Campaign by 
Story
HB 78: A Pro-Housing Tax Reform Maryland Should Embrace
Joshua Vincent, Center for the Study of Economics
Joshua Vincent, Executive Director
That may sound technical, but the practical effect is simple and powerful—stop penalizing construction and rehabilitation, and start rewarding productive use of well-located land.
This is not a statewide mandate. HB 78 is a local-option authority. If a county or Baltimore City wants to modernize its property tax to align with housing and reinvestment goals, HB 78 provides the legal tools to do so.
The problem with today’s property tax
Under the conventional property tax, when you improve a property—renovate a rowhouse, add apartments, build a new storefront—you typically raise the assessed value of the building, which raises the tax bill. In other words, we tax the act of investing.
That creates perverse incentives:
It can make renovations and new construction harder to pencil out.
It encourages “do nothing” holding patterns—especially for underutilized lots in strong locations.
It can reward speculation while discouraging the exact reinvestment communities need.
What HB 78 changes
HB 78 allows jurisdictions to set one rate for land and another for improvements. That opens the door to a “split-rate” approach that:
Reduces the tax penalty on building, making it easier to justify new housing and rehabs.
Encourages infill, because land that sits idle becomes relatively more expensive to hold.
Promotes revitalization, especially where vacancy and underuse are persistent.
This is precisely the kind of incentive alignment Maryland needs if it is serious about increasing housing supply and accelerating neighborhood reinvestment.
Why supporters are right to focus on housing, vacancy, and tax base
The best real-world evidence in the U.S. comes from Pennsylvania municipalities that have used split-rate property taxes. While every city is different, the core findings from published research are consistent with common sense: when you tax buildings less and land more, you reduce the friction on construction and rehabilitation and encourage land to be put to productive use.
For Maryland, that matters across several priorities:
1) More construction and rehabilitation. HB 78 makes it easier to build and improve properties by reducing the marginal tax hit on the structure. That is a direct pro-housing signal.
2) Fewer vacancies and land banking. Vacancy does not disappear by itself. A land-value-intensive structure increases the carrying costs of holding high-opportunity land vacant or underused, nudging owners toward renovation, redevelopment, sale, or productive leasing—especially when paired with standard tools such as code enforcement and streamlined permitting.
3) Affordability through supply. No single bill “solves affordability.” But if HB 78 helps jurisdictions unlock more units—infill apartments, conversions, mixed-use redevelopment—that is the most durable path to moderating price growth over time.
4) Stronger tax base over time. A healthier development pipeline and more productive land use expand the overall value of taxable property. The point is not to “raise taxes,” but to improve the underlying base by encouraging investment where it is most economically and socially valuable.
Answering the predictable critiques
“This will shift taxes onto homeowners.” It does not have to. Jurisdictions can design implementation to be revenue-neutral, phase changes in gradually, and add targeted protections for vulnerable homeowners. HB 78 provides authority; local governments control design.
“Land valuation is controversial.” Maryland already assesses land and improvements separately as part of standard assessment practice. Implementation requires transparency and administrative discipline, but the building blocks are already present. The Maryland Department of Assessment and Taxation has already made great progress in recalculating land values statewide and in the city of Baltimore.
“This is too risky.” HB 78 is optional. Jurisdictions can pilot, monitor outcomes (permits, vacancy, unit counts, delinquencies), and adjust. That is exactly what responsible local governance looks like.
The bottom line
HB 78 is a practical reform that aligns tax policy with what Maryland says it wants: more housing, more reinvestment, less vacancy, and stronger communities. It does not force any county or Baltimore City to act. It simply removes a legal barrier and gives local leaders the flexibility to use a smarter set of incentives.
If Maryland is looking for credible, locally controlled, pro-housing policy tools, HB 78 deserves a favