyers. The Executive must establish by regulation an interest rate for loans based on a benchmark representing the County's cost of borrowing, such as the rate the County pays on a recent issue of County general obligation bonds. (e) In approving a loan, the Executive must: (1) consider the eligible homebuyer's financial resources, including savings available to pay the closing costs, in relation to the purchase price of the home and the down payment requirements of any other lender; and (2) give a high priority to homebuyers of low income or who buy single family residences in areas with a low rate of homeownership, determined according to criteria in Executive regulations. (f) The Executive must require that a loan becomes due and payable when the single family residence is sold or transferred or no longer serves as the eligible homebuyer's primary residence. The Executive may waive a requirement of this subsection if the requirement would impose financial hardship on an eligible homebuyer. (g) If a borrower defaults on a loan, the Executive may modify the rate of interest, the time or amount of payment, or any other term of a loan to assure repayment of the loan and achieve the purpose of the program. (h) A loan should comply with all applicable federal and State guidelines to enable sale of the underlying mortgage in the secondary market when the lender expects to sell the mortgage. **Sec. 25B-13. Program administration.** (a) The County Executive may: (1) delegate any power or duty under this Article to any agency, as defined in Section 25B-2(b); and (2) enter into an agreement with an agency to administer this program. (b) The Executive may: (1) charge application fees or other fees to loan applicants or lenders; (2) adopt regulations to administer the program; (3) attach specific terms to any loan as necessary to carry out the purpose of the program; (4) establish additional eligibility standards for a loan, taking into account the applicant's ability to pay, the cost of the single family residence, and other relevant factors; (5) establish regulations to determine which items or portion of the closing costs can be included in the loan; (6) enter into contracts with third parties who would make or service a loan made under this Article; (7) enter into any necessary agreement with the State Department of Housing and Community Development to receive a delegation of the State settlement expense loan program under State law in the County; and (8) take any other action necessary or convenient for the effective operation of the program. **Sec. 25B-14. Closing cost assistance fund.** A revolving fund is established to be used to make loans and to pay expenses of the program. All appropriations and other receipts for the program must be placed in the fund, and all payments for program expenses must originate in the fund. Unappropriated surplus in the fund may be transferred through the appropriation process. **Sec. 25B-15. False statements or reports.** (a) A person may not knowingly make or cause any false statement or report to be made in any document required to be furnished in relation to a loan. (b) A person applying for a loan may not knowingly make or cause any false statement or report to be made for the purpose of influencing an action on a loan application. (c) Any person who violates any provision of subsection (a) or (b) of this section is guilty of a Class A offense. **Sec. 25B-16. Annual report.** By March 1 of each year, the County Executive must submit an annual report for the preceding calendar year describing implementation of the program, including the number and dollar value of loans made, income characteristics of loan recipients, and the number and dollar value of any loan defaults. ### Article IV. Productivity Housing Program. **Sec. 25B-17. Definitions.** In this Article, the following words have the following meanings: (a) Area-wide median income means the income level determined to represent the median income for the Washington area by the U.S. Department of Housing and Urban Development, adjusted for household size. (b) Consumer Price Index means the latest published version of the Consumer Price Index for all Urban Consumers (CPI-U) for the Washington-Arlington-Alexandria Core Based Statistical Area (CBSA), as published by the United States Department of Labor, Bureau of Labor Statistics, or any similar index selected by the County Executive. (c) Date of original sale means the date of settlement for purchase of a productivity housing unit. (d) Date of original rental means the date that the first lease of a productivity housing unit takes effect. (e) Department means the Department of Housing and Community Affairs. (f) Developer means a person or other legal entity that seeks to develop a productivity housing project. (g) Director means the Director of the Department or the Director's designee. (h) Dwelling unit means a building or part of a building that provides complete living facilities for one family, including at a minimum facilities for cooking, sanitation and sleeping. (i) Housing Initiative Fund means the fund established under section 25B-9. (j) Productivity housing or productivity housing project means a project to build dwelling units for sale or rent at one location where at least 35 percent of the dwelling units are sold or rented to households with incomes below the area-wide median income. (k) Productivity housing unit means a dwelling unit in a productivity housing project that is subject to rent limits or sales controls under this Article. (l) Program means the productivity housing program. **Sec. 25B-18. Productivity housing program.