Every Cloud has a Silver Lining

REALTORS® scored wins during a session filled with budget woes

BY LISA MAY

In a tough 2025 General Assembly Session, REALTORS® Achieved Priority Wins.

Six months ago, Maryland’s future showed more storm clouds than sunshine. What started as an estimated budgetary shortfall of $3 billion escalated to $3.3 billion in the opening weeks of the 2025 General Assembly session. Hopes that Maryland’s economy could grow its way to fewer cuts or lesser taxes ran into a reality that could no longer be ignored by policymakers.

This impacted the 90-day Session in several ways. First, REALTORS® had to be more engaged in the budget process than ever before, as an ever-changing assortment of tax and fee provisions were floated to bridge the budget gap. Second, the time legislators would need to devote to fiscal matters meant fewer opportunities to consider other policy matters, like housing supply. Finally, bills which imposed costs on state operations were often pulled from consideration, even those which had already received a scheduled hearing, or were held before being introduced.

Yet, even when facing those headwinds, REALTOR® advocacy efforts returned results on our priority issues in several categories.

Housing

A top housing priority for Maryland REALTORS® over the past four years was promoting and allowing greater use of Accessory Dwelling Units (ADUs). While the path this issue took to passage was both frustrating and unnecessarily long, we can finally say that statewide legislation to require local governments in include ADU provisions in their zoning ordinances is a reality.

Over the next 18 months, each county and municipality which has zoning authority over single-family detached residential properties must update their codes to comply with HB 1466/SB 891 (see sidebar for detailed provisions). Both state and local REALTOR® associations will remain engaged in this process to ensure that these zoning amendments provide as much flexibility as possible for homeowners who wish to add an ADU to their properties.

Not all housing proposals were as successful, even those proposed by the Moore Administration. What was introduced as the Housing for Jobs Act, HB 503 would have tied local housing production needs to employment figures and limited the ability of local governments to deny new housing developments when a shortage exists. This was a welcome step toward acknowledging the vital role that housing plays in supporting our workforce and economic success.

Unfortunately, county and municipal governments once again stepped in to oppose common sense housing solutions. After securing support for amendments to remove linkages between housing goals and employment, leaving only a limited vesting option for new housing developments, the bill was further weakened in the Senate to a mere study. With the resulting bill bearing little resemblance to the original, the Administration abandoned its push for passage, and the bill died.

It is a sad reminder that even with the success of ADUs and 2024’s Housing Expansion Act, we have not yet defeated local government obstructionism or the lack of political will to overcome it. It is a battle that housing advocates, including REALTORS®, must continue to fight and win.

Consumer Protection

Following a multi-year effort on the issue, REALTORS® were successful in addressing the assignment of real estate contracts, informally known as “wholesaling.” Original proposals to require licensure for those engaging in routine assignments of contracts were opposed by state regulators, but that did not deter our efforts. HB 124/SB 160 requires that notice be given if a contract for sale may be assigned.

By pivoting to a required disclosure model, based on current Arizona law, property owners and eventual property buyers can achieve needed transparency in the transaction. In addition, this bill provides that if the owner or purchaser does not receive the required disclosure, they may rescind the sale at any time before settlement without penalty.

Similarly, we experienced a breakthrough in combatting the fraudulent possession of property by squatters. While legislation to address squatting had been introduced in previous sessions, tenant advocates had been successful in claiming that any changes to current procedures would be abused by landlords to wrongfully evict lawful tenants. However, in the past year, many members of the General Assembly were made aware of or even were asked to intervene in squatting incidents involving their constituents, which changed the balance of the policy debate.

The result was a host of bills on the subject, with SB 46 being the final legislative vehicle to enact an expedited unlawful detainer process. Beginning October 1, unlawful detainer hearings will be required to be held no later than 10 days following the complaint filing, with service of process occurring in no more than 4 days. Should the property occupant choose to appeal the court’s decision and remain in the property during that appeal, the occupant must file a bond with the court or pay the property owner the fair rental value of the property, court costs, and all losses and damages occurring before and during the appeal.

Real Estate Education Requirements

Maryland REALTORS® were also successful in passing HB 972/SB 680 to address inconsistencies and outdated provisions in state law regarding the provision of real estate continuing education. To match national requirements, classes for Fair Housing will now be 2.0 hours for all residential licensees; for those who are exclusively commercial practitioners, 2.0 hours of compliance with the Americans with Disabilities (ADA) Act will now be required.

The bill also clarifies an interpretation by the Real Estate Commission which required separate brokerage classes for initial and renewal licensees (known as BRAD-SD and BRAD, respectively), which will now be returned to a single requirement for all renewal types. Broker Supervision classes will be reduced from 3.0 hours to 1.5 hours, to better reflect course content, and information on the practice of “flipping” will be removed from Ethics classes. Finally, the bill sets a single standard for real estate schools to select qualified instructors and develop course materials for all continuing education offerings.

Condos and HOAs

It took several attempts, but legislation providing additional flexibility to community associations to meet reserve funding requirements has received final approval. HB 292 clarifies which items should be included in reserve study calculations and updates to those studies and gives associations two more years and additional funding methods to show compliance with reserve requirements. The bill also allows the governing body of the association, following a two-thirds majority vote, to alter established reserve funding plans for up to one fiscal year if experiencing financial hardship.

