Balancing Act

Can Maryland Manage Budget Woes, Fund Its Priorities, and Deliver on Housing?

BY LISA MAY, DIRECTOR OF ADVOCACY AND PUBLIC POLICY

If you’re looking for an upside in Maryland’s budget picture, it’s this: our projected revenue shortfalls haven’t gotten any worse.

Of course, they haven’t gotten noticeably better, either. This tension over Maryland’s budget, and whether to raise taxes or cut spending, is expected to influence virtually all other legislative initiatives in 2025. This includes housing.

To Tax or Not to Tax

Last year’s General Assembly session featured a pointed standoff between the House and Senate on the issue of taxation. House members introduced a host of measures to address Maryland’s projected $1 billion budget shortfall in 2026, which is expected to grow to over $3 billion by 2028. Meanwhile, the Senate held firm on a “wait and see” approach to revenue and deficit projections, which was backed by Governor Wes Moore.

Heading into 2025, not much has changed, either in our state’s budget outlook or the positions of the Governor and General Assembly. Both Senate President Bill Ferguson and Governor Moore have reiterated their skepticism on tax increases, saying a “high bar” would need to be cleared to gain their support. Meanwhile, Maryland’s economy has yet to show the level of growth that would cause House members to abandon their pursuit of new revenues.

Two of those 2024 tax bills that may make an appearance again this session are of particular interest to REALTORS®.

First is the infamous sales tax on services bill. Last year’s HB 1515 would have imposed a 5% sales tax on all professional services, including real estate, mortgage lending, settlement services. This would have resulted in an additional $4 billion in taxes on Maryland businesses.

REALTORS® defeated this issue based not only on its impacts to our members’ businesses, but also on the detrimental effects this would have on housing construction and affordability.

The second bill is known as the Fair Share for Maryland Act (HB 1007/SB 766 of 2024). Most of the headlines on this bill surround the provision for worldwide combined reporting for corporate income and income tax increases on top earners. However, the act also lowers the Maryland estate tax exclusion from the current $5 million down to $2 million. It also would impose an additional 1% tax on net capital gains, which could include primary residences sold for $1.5 million or more.

As new taxes and fees are debated in the General Assembly, REALTORS ® will need to be vigilant that these proposals do not damage the progress made on housing supply or stifle Maryland’s economic recovery.

Housing: But Wait, There’s More

With the passage of the Housing Expansion and Affordability Act (HB 538) last year, it would be tempting for the General Assembly to declare victory on the issue of housing supply and turn their attention to other pressing matters. That won’t be the case, and years of REALTOR® advocacy had a lot to do with that.

Maryland REALTORS® originally sought legislation back in 2022 to remove local restrictions on Accessory Dwelling Units (ADUs). At the time, state level involvement in local land use and housing policy was far more limited, and the bill’s failure in that session was a direct result.

We have quite a different landscape today. Incremental progress was made in 2023, when legislation establishing an ADU Task Force was approved. That Task Force issued their recommendations over the summer, which would allow one ADU, by-right, on a single-family residential property, while preventing local governments and homeowner’s associations from enacting overly burdensome requirements in the areas of parking, impact fees, lot requirements, and utility connections.

While it has been frustrating for REALTORS® to watch this process play out over several years, only to come up with virtually the same ADU provisions we initially proposed in 2022, we can now leverage the Task Force’s consensus findings into our push for common sense ADU legislation statewide.

REALTORS® are also looking to make a difference on housing by promoting and preserving homeownership options. This includes supporting expansion of Maryland’s Homeowner’s and Renter’s Property Tax Credit programs, which offset the costs of rising property tax bills for low-income residents. These programs have maintained the same asset and income limitations for the past 15 years while property values have doubled, and the state’s minimum wage has increased. Fewer and fewer residents are able to qualify because asset caps are not adjusted for inflation.

We will also engage on proposals from the Department of Housing and Community Development (DHCD) to provide additional support and resources for first-time homebuyers. It is certainly an area for focus, both here in Maryland and across the country.

According to NAR’s recently released 2024 Profile of Home Buyers and Sellers, the share of first-time buyers declined last year from 32% down to 24%, reaching its lowest level in 40 years.

There are a host of other pro-housing proposals being floated around the Capitol, including substantial changes to Adequate Public Facilities Ordinance guidelines and setting targets for local housing production. What remains to be seen is the appetite for the General Assembly to once again face off with local governments over land use and the limitations imposed on new spending in light of our budget situation.

Play it Again

If the following issues sound familiar, there’s a reason for that. REALTORS® supported two pieces of legislation last session that fell short of passage in 2024, but that we will revive in 2025.

The first of these is a bill to address condo and HOA resale fees and timeframes. One of the top complaints to our Legal Hotline is excessive fees charged by Associations to obtain resale information. In some instances, these result in hundreds of dollars in additional costs to consumers. At a minimum, associations and their packet providers should be limited to the fees currently outlined in statute. In addition, we are seeking to shorten delivery timeframes and standardize deadlines across the separate Condo and HOA statutes.