** (a) Establishment. The Department must establish a productivity housing program. (b) Purpose. The purpose of the program is to promote the construction of housing affordable to households with incomes at and below the area-wide median income level. The construction of that housing is intended to: (1) allow households with incomes at and below the area-wide median income level to have greater housing choices in the County; (2) increase the availability of housing for those workers whose income cannot support the high cost of housing that is located close to the workplace and as a result, are increasingly priced out of housing opportunities; (3) assist County employers in reducing critical labor shortages of skilled and semi- skilled workers by providing housing that will be accessible to the workplace; and (4) reduce traffic congestion by shortening commute distances for employees who work in the County but who otherwise must live outside the County. (c) Relationship to other affordable housing programs. The program is intended to complement the moderately priced housing program under Chapter 25A and other County programs designed to promote affordable housing. (d) Regulations. The County Executive must adopt regulations under method (1) to administer this Article. These regulations may include setting maximum sale prices and annual rent limits after adjustments for inflation, establishment of sale price and rent ranges, the range of income-eligible households that will be served, foreclosures, waivers, income eligibility standards, notice to the Department of sales and rentals, and other relevant matters. The regulations must set a range of sale prices for productivity housing units which do not exceed 175 percent of the sale prices set for comparable moderately priced dwelling units under Chapter 25A. **Sec. 25B-19. Execution of agreement; building permit issuance.** (a) Agreement. If the developer of a productivity housing project has obtained approval for a special exception under Chapter 59 and all necessary regulatory approvals from the Planning Board, the Director and the developer must execute an agreement ensuring compliance by the developer and any successor in interest with this Article. The agreement must incorporate the staging plan for the construction of productivity housing units, the mix of dwelling unit sizes and types, and the selling price or annual rent for each unit. Where appropriate, the agreement must reflect conditions required as part of the special exception and other regulatory approvals. (b) Certification of director as prerequisite to issuance of building permit. After an agreement is executed under subsection (a), before a building permit is issued the Director must certify to the Director of Permitting Services that the requirements of this Article have been met. **Sec. 25B-20. Construction of productivity housing units.** (a) Staging plan. The staging plan for all dwelling units in a proposal must be arranged so that productivity housing units will be built before or along with other dwelling units. (b) Enforcement. If productivity housing units are not built before or along with other dwelling units as provided in the staging plan, the Department of Permitting Services may withhold any later building permit applicable to the project until the productivity housing units contained in the staging plan are built. **Sec. 25B-21. Control of sale prices; rent limits; income eligibility; foreclosures.** (a) Sales; control period. The sale price of a productivity housing unit is controlled under this subsection for 10 years after the date of original sale. During the control period, a productivity housing unit must only be sold to an individual with a household income that does not exceed the area-wide median income. (b) Resale price during control period. Except for foreclosure proceedings, a productivity housing unit constructed or offered for sale under this Article must not be resold during the applicable control period for a price greater than the original selling price plus: (1) a percentage of the unit's original selling price equal to the increase in the cost of living, as determined by the Consumer Price Index. (2) the fair market value of capital improvements made to the unit between the date of original sale and the date of resale; (3) an allowance for closing costs which were not paid by the initial seller, but which will be paid by the initial buyer for the benefit of the later buyer; and (4) a reasonable sales commission. (c) Resale price after control period ends. (1) For the first sale of a productivity housing unit after the applicable control period ends that exceeds the allowable price specified under subsection (a), the seller must pay to the Housing Initiative Fund one-half of the excess of the total resale price over the sum of: (A) the original selling price; (B) a percentage of the unit's original selling price equal to the increase in the cost of living as determined by the Consumer Price Index; (C) the fair market value of capital improvements made to the unit between the date of original sale and the date of resale; and (D) a reasonable sales commission. The Director must adjust the amount paid into the Housing Initiative Fund in each case so that the seller retains at least $10,000 of the excess of the resale price over the sum of the items in subparagraphs (A)--(D). (2) The Director must find that the price and terms of a sale covered by paragraph (1) are bona fide and accurately reflect the entire transaction between the parties so that the full amount required under paragraph (1) is paid to the Fund. When the Director finds that the amount due the Fund is accurate and the Director of Finance receives the amount due, the Director must terminate the controls imposed by this section and execute a release of all restrictive covenants. (d) Limits on rents. Unless the unit was previously sold under subsection (c), any productivity housing unit built or offered for rent under this Chapter must not be rented for 20 years after the date of original rental at a rent greater than the rent allowed for productivity housing units under this Article and applicable regulations. Rent may include parking but does not include utilities when they are paid by the tenant. Different rents must be set when utility costs are paid by the owner and included in the rent. During the applicable control period, a productivity housing unit must only be rented to an individual with a household income that does not exceed the limits set under this Article. (e) Foreclosure. If a productivity housing unit is sold in a foreclosure proceeding begun by a lending institution, the Director must terminate the productivity housing controls and execute a release of all restrictive covenants if all the proceeds of the sale, if any, that must be paid to the Housing Initiative Fund have been paid. If a foreclosure sale of a productivity housing unit occurs during the applicable control period, any price paid at the foreclosure sale that exceed the price established under subsection (b) plus any reasonable costs and fees of foreclosure must be paid into the Housing Initiative Fund. If a productivity housing unit is foreclosed after the control period, subsection (c) applies. If the unit sold was a rental unit, the Department must calculate the sale price that would have been permitted at the date of original rental as if the unit had been originally offered for sale. (f) Bulk sales. This section does not prohibit the bulk sale or transfer of all or some rental productivity housing units if the buyer is bound by all covenants and controls on the productivity housing units. **Sec. 25B-22. Compliance.** (a) Covenants. (1) This Article applies to the owner, any successor in interest, assignee, or other person with a legal or equitable interest in the productivity housing unit. Before recording the plat for a productivity housing project, the owner must execute and record covenants assuring that: (A) the restrictions of this Article run with the land; and (B) the covenants are binding on the owner, any assignee, mortgagee, subsequent purchaser, and any other party that receives title to the property. (2) Covenants executed to satisfy paragraph (1) must be senior to all instruments securing permanent financing. (b) Later deeds. The grantor must state, in any deed or instrument conveying title to a productivity housing unit, that the unit is subject to this Article until the restrictions are released under Section 25B-21 or other provision of law. (c) Violations. (1) The Director of Permitting Services may deny, suspend, or revoke any building or occupancy permit upon finding a violation of this Article. (2) The Planning Board may revoke any previously approved preliminary plan of subdivision, sketch plan, or site plan, upon finding a violation of this Article. (3) Any violation of this Article is a Class A violation. ### Article V. Workforce Housing **Sec. 25B-23. Definitions.** In this Article, the following words have the following meanings: (a) Area-wide median income means the latest published income level determined to represent the median income for the Washington area by the U.S. Department of Housing and Urban Development, adjusted for household size. (b) Consumer Price Index means the latest published version of the Consumer Price Index for all Urban Consumers (CPI-U) for the Washington-Arlington-Alexandria Core Based Statistical Area (CBSA), as published by the United States Department of Labor, Bureau of Labor Statistics, or any similar index designated by regulation. (c) Date of original sale means the date of settlement for purchase of a workforce housing unit. (d) Date of original rental means the date that the first lease of a workforce housing unit takes effect. (e) Department means the Department of Housing and Community Affairs. (f) Developer means a person or other legal entity that seeks to develop a housing project. (g) Director means the Director of the Department or the Director’s designee. (h) Dwelling unit means a building or part of a building that provides complete living facilities for one family, including at a minimum facilities for cooking, sanitation, and sleeping. (i) Housing Initiative Fund means the fund established under Section 25B-9. (j) Workforce housing project means a housing or mixed-use project where dwelling units are sold or rented to households with incomes at or below 120% of the area-wide median income under an agreement between the developer and the Director. (k) Workforce housing unit means a dwelling unit in a workforce housing project that is subject to rent limits or sales controls under this Article. (l) Program means the workforce housing program. **Sec. 25B-25. Execution of agreement; building permit issuance.