Planning a residential project in Montgomery County and unsure when MPDU rules kick in? You are not alone. The County’s Moderately Priced Dwelling Unit program can impact approvals, pricing, and schedules in ways that catch teams off guard. In this guide, you’ll learn when MPDUs apply, what compliance can look like, and how to plan your timeline and pro forma with confidence. Let’s dive in.
When MPDU rules are triggered
MPDU obligations are tied to specific approvals and what you are building, not just the zoning on paper. The most common triggers are approvals that add residential units or increase entitlement density.
Approvals that commonly trigger MPDUs
- Site plan approvals that add multi-unit housing.
- Building permits for new multifamily or condo construction.
- Preliminary plan or subdivision approvals for for-sale communities.
- Rezoning approvals that increase density or unit count.
The exact trigger for your parcel depends on County Code language and how DHCA applies it. Always confirm which approval controls your MPDU requirement.
Thresholds and project types
Thresholds vary by jurisdiction and can differ by project type. In Montgomery County, the rules can vary based on:
- For-sale subdivisions versus rental apartments or condominiums.
- Additions or conversions, such as commercial-to-residential.
- Phased developments where only some phases exceed thresholds.
Because thresholds and definitions change over time, request a written MPDU applicability determination from DHCA early in entitlement.
Fast due diligence checklist
- Identify the governing zoning, master plan, and parcel history.
- Determine which approval will control MPDU obligations for your project.
- Ask DHCA for an MPDU determination letter at pre-application.
- Check for recorded covenants or prior MPDU agreements on the site.
What you may have to provide
MPDU requirements are typically expressed as a percentage of total units, and you may have more than one way to comply.
Set-aside basics
- The County sets a unit percentage for the applicable project scope.
- Percentages can differ by area plan, housing type, or project size.
- Use a conservative MPDU percentage in early modeling until DHCA confirms the number.
Compliance paths
- Build MPDUs on-site and sell or lease at restricted prices.
- Deliver MPDUs off-site within an approved area, subject to DHCA approval.
- Make a payment in lieu if DHCA allows a buyout for your case.
- Dedicate land or deliver completed units to the County or an approved non-profit.
Alternatives require DHCA review and are not guaranteed. Discuss them early in the process.
Project-type nuances
Some plan areas or small infill projects may have different expectations or exemptions. Government-assisted projects or subsidy layering can also interact with MPDU obligations. Confirm with DHCA before you lock your approach.
Affordability controls that affect value
MPDUs are not one-time obligations. They carry long-term controls that influence underwriting, exits, and operations.
Control periods and covenants
- Affordability controls often last for decades and are recorded on title.
- Regulatory agreements run with the land and affect resale or refinance.
- Lenders will review covenant terms and may require additional time to approve.
Resale and rental mechanics
- For-sale MPDUs are subject to formula-based resale price limits.
- Rental MPDUs must be leased at restricted rents to income-qualified households.
- Income certification and compliance reporting are expected throughout the control period.
Financing and exit impacts
- Lower restricted prices or rents change NOI and sale proceeds.
- DSCR, collateral value, and takeout assumptions must reflect MPDU restrictions.
- If layering tax credits or subsidies, confirm how those interact with MPDU controls.
Plan areas, rezoning, and changing obligations
Area plans and entitlement changes can shift the MPDU playbook.
Master plan specifics matter
Master plans and sector plans can recommend different inclusionary rates or approaches, especially in transit corridors or targeted neighborhoods. Verify the plan area provisions that govern your parcel.
Rezoning and density increases
If you are seeking a rezoning or density bonus, MPDUs may apply to the net new units or to the total unit count. The correct baseline depends on County implementation. Nail this down with DHCA before finalizing your entitlement strategy.
Grandfathering and vesting
Projects vested under prior ordinances may follow older rules. New applications can trigger new requirements. Confirm your vesting date with County staff and document how it applies to MPDUs.
Modeling and schedule implications
MPDUs affect how you model units, timing, and cash flow. Build multiple scenarios and pressure test assumptions.
- Requirement basis: Confirm whether the MPDU percentage applies to gross units or net new units.
- Percentage sensitivity: Run a range, then update to DHCA’s confirmed figure.
- Unit mix: Expect MPDUs to reflect the project’s bedroom mix or follow DHCA allocation rules.
- Revenue impact: MPDUs cost similar to build but generate restricted revenue. Model cross-subsidy from market units.
- In-lieu fees: If a buyout is possible, budget per-unit fees and phasing. Request the current policy from DHCA.
- Phasing and delivery: Tie MPDU delivery to construction milestones and certificates of occupancy to avoid bottlenecks.
- Lender alignment: Share draft covenants early so financing teams can underwrite restrictions.
Your step-by-step plan
Early moves
- Schedule a pre-application discussion with DHCA and Planning.
- Request a written MPDU applicability determination for your parcel.
- Confirm applicable master plan provisions and whether they change MPDU expectations.
Documents to request
- Current MPDU administrative rules or handbook.
- Any payment-in-lieu guidance or fee formula.
- Sample MPDU regulatory agreement or covenant.
- Income limits and pricing or rent-setting formulas.
- Marketing and qualification procedures for sales or leasing.
Common scenarios to anticipate
Small infill projects
Whether MPDUs apply can hinge on unit thresholds and how approvals are structured. Get DHCA clarity before you submit.
Adaptive reuse or conversions
Commercial-to-residential conversions can trigger MPDUs. The trigger depends on the approval type and resulting unit count.
Phased projects
Phasing can change which units are counted and when obligations must be met. DHCA review of any phased compliance plan is essential.
Mixed compliance strategies
Combining on-site MPDUs in one phase with an in-lieu approach in another might be possible, but only with explicit DHCA approval.
Final thoughts and next steps
The biggest mistake you can make is treating MPDUs as a box to check late in the process. The most successful teams lock in an approach with DHCA early, align their pro forma and schedule to the chosen compliance path, and keep lenders informed as covenants are drafted. That planning reduces surprises and protects returns.
If you want a development-first team to map your entitlement, compliance, and exit strategy, we can help. Unlock your property’s highest and best use with Broad Branch Partners.
FAQs
Do MPDU rules apply to small infill projects in Montgomery County?
- It depends on unit thresholds and approval structure, so request an early written determination from DHCA to confirm applicability.
Can I pay a fee instead of building MPDU units on-site?
- Sometimes, but alternatives like payment in lieu or off-site units require DHCA approval and may be structured to favor on-site delivery.
Do MPDU units need to match my project’s bedroom mix?
- Many programs require MPDUs to reflect the project’s bedroom mix or follow DHCA allocation rules, so confirm the distribution with DHCA.
How long do MPDU affordability restrictions last?
- Control periods are long term and enforced by recorded covenants; verify the exact duration and formulas in the County’s rules and your regulatory agreement.
What happens if my project is rezoned or phased?
- Rezoning and phasing can change how MPDUs are calculated and delivered; clarify the baseline and timing with DHCA before finalizing entitlements.
