Montgomery County Rent Stabilization: What Landlords Need to Know

More than half of renters in Montgomery County, Prince George's County, and Baltimore County are cost-burdened — spending over 30% of their income on housing. That statistic sits at the heart of why both Montgomery and PG Counties have enacted rent stabilization ordinances, and why investors targeting those markets need to understand the rules before underwriting a deal based on unlimited rent growth.

Rent stabilization doesn't necessarily kill returns. But it changes the calculus in ways that catch investors off-guard.

Montgomery County Rent Stabilization

Montgomery County enacted rent stabilization as part of a broader housing policy response to its affordability crisis. The program caps annual rent increases for covered units and requires landlords to comply with specific notice and documentation requirements.

What's covered: The ordinance applies to most residential rental units in Montgomery County, with notable exemptions.

Key exemptions:

• Units during the first 23 years after their certificate of occupancy (new construction exemption)
• Single-family homes and owner-occupied properties with four or fewer units
• Subsidized affordable housing units with their own contractual rent restrictions
• Units that have undergone substantial rehabilitation meeting specific cost thresholds

Allowable increase: Montgomery County caps annual increases at CPI-U plus 3%, with a maximum of 6%. The published cap for 2025–2026 is 5.7%. For lease renewals, landlords must provide proper written notice and document that the increase falls within the allowable percentage.

After the exemption: Once the 23-year new-construction exemption ends, the annual cap applies to covered increases. Do not underwrite a market-rate reset without confirming that a specific exemption applies.

Hardship exemptions: Do not assume a hardship exception. Confirm the current county rules and process before underwriting an increase above the standard cap.

Practical implication for investors: If you're acquiring a Montgomery County rental with a long-term tenant at below-market rent, run the numbers on the CPI-based cap. If market rent is $2,400 and the sitting tenant pays $1,800, you may need years to close that gap through allowable annual increases — or you wait for turnover and reset to market.

Prince George's County Rent Stabilization

PG County has its own rent stabilization program that applies to multifamily rental properties. The county's program shares some structural similarities with Montgomery's but has its own specific rules and thresholds.

What's covered: PG County's ordinance also covers single-family rentals. A small landlord who owns no more than five units individually or through a living trust is exempt; an LLC or corporation does not qualify for that exemption.

Allowable increase: PG County caps annual increases at CPI-U plus 3% or 6%, whichever is lower. The published cap for 2025–2026 is 5.7%.

New construction exemption: Units with a certificate of occupancy issued on or after January 1, 2000, are permanently exempt from the cap. This is why much of PG County's newer development underwrites without rent-stabilization assumptions.

The cost-burden context: Over half of PG County renters are cost-burdened. The county's proximity to the federal employment corridor — Andrews Air Force Base, NASA Goddard, the federal agencies in Suitland — creates high but income-constrained tenant demand. Rents in the $2,300-$2,800 range for SFRs reflect that market ceiling.

Rent banking in PG County: Landlords can bank unused annual increases for later use, subject to the ordinance's notice and calculation rules. Do not assume a vacancy creates an unrestricted market-rate reset.

How Rent Stabilization Affects Investment Property Analysis

Cap rate compression: If you're underwriting a 7% cap rate based on market-rate rent with 3-5% annual rent growth assumptions, and the property has a long-term tenant at 80% of market, your actual near-term cap rate is lower. Stabilization delays the path to full market rent.

Hold period matters: Investors planning to flip after 2-3 years need to account for whether they'll reach market rents in that window. Investors planning 10+ year holds should model the annual cap and any available rent banking rather than assuming turnover creates an unrestricted reset.

Exit valuation: When you sell, the next investor will underwrite on actual in-place rents, not market rents. If your stabilized rents are below market, your exit cap rate is compressed relative to a comparable market-rate building. This is a real drag on IRR for stabilized properties with long-term tenants.

New construction strategy: Montgomery's 23-year post-certificate-of-occupancy exemption and PG's permanent exemption for units with a certificate of occupancy on or after January 1, 2000 explain why some investors target newer buildings. Confirm the applicable exemption before underwriting unrestricted rent growth.

What Maryland Does Not Have

Maryland does not have statewide rent control. The county-level programs are enacted locally, and most Maryland counties have no rent stabilization at all. Baltimore City does not currently have a hard percentage rent cap. Its Strengthening Renters' Safety Act, effective January 1, 2026, targets landlords with 20 or more units and priority dwellings through other renter protections.

Howard County, Anne Arundel County, and most other Maryland counties operate without any rent increase restrictions. Investors targeting those markets can underwrite rent growth based on market conditions without a regulatory cap.

Navigating Compliance

If you own or are acquiring stabilized units:

1. Confirm county registration and licensing requirements for covered units before leasing
2. Document every rent increase with proper notice (timing and form matter for enforceability)
3. Track the annual CPI-based cap — counties publish updated rates for the applicable control period
4. Check any claimed exemption or exception before increasing rent above the standard cap
5. Document rent banking or any other permitted adjustment in your files before setting new rent

Rent stabilization is one layer of the Maryland regulatory environment that affects projected returns. The Maryland Investment Property Guide covers stabilization rules alongside transfer taxes, landlord-tenant law, and county-specific market analysis — everything in one place so you can underwrite accurately before committing capital.

See more Maryland guides →