** (a) Agreement. (1) After the developer of a housing project has obtained approval from the Planning Board of a site plan that includes the number of workforce housing units approved under any applicable provision of Chapter 59 and all other necessary regulatory approvals, the Director and the developer must execute an agreement assuring compliance with this Article by the developer and any successor in interest. The Director must attach a copy of the approved site plan to this agreement. (2) The agreement must incorporate a staging plan for the construction of workforce housing units, the mix of dwelling unit sizes and types, and the maximum selling price or annual rent for each unit. The staging plan must require all workforce housing units to be built before or at the same time as the other dwelling units. Where appropriate, the agreement must reflect conditions required as part of other regulatory approvals. (3) The agreement must require that the number of efficiency and one-bedroom workforce housing units each must not exceed the ratio that market-rate efficiency and one-bedroom units respectively bear to the total number of market-rate units in the subdivision. The Director must not approve an agreement that reduces the number of bedrooms required by this subsection in any workforce housing unit. (b) Issuance of building permit. The Director of Permitting Services must not issue a building permit for any development where workforce housing units are approved under Chapter 59 until the agreement required by subsection (a) is executed. After an agreement is executed under subsection (a), the Director must certify to the Director of Permitting Services before a building permit is issued that all applicable requirements of this Article have been met. If all workforce housing units are not built before or at the same time as other dwelling units as required in the staging plan, the Director of Permitting Services may: (1) withhold any later building permit for any part of the same development until all workforce housing units designated in the staging plan are built; (2) issue a stop work order, effective until all workforce housing units designated in the staging plan are built; or (3) withhold any use and occupancy permit for other units in the development until all workforce housing units designated in the staging plan are built. **Sec. 25B-26.Control of sale prices; rent limits; income eligibility; foreclosures.** (a) Sales; control period. The sale price of a workforce housing unit must be controlled under this subsection for 20 years after the date of original sale. During the applicable control period, a workforce housing unit must only be sold to an individual with a household income that does not exceed 120% of the area-wide median income or a lower amount set by regulation. Any workforce housing unit offered for sale, or for resale during the control period, must first be offered exclusively for 60 days to the Department and the Housing Opportunities Commission, in that order. The Department and the Commission may buy a workforce housing unit at any time during the control period, and may resell the unit to an eligible person. A resale by the Department or Commission starts a new control period. (b) Resale price during control period. (1) Resale price. Except in a foreclosure proceeding, a workforce housing unit constructed or offered for sale under this Article must not be resold during the applicable control period for a price greater than the maximum sale price for a similar new workforce housing unit under applicable regulations on the date of the resale. (2) Return to seller. The Department must supplement any bona fide price that the seller of a workforce housing unit receives from the buyer under paragraph (1) so that the seller receives a total of the original sale price of the unit plus: (A) an allowance for closing costs which were not paid by the initial seller, but which will be paid by the initial buyer for the benefit of a later buyer; (B) the fair market value of any capital improvement that the Director finds was needed to maintain the equity of the unit; (C) a percentage, set by regulation, of the difference between the unit’s appraised market value (as defined by applicable regulations) when the seller bought the unit and its appraised market value when the seller offered the unit for sale, which must not exceed 50% of the total price appreciation; and (D) a reasonable sales commission. The Department may use funds in the Housing Initiative Fund to pay all or part of the amount returned to the seller under this paragraph, to the extent provided in applicable regulations. (3) Payment to Housing Initiative Fund. If the bona fide price the seller receives is greater than the amount allowable under paragraph (2), the seller must pay the difference to the Fund. The Director must find that the price and terms of a sale covered by paragraph (1) are bona fide and accurately reflect the entire transaction between the parties so that the full amount required under this Section is paid to the Fund. (c) Resale price after control period ends. (1) For the first sale of a workforce housing unit after the applicable control period ends that exceeds the allowable price specified under subsection (a), the seller must pay to the Housing Initiative Fund one-half of the excess of the total resale price over the sum of: (A) the original appraised market value; (B) a percentage of the unit’s original appraised market value equal to the increase in the cost of living as determined by the metropolitan area Consumer Price Index; (C) the fair market value of capital improvements made to the unit between the date of original sale and the date of resale; and (D) a reasonable sales commission. The Director must