Montgomery County Councilman: Lack Of Job Growth Becoming A 'Crisis'

Montgomery County has a series of challenges to address, local officials and developers agree, from overcrowding schools to congested roads to rising construction costs. But the one factor they say could help overcome them all — job growth — has been woefully inadequate in recent years. 

County Council member Hans Riemer and several top developers, speaking Tuesday at Bisnow's Future of Bethesda and Beyond event, said the county is increasingly falling behind its Northern Virginia neighbors in economic growth and needs to spur more job creation to fund its other priorities. 

During the 12 months ending April 30, Northern Virginia accounted for 91% of the D.C. region's job growth with its 26,900 new jobs, according to a report from the Stephen S. Fuller Institute. Suburban Maryland, which the report did not break down by county, lost 1,400 jobs over that period. Riemer, referring to the Fuller report after a speaker cited it on the previous panel, said it signals a serious problem. 

"The issue is that almost all of the job growth in the region over the last two years has shifted; it's almost all happening in the Northern Virginia subregion," Riemer said. "If that's a trend, if that's not some kind of aberration, that is a crisis for Montgomery County."

Riemer, chair of the council's Planning, Housing and Economic Development Committee, said the county should focus on creating a pipeline of talented technology workers who will draw new companies to the area. He pointed to Amazon's focus on the talent pipeline when putting its second headquarters in Northern Virginia, which is building a new Virginia Tech campus along with HQ2. 

Montgomery County should look to that strategy as a model, Riemer said, and suggested building a new University of Maryland campus in Silver Spring. He noted that the Interstate 270 corridor has a strong life sciences sector, and said the county should try to foster a biotech corridor along the Purple Line route. 

"How can we build an urban bio market connecting Bethesda and Silver Spring to College Park? There are so many opportunities when you think about the Purple Line as a tech corridor," Riemer said. 

Foulger-Pratt CEO Cameron Pratt also lamented the county's weak job growth numbers, but he said the critical issue that needs to be addressed is transportation. He said the county should look to build a new bridge crossing the Potomac River to the Reston and Dulles area, an idea that has been put forward for decades but hasn't moved forward.

"Drive out to the Toll Road and look at the number of jobs being created just a few miles away on the other side of the river," Pratt said. "We've got this Great Wall of China, which is the Potomac River, that nobody can cross because there's one access point down at the American Legion Bridge. If we could connect to all of the economic activity in Northern Virginia and the Dulles Toll Road by building a bridge, all of a sudden Gaithersburg and Germantown become connected instantly."

A lack of political will to take on the thorny project has been cited as the reason it hasn't gotten off the ground. It would likely cut through an agricultural reserve on Maryland's side of the Potomac and parkland or the Trump National Golf Course on Virginia's, according to Bethesda Magazine. Former Virginia Gov. Terry McAuliffe once said he wouldn't help fund the river because it's Maryland's jurisdiction.

Riemer said he agreed with Pratt's idea of creating better connections with Northern Virginia. He did not explicitly endorse a new bridge, instead promoting an expansion of the existing bridge's capacity.

"We need to ensure we're part of a connected region," Riemer said. "If we cut ourselves off from the region, we are going to wither on the vine, and that is a fundamental reality."

Lagging job growth in Montgomery County has caused apartment rents to stagnate, multiple developers said, which makes them less likely to invest in new multifamily projects in the area. 

AvalonBay Communities Senior Vice President Martin Howle said that, as a public REIT, his company lives and dies by the rent growth of its apartments. He said he has seen some rent growth in D.C. and in the Baltimore area, but Montgomery County has struggled to achieve rate increases. 

"In this area in particular, we have struggled to see rent growth, which makes it fundamentally more difficult to invest in projects," Howle said. "Downtown Bethesda, with the cost to build here, I don't see the rent growth and return opportunities here."

Development is also becoming increasingly difficult in Montgomery County, just as it is across the country, because of rising construction costs, Pratt said. But he said areas that achieve strong economic growth are able to overcome the rising costs. 

"The rising construction costs and the cost of development is a problem, but it's all solved when there's rent growth, and rent growth happens in markets where there's job growth," Pratt said. "So if you fix the job growth problem, that fixes a lot of problems."

Montgomery County is also standing in its own way when it comes to spurring new projects, developers said, because of the moratorium it has imposed. A one-year moratorium on new housing approvals went into effect July 1 in areas that cover 12% of the county, including parts of North Bethesda and Silver Spring. 

Bozzuto Vice President Alisa Rosenberg said the delays caused by the moratorium only make projects more expensive and more difficult to make work. 

"Time kills all deals," Rosenberg said. "There's no way a deal is going to look better in a year or two. It's going to be more challenging to get it through a very complex process. Montgomery County already is approximately a two-year entitlement process, and you're adding a year of delays."

Research from the Montgomery County Planning Department indicates new apartments contribute a relatively small percentage of public school students compared to existing single-family homes. Rosenberg emphasized that new apartment buildings pay impact fees that go toward school construction, while turnover of existing single-family homes does not generate the same fees. 

Donohoe Cos. Senior Vice President Jad Donohoe used the company's Gallery Bethesda building as an illustrative example. He said the building has 234 apartment units and just 16 children live there, including those younger than kindergarten age. 

"It is demography, not development, causing the problems with schools," Donohoe said. "To try to put it back on new development makes little sense when those are the only folks paying into the pot for new schools."

Duball President Marc Dubick said the moratorium makes it harder to secure financing from banks and institutional investors. 

"As developers, we can all play by the rules, but if there's uncertainty it makes our ability to do projects that much harder, and it scares the living heck out of our institutional partners," Dubick said. "Clarity with schools should be a top priority."

Riemer tried to instill some clarity on the housing moratorium issue. He said the county has lined up financing for two new high schools that will allow the current moratorium to be lifted after one year.

He also said the county will soon review the underlying policy that triggers the moratorium when schools reach a certain capacity. A majority of the council supports new development, he added.

"I acknowledge it's really unfortunate that some of our most attractive real estate markets are in moratorium right now," Riemer said. "There is a consensus to support smart growth in Montgomery County, and to have that contradiction in place where there's a brick wall in front of what we want to get is on all of our minds."