HB 1408, a bill to address real estate “wholesaling” practices, fell just short of passage in the final days of the session. However, assignment of real estate contracts continues to be an area of concern within Maryland due to the potential pitfalls for consumers. REALTORS® have worked with a group of stakeholders and with members of the General Assembly to reach consensus on this issue and better position it for passage in 2025. If successful, Maryland would be among the growing list of states that have required disclosures from real estate wholesalers so that consumers have full transparency during a wholesale transaction.

Getting Down to Business

We are entering the first legislative session since the announcement of the NAR settlement and associated changes to real estate brokerage practices. Maryland, as you know, was not as impacted as other states when it came to issues like written buyer agreements and clear disclosure of compensation amounts, but that doesn’t mean there won’t be adjustments in this area of law.

One area Maryland REALTORS® is exploring is the creation of a transactional brokerage relationship option between real estate licensees and their clients. Both Colorado and Kansas allow clients to engage real estate licensees to facilitate a property sale without exclusively representing either party. In passing this option, Colorado legislators stated that the public benefits from a system where they may “engage any such real estate broker on terms and under conditions that the public and the real estate broker find acceptable. This includes engaging a broker as a single agent or transaction-broker.”

For our purposes, this would allow more sophisticated buyers and sellers to still rely upon a real estate professional’s knowledge without needing all the services due under current agency relationships. It would be a shift in Maryland brokerage law, and one that may take several years to achieve, but REALTORS® will start that process in the new year.

Another piece of legislation arising partially from NAR changes is a bill on real estate instruction and Fair Housing education requirements. NAR’s announcement of a 2-hour fair housing training mandate for REALTORS® would result in Maryland members needing instruction in excess of the state’s 1.5-hour requirement. Our proposal would increase the Fair Housing instruction requirement to match NAR’s 2-hour course and reduce the elective credit requirement by 0.5 hours, to maintain the same overall education standards of 15 hours of instruction per renewal cycle. In addition, we will recommend that licensees who designate themselves as exclusively commercial practitioners complete coursework on Americans with Disabilities Act (ADA) compliance for license renewal.

Also included in that bill will be a clarification on how real estate education providers are certified and how certain courses are approved by the Maryland Real Estate Commission (MREC). As we experience higher levels of turnover in both the industry and in staffing of real estate education organizations, the ability to approve qualified instructors must become more nimble and timely. Our proposal would reiterate that the statutory and regulatory duty of approving real estate schools falls to MREC, but once approved those schools are responsible for evaluating and approving qualified instructors for individual classes. Also, schools and instructors, through the application and approval process, would design agency and supervision courses.

Year after year, legislation is introduced to add new real estate notices and disclosures to the contract of sale. This results in a longer and more confusing process for buyers to sort through when attempting to learn more about the property they wish to purchase. One solution that Maryland REALTORS® is exploring is the creation of a property disclosure portal using state mapping data. If successful, prospective purchasers could visit one state website to learn whether the property is subject to various easements, located in critical areas or floodplains, or in proximity to military installations or dewatering zones. In essence this would create a one stop shop for these and any future disclosures the General Assembly may hope to enact.

Finally, instances of real estate fraud continue to plague our markets. Last session, legislators made attempts to address various seller impersonation schemes, often involving vacant land parcels. While REALTORS® shared their concerns on the seriousness of the issue, some of the proposals from 2024 were not truly workable solutions. We have held subsequent meetings with stakeholders on what, if anything, is the legislative fix to this problem.

Another area of real estate fraud is found in the reemergence of squatters. Owners listing their homes for rent or sale have been vulnerable to squatters occupying their property, and claiming to have a valid lease, with differing responses from local law enforcement. Addressing squatters is always a challenge in states with strong tenant protections, like Maryland, but solutions have been in advanced in other tenant-friendly states like New York which could prove instructive for the General Assembly.

Become an Advocate

There’s a terrific opportunity for you to play an active role in promoting these and other policy issues. Join your Advocacy team for the 2025 Maryland REALTORS® Lobby Day on Wednesday, February 12.

This annual event draws over 200 REALTORS® to our state capitol complex in Annapolis. Attendees will hear a briefing on the key housing issues of the session from your Maryland REALTORS® Leadership and association lobbyists. In addition, the results of the latest Maryland State of Housing poll will be revealed, which quantifies the latest data on the housing needs of current and future residents.

Armed with this information, our REALTOR® members will set out to meet with their Delegates, Senators and staff about our legislative priorities and the housing issues facing their districts. It’s a day of grassroots lobbying like only the real estate industry can provide.

Registration for Lobby Day will open in early January. This event has sold out in recent years, so make your plans to join us now. Check the Maryland REALTOR® Report and our website for additional information, as it develops. We hope to see you there!