Montgomery Co. loses hundreds of thousands of dollars in ‘lax administration’ of short term rentals, IG report finds – WTOP News

More than three quarters of short-term residential rentals being offered in Montgomery County, Maryland, are unregistered, according to a report from the county’s Office of the Inspector General.

The findings in the latest report from Inspector General Megan Davey Limarzi show that more than 85% of the more than 1,400 short-term residential rentals operating in Montgomery County are not licensed.

Despite having created licensing regulations for short-term residential rentals (STRRs) in 2017, the IG’s report stated that Montgomery County has lost out on fees and taxes it could have collected, and has been “lax” in administering the regulations it put in place.

The report estimates that if licensing fees were collected on the unregistered STRRs in 2024, more than $196,000 in revenue would have been generated. If the county had assessed the maximum penalty for illegally operating a STRR, the IG’s report stated, the county could have collected $659,000 in penalties in 2023.

Not only did the county not collect fees tied to licensing of short-term rentals, the report from the IG states, “The county is unable to reconcile tax payments received by the short term rentals brokers against what was collected.”

When the regulation was initially put in place in 2017, the Department of Health and Human Services was charged with enforcing the regulations.

According to the IG’s report, “DHHS made minimal effort to enforce STRR Code provisions leading to unlicensed and ineligible STRRs and thousands of dollars in missed revenue.”

The report also found that there was, “Insufficient staffing and no formal policies or procedures exist to administer the STRR program.”

Ken Hartman-Espada, assistant chief administrative officer for Montgomery County, told WTOP that County Executive Marc Elrich worked to take on the issue when he submitted legislation to the county council in April of 2023.

That bill was signed into law in November of 2023 and took effect on July 1 of this year, according to Hartman-Espada.

“The legislation beefed up the responsibility of the county, moved the function from the Health Department to the Housing Department, and we provided additional staff people in the budget,” to administer the short-term rental program, said Hartman-Espada.

The IG’s report states the county has hired a staff of four people who will oversee enforcement of the regulations, and that a fifth staff member is expected to begin work soon.

The OIG’s office made a series of recommendations, including having the county Department of Finance conduct audits to verify the amount of taxes being paid by short-term rental brokers and assessing interest and penalties when warranted under the county code.

Other recommendations include having the Department of Housing and Community Affairs enforce compliance, maintain a list of all short-term residential rentals in the county and relay the requirements of the program to hosts, residents and prospective guests.

Richard Madaleno, the county’s chief administrative officer, responses are part of the IG’s report.

In the report’s appendix, Madaleno indicated that his office “concurs” with most of the findings, but that in one case, where the IG calls for “routine audits of aggregate transient tax payments,” he said the county doesn’t have enough staff to carry that out.

However, Madaleno said that the Department of Finance would report back on how to address that issue by Sept. 30 of 2025.

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