Two investors can make offers on the same 25-year-old condo in Silver Spring and be buying two different assets. One is an individual buying a first rental. Under Montgomery County's rent stabilization law, that buyer can raise the rent at renewal however the lease market allows. The other plans to put the unit in an LLC, or already owns two other County rentals. For that buyer, increases are limited to 5.2% for leases signed between July 1, 2026 and June 30, 2027. The square footage, the HOA, and the comps are identical. The difference is the name on the deed.
Rent stabilization took effect July 23, 2024, and it limits annual increases on regulated units to the Washington-area CPI-U plus 3 percentage points, or 6%, whichever is lower. Whether that formula touches a particular unit depends on three things: the owner, the building's age, and the municipal boundary.
The exemption is written about the landlord
Most of the County's exemptions describe a property: newer construction, ADUs, assisted living, short-term lodging. The one that matters most to small investors describes a person instead. Section 29-60 of the County Code exempts:
a rental unit owned by a landlord who: (A) owns 2 or fewer rental units within the County; and (B) is either: (i) a natural person; or (ii) the trust or estate of a decedent.
An LLC or corporation isn't a natural person, so on the code's wording, a single condo held in an LLC doesn't qualify for the small-owner exemption. Many small landlords set up an entity for liability reasons. In Montgomery County, that choice also decides whether a rent cap applies. How to hold title is a question for an attorney and a tax professional. The rent cap is one more input to bring to that conversation.
The unit count works at the same owner level. The limit is two units per owner across the County, and the code adds that an exemption "expires when the conditions entitling the unit or facility to an exemption cease to exist." When an owner buys a third County rental, the condition is gone for the whole portfolio. On the text, the first two units lose the exemption along with the new one. DHCA hasn't published guidance on how co-owned units or spouses' separate holdings are counted. Anyone near that line should ask the department directly before assuming either answer.
So a third rental can change what the first two are worth as rental income. Someone running numbers on a third unit is also re-running the first two.
The building's birthday sets the second clock
The owner test only matters once a building is old enough to be covered at all. The law applies to most County-licensed rentals at least 23 years old. Age is measured from the "Year Built" on the property's Maryland SDAT record, and a unit turns 23 on January 1 of the 23rd year after that date. DHCA's own example is a building with an SDAT year of 2002, which became regulated on January 1, 2025. On the same arithmetic, buildings recorded as 2003 came under the law on January 1, 2026, and buildings recorded as 2004 cross over on January 1, 2027.
That makes the exemption for newer buildings temporary. A condo in a building with a 2005 SDAT year is exempt today on age and becomes subject to the cap on January 1, 2028, unless the owner qualifies some other way. DHCA publishes property lists for units under rent stabilization as of 2026 and for properties entering from 2027 through 2031.
Bethesda Magazine's report on the first-year results listed how many units are projected to join each January 1:
| Year | Units projected to become rent-stabilized |
|---|---|
| 2027 | 1,762 |
| 2028 | 955 |
| 2029 | 422 |
| 2030 | 726 |
| 2031 | 1,302 |
As of January 1, 2026, that same report counted 67,249 stabilized units out of roughly 114,000 licensed rentals, or about 59%. DHCA's report put the figure at 65,669 units, or 57% of its estimate, as of December 31, 2025. The two counts sit on either side of a January 1 date, which is when the law adds each new building vintage.
If you're underwriting a rental bought in a building from the early 2000s, the SDAT year built belongs on the first page of your notes. It can turn an uncapped rent projection into a capped one partway through the hold.
The cap carries over to the next tenant
In a covered unit, the limit applies to new leases as well as renewals. Under Section 29-58, on "a lease renewal or new lease agreement," the rent can't exceed the base rent plus the annual allowance plus any banked amount, with a ceiling of 10% of the base rent. A move-out doesn't reset the rent to market. The only special case in the code is a regulated unit that comes back to the rental market after sitting vacant more than 12 months with no active lease. For that unit, the DHCA Director sets the allowable increase by regulation.
Banked rent is the part that often surprises new owners. If a landlord raises rent by less than the full allowance, or not at all, or holds rent flat through a multi-year lease, the unused portion is banked to that unit, and it doesn't expire. Here's how it works on a $2,400 regulated unit during the current period:
- The 2026–27 allowance is 5.2%, or $124.80.
- A landlord who raises the rent by $72, or 3%, banks the $52.80 difference.