However, the General Assembly did not pass other reform proposals, including those to license community

managers or to reign in fees charged in the resale process.

Property Management

Landlord-Tenant issues are always a difficult one for REALTORS®, with what seems an annual ritual of battling bad proposals and minimizing damages on what eventually becomes law. While there was no shortage of bad bills, the “worst of the worst” remained bottled up in the final hours of Sine Die.

With “good cause” legislation advancing through the House in 2024, many feared this would be the year it received final approval. The Senate had other plans. By acknowledging that the multiple layers of landlord restrictions were taking a toll on housing production and the availability of rental housing, Senate leaders proposed a compromise: local governments could choose to enact “good cause” or rent stabilization, but not both. This provision changed the tenor of the conversation about HB 709/SB 651. Without an agreement from the stakeholders, “good cause” was put on hold for yet another year.

Bills impacting rentals that did receive approval were:

• HB 767/SB 442, setting advance notice requirements for evictions;

• HB 1076, to provide advance notice of landlord entry;

• HB 1152/SB 896, requiring listing of pet policies in the rental application and on a property’s website (if any); and,

• SB 856, outlining a landlord’s responsibilities for tenant mold complaints.

REALTORS® were successful in obtaining favorable amendments to all the above legislation.

Budget

Finally, we come to the most substantial issue of session: the budget.

REALTORS® had good reason to worry about what taxes and fees might be imposed on the industry. The Administration’s budget avoided direct taxes on real estate services, but did propose eliminating itemization on state tax returns, pausing new opportunity zone tax credits, and lowering estate tax exemption levels.

That was hardly the extent of budget items that were on the table. Stand-alone legislation was introduced to increase statewide property taxes and transfer taxes, and Department of Legislative Services staff recommended increasing both to generate part of the revenue needed to close budget shortfalls. There was also a return of sales taxes on services, though at a lower rate than in 2024 and excluding industries directly related to housing.

By the end of the debate however, REALTORS® were able to minimize impacts on real estate, particularly when considering what could have been. (See the sidebar for final budget provisions). This was due in large part to the successful advocacy efforts of the past few years, where we have emphasized Maryland’s housing affordability and supply challenges. It’s fair to say that message is beginning to resonate, at least as far as the 2025 Session is concerned.

Maryland’s budget woes may not be over. Federal level uncertainties have already set off rumors of a special session in early Fall, raising the possibility of additional budget cuts or revenue actions.

But for today at least, REALTORS® can find some rays of sunshine from an otherwise cloudy 2025 General Assembly Session.

Key Provisions for ADUs (HB 1466/SB 891)

Local Law Requirement: By October 1, 2026, the legislative body of counties and municipalities must adopt a local law authorizing the development of ADUs on land zoned for single-family residential use.

Zoning Use Permit Applications: The law outlines requirements for the approval of zoning use permit applications related to ADUs, with localities able to place restrictions based upon resident health, safety, and welfare.

Density Exclusions: ADUs are excluded from density requirements and other limits on residential growth that apply to the parcel.

Setbacks: Localities may not require setbacks that exceed existing requirements for other accessory structures.

Parking Requirements: The creation of on- and off-street parking spaces for ADUs is addressed under certain criteria, including consideration of available parking, costs to construct, and increases to impervious surfaces as determined by a parking study. Localities must provide a parking waiver process.

Restrictions on Property Instruments: The legislation prohibits unreasonable restrictions on the development or use of ADUs on property zoned for single-family residential use in recorded instruments affecting the transfer or sale of real property.

Homeowners’ Association Authority: It authorizes the governing body of a homeowners’ association to treat an ADU as a separate lot for purposes of voting and levying assessments.

Historic Properties: Restrictions on ADU development can be placed on properties designated on the Maryland Register of Historic Properties or on parcels where the only vehicular access to the ADU is through an alleyway.

New Tax Provisions in the FY 2026 Budget

The Budget Reconciliation and Financing Act (HB 352) makes several changes to Maryland tax policy::

Itemization: Increasing the standard deduction by 20%, while gradually phasing out itemized deductions for those with adjusted gross incomes above $200,000

Income Taxes: Adds two new income tax brackets:

• 6.25% for single filers of $500,000-$1 million and joint filers of $600,000-$1.2 million

• 6.5% for single filers above $1 million and joint filers above $1.2 million

Capital Gains: Establishes a 2% surcharge on net capital gains if adjusted gross income is above $350,000. This does not apply to the gains from the sale of real property used as a primary residence sold for less than $1.5 million.

Technology Taxes: Imposes a 3% tax on data and IT services provided within Maryland, based upon federally defined categories, while excluding certain cloud computing, cyber security, and other emerging technology services.

Local Income Taxes: Local governments are authorized to increase the local income tax rate from 3.2% to 3.3%.

New vehicle fees and taxes: Includes increases to titling fees, excise tax rates, annual registration fees, rental taxes, and tire purchases.

Lisa May is the Director of Advocacy and Public Policy for Maryland REALTORS®.