adjust the amount paid into the Housing Initiative Fund in each case so that the seller retains at least $10,000 of the excess of the resale price over the sum of the items in subparagraphs (A) — (D). (2) The Director must find that the price and terms of a sale covered by paragraph (1) are bona fide and accurately reflect the entire transaction between the parties so that the full amount required under paragraph (1) is paid to the Fund. When the Director finds that the amount due the Fund is accurate and the Director of Finance receives the amount due, the Director must terminate the controls imposed by this section and execute a release of all restrictive covenants. (d) Limits on rents. Unless the unit was previously sold under subsection (c), any workforce housing unit built or offered for rent under this Chapter must not be rented for 99 years after the date of original rental at a rent greater than the rent allowed for workforce housing units under this Article and applicable regulations. Rent may include parking but does not include utilities when they are paid by the tenant. Different rents must be set when utility costs are paid by the owner and included in the rent. During the applicable control period, a workforce housing unit must only be rented to an individual with a household income that does not exceed the limits set under this Article. (e) Foreclosure. If a workforce housing unit is sold in a foreclosure proceeding begun by a lending institution, the Director must terminate the workforce housing controls and execute a release of all restrictive covenants if all proceeds of the sale, if any, that must be paid to the Housing Initiative Fund have been paid. If a foreclosure sale of a workforce housing unit occurs during the applicable control period, any price paid at the foreclosure sale that exceeds the price established under subsection (b), plus any reasonable costs and fees of foreclosure, must be paid into the Housing Initiative Fund. If a workforce housing unit is foreclosed after the control period, subsection (c) applies. If the unit sold was a rental unit, the Department must calculate the sale price that would have been permitted at the date of original rental as if the unit had been originally offered for sale. (f) Bulk sales. This section does not prohibit the bulk sale or transfer of all or some rental workforce housing units if the buyer is bound by all covenants and controls on the workforce housing units. **Sec. 25B-27.Compliance.** (a) Covenants. (1) This Article applies to the owner and any successor in interest, assignee, or other person with a legal or equitable interest in a workforce housing unit. Before recording the plat for a workforce housing project, the owner must execute and record covenants assuring that: (A) the restrictions of this Article run with the land; (B) the covenants are binding on the owner, any assignee, mortgagee, or later purchaser, and any other party that receives title to the property; and (C) the County may create a lien to collect that portion of the sale price or foreclosure sale price of a workforce housing unit which exceeds the approved resale price. (2) Any covenant executed to satisfy paragraph (1) must be senior to all instruments securing permanent financing. (b) Later deeds. The grantor must clearly and conspicuously state, in any purchase and sale agreement and any deed or instrument conveying title to a workforce housing unit, and the grantee must clearly and conspicuously acknowledge, that the unit is subject to this Article and the restrictions in the covenants until all restrictions are released under Section 25B-27 or another provision of law. Any deed or other instrument conveying title to a workforce housing unit during the control period must be signed by both the grantor and grantee. When a deed or other instrument conveying title to a workforce housing unit is recorded in the land records, the grantor must cause to be filed in the land records a notice of sale for the benefit of the County in the form provided by state law. (c) Violations; enforcement. (1) Any violation of this Article or regulations adopted under it is a class A violation. (2) An occupancy permit must not be issued for any building to any applicant, or a successor or assign of any applicant, for any construction which does not comply with this Chapter. The Director of Permitting Services may deny, suspend, or revoke any applicable building or occupancy permit if the Director finds that the applicant or permittee has committed a violation of this Article. The Planning Board may revoke any previously approved preliminary plan of subdivision, site plan, or sketch plan, if the Board finds a violation of this Article. (3) The Director may take legal action to stop or cancel any transfer of a workforce housing unit if any party to the transfer does not comply with all requirements of this Article. The Director may recover any funds improperly obtained from any sale or rental of a workforce housing unit in violation of this Article, plus costs and interest at the rate prescribed by law from the date a violation occurred. (4) In addition to or instead of any other available remedy, the Director may take leal action to: (A) enjoin a workforce housing unit owner who violates this Article, or any covenant signed or order issued under this Article, from continuing the violation; or (B) require an owner to sell a workforce housing unit owned or occupied in violation of this Article to the County, the Housing Opportunities Commission, or an eligible person.