- At a later renewal, that banked amount can be added to that year's allowance, as long as the total increase stays within 10% of the current rent.
The allowance also changes each year. It was 6% in 2024, 5.7% in 2025, and 5.2% in 2026, falling as regional CPI-U went from 3.3% to 2.7% to 2.2%. Some rules apply whether or not the unit is regulated. Rent can rise only once every 12 months, never mid-lease, and both regulated and exempt units need 90 days' written notice by U.S. mail or in person with a signed receipt.
A city line can swap the whole rulebook
The County program doesn't apply in Gaithersburg, Rockville, Takoma Park, Barnesville, or Laytonsville. That means two condos a few miles apart can fall under different rules, and in Takoma Park the rules work differently.
| Location | Rule on rent increases | Current figure |
|---|---|---|
| Unincorporated County and other covered areas | Mandatory cap on regulated units | 5.2%, July 1, 2026 to June 30, 2027 |
| Rockville | Voluntary guideline; County program does not apply | 2.59%, effective April 14, 2026 |
| Takoma Park | City's own rent stabilization | 3.0%, July 1, 2026 to June 30, 2027 |
| Gaithersburg | City landlord-tenant code; disputes handled locally | No citywide cap figure published on the pages reviewed |
Takoma Park's 2026 notice says its program covers individual rental condominium units as well as properties with two or more units. The County's two-unit exemption for individual owners doesn't carry across that border. In Takoma Park, a single condo rental can be covered no matter who owns it, and the allowance there is lower than the County's.
What the first year shows, and what's still in play
DHCA's first implementation report covers July 23, 2024 through December 31, 2025. It approved three Fair Return applications, which let a landlord seek more than the standard increase by showing the property isn't earning the return the regulation guarantees, and three capital-improvement petitions. One substantial-renovation application was pending. The department also reported rent refunds of $68,515.84 across 195 units. Petitions for relief have been rare so far, and refunds for overcharges have been actually paid. Neither record shows how small landlords as a group responded, and no County data yet tracks sales, conversions, or units leaving the rental market.
The rules aren't settled either. Montgomery Planning's September 2025 pipeline analysis reported that developers cited rent stabilization as a barrier, including vacancy control and the lack of a permanent new-construction exemption. Staff recommended exploring recalibration. The cause of the permit slump is still disputed. According to Bethesda Magazine, multifamily permits dropped from 555 in Q1 2024 to seven in Q1 2025, then topped 500 in Q4 2025. County leaders pointed to tariffs, interest rates, and regional uncertainty rather than the law. Bethesda Magazine also reported in February 2026 that Council President Natali Fani-González favored keeping the rolling 23-year exemption, and that County Executive Marc Elrich said he would consider a period between seven and 23 years. In July 2025, Elrich had also called on the Council to revisit the cap formula, according to Montgomery Perspective.
As of October 2026, no amendment to the 23-year rule or the CPI-plus-3% formula had been enacted. The current DHCA pages still state both. The bill moving now is a different one. Bill 8-26 targets rent-setting algorithms and price coordination, and a Council committee recommended passage on October 5, 2026, according to a Council statement. A change to the age window would shift every building's date on the timeline above, so anyone buying a rental with a long hold in mind should keep an eye on it.
Quick answers
Does an exempt owner still have to report anything? Yes. DHCA's annual rental survey is mandatory and asks for each unit's exemption status. The County warns that noncompliance can lead to a citation or to denial of license renewal. The County's survey page listed both April 30 and May 15 as the 2026 deadline. Both dates have passed, so owners should ask DHCA about late filing and about the timing of the next survey.
Are single-family homes and townhouses covered? They aren't excluded as a category. DHCA reports regulated units in its single-family, townhouse, and small-multifamily license categories. Whether a given house is covered depends on its age, its license, and the owner tests above.
I read on a County page that there's no rent control in Montgomery County. Which is right? That line comes from an older DHCA renter FAQ that doesn't carry a date. It conflicts with the department's current rent stabilization pages, which describe the cap in force today.
If you're weighing a Montgomery County rental, or deciding whether to add a third, it helps to run the rent numbers under both outcomes before you price your offer. Jonathan Rundlett can help you check a property's SDAT year built and its jurisdiction, and how it fits your current portfolio. Through Prosperity Property Management, he can also handle the leasing, notices, and annual reporting once you own it. If you already hold a County rental, start with a free home valuation so you know what that unit is worth before you plan your next move.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
