Montgomery County To Halt Housing Development In Parts Of Bethesda, Silver Spring

No new residential projects can receive approvals for the next 12 months in several parts of Montgomery County, many of which are growing neighborhoods with transit-oriented developments in the pipeline. 

Montgomery County will institute a one-year housing moratorium July 1 on a series of areas with overcrowding schools, including parts of North Bethesda and Silver Spring. 

The Montgomery County Planning Board Thursday voted to certify the results of the school test that determine the areas included in the moratorium, though Planning Board Chair Casey Anderson said that was largely a procedural step.

The County Council passed a law in November 2016 to monitor school capacity and institute a moratorium for areas with enrollment exceeding 120% of projected capacity. Last year, the county halted development in parts of Silver Spring, Wheaton and Bethesda, and this year it is being expanded to cover about 12% of the county.

Anderson said he does not agree with the moratorium policy because of its impact on the housing market. 

"It constrains the ability to deliver new housing at a time when we have a huge shortage of housing, both market-rate and affordable," Anderson said. "This makes it a lot harder to meet that supply need for new housing in general and specifically for the areas around White Flint and Downtown Silver Spring, it's more difficult to attract new investment."

The clusters subject to the moratorium have 10,716 residential units in the pipeline that are already approved to move forward, according to the Montgomery County Planning Board. The moratorium would prevent any new projects from receiving approval and could hurt the ability of approved projects to obtain financing. 

The moratorium would freeze new housing approvals in four entire school clusters, Montgomery Blair High School, Albert Einstein High School, Walter Johnson High School and James H. Blake High School, plus 13 individual elementary school districts. 

The Einstein, Blair and Blake clusters, plus several of the elementary school districts, include portions of Silver Spring, an area with a large amount of new housing in the pipeline around the Metro station and the under-construction Purple Line light rail project. 

Washington Property Co. President Charlie Nulsen, founder of business group Empower Montgomery, has built several projects in Silver Spring. The firm's 20-story apartment building at 8250 Georgia Ave. delivered earlier this month with 50% of its 338 units pre-leased, Nulsen said, showing the demand for new housing in Silver Spring.

While he has no projects in the near-term pipeline that will be directly affected by the moratorium, he said it will be bad for the area's growth. 

"Downtown Silver Spring is the perfect example of an area that is mass-transit-oriented, we've got the Purple Line coming," Nulsen said. "To place a moratorium on residential construction in that type of Central Business District is just counterintuitive to what's needed."

While one-year delays to multifamily projects may not do irreparable damage, Nulsen said the larger concern is the uncertainty it creates for investors and the overall image of the county as a smart place to invest. 

"It can be devastating," Nulsen said. "Candidly, just the word moratorium when it comes to economic development is a huge negative, because it's an unknown. Just to have it on people's lips, let alone have it implemented, is always perceived to be a very big negative when it comes to planning projects and holding down costs and talking to financing and capital sources for investment."

Nulsen said the effect on the perception of the county from the investment community could reverberate for years to come. 

"It's even a little bit worse because when the capital sources turn their heads away, they don't turn back immediately," Nulsen said. "When they feel like an area has this unknown timing for investment they tend to move to other places and it's very hard to get them to come back."

The Walter Johnson cluster covers a section of North Bethesda around the White Flint and Grosvenor-Strathmore Metro stations. Multiple large-scale projects are planned in the area, including the construction of 717 apartment units on the site of the Westfield Montgomery Mall. It also includes Fivesquares Development's planned 2,200-unit Strathmore Square project at the Grosvenor-Strathmore Metro station. 

Fivesquares received approval earlier this month for the first 1,300 units at the project, exempting that portion of the project from the moratorium. Fivesquares principal Ron Kaplan said the team plans to break ground within the next six months on a new parking garage for the Metro station, and after that yearlong project, it plans to begin the first apartment building with 350 units. 

Kaplan said the uncertainty a moratorium creates is never a good thing for a development. But he is confident the county will lift the moratorium after one year, which has helped him reassure the firm's financial partners. 

"By being able to demonstrate that it's a one-year moratorium, that mitigates the uncertainty a lot," Kaplan said. "You can see around the country other places that have moratoriums put in place it's completely uncertain when you will be out of moratorium."

In addition to the negative effects on the housing market and investment landscape, planners and advocates say the moratorium fails to fix the problem it was intended to solve: school overcrowding. Anderson said there is a misperception that new development is directly correlated with growing school populations.

He said planning department research indicates new apartments contribute a relatively small percentage of students to the county's public schools, while the majority of new students move into existing single-family homes. 

"It's pretty clear that it's not well-synchronized with the goals it's designed to achieve," Anderson said of the moratorium. "There is really a mismatch that is rooted in the assumption that the only source of new students is new development, and it turns out that's not true."

Developers of new apartments pay Development Impact Taxes that go toward helping the county's school system expand capacity, while move-ins to existing single-family homes do not contribute the same revenue. This dynamic makes the moratorium policy counterproductive by reducing the county's resources to expand school capacity, Coalition for Smarter Growth Maryland Advocacy Manager Jane Lyons said. 

"It was supposed to be a stick to help the county guide more resources toward building schools," Lyons said. "The moratorium doesn't build schools, and in fact it undermines the county's ability to build schools because it chokes off economic development and the growth in tax base the county needs to build more schools."

Lyons said delaying new multifamily development near transit also hurts the county's progress on transportation and environmental goals because residents of those apartments would be more likely to walk or take the Metro to work than to drive. 

"Places like Downtown Silver Spring and North Bethesda are transit-oriented places, and transit-oriented development creating walkable neighborhoods is really the key to Montgomery County's economic future," Lyons said. "The moratorium is a very blunt and counterproductive tool that only makes it worse, not better. Not being able to build that housing the county needs means that the county is stifling its own growth."