Councilmember Evan Glass (D-At Large) has introduced the Housing Impact Fairness Tax (Bill 34-19) that would, under certain conditions, tax new home construction following the demolition of an existing single-family home.

Co-sponsored by Councilmember Will Jawando (D-At Large), the bill would earmark the new revenue for school construction and affordable housing initiatives.

“[The legislation will] close the teardown loophole here in Montgomery County so that all new residential development contributes to our growing impact and infrastructure needs” Glass said in a press conference.

The bill would create a new “Affordable Housing Teardown Excise Tax [that] would apply to certain total demolitions and partial demolitions of attached or detached single-family homes when the replacement home has a greater square footage than the original home,” according to the staff report.

The tax would apply to total demolitions, or when the partial demolition is greater than 50 percent of the existing home, and when the new construction has a larger square footage than the original home. The initial rate would be set a $9 per square foot for each square foot exceeding the original.

This revenue would be used solely for affordable housing initiatives.

In addition, the bill would “apply the public school impact tax to a new, reconstructed, or altered attached or detached single-family home that replaces a home built before the effective date of the school impact tax law, which was March 1, 2004.”

Homes built before that date were not subject to the impact tax. This revenue would be used for public school improvements.

Glass estimated that the legislation would add an additional $5.7 million annually for school construction and $4.3 million annually for affordable housing initiatives.

Citing data from the Planning Department, Glass said, “The average home that was torn down was built in 1948, is 1,700 square feet and sells for $700,000.

“The new home that replaces it is approximately 4,200 square feet and sells for $1.75 million,” he added.

The bill would not charge impact fees to extensions, additions, or similar remodeling projects, Glass said.

Screenshot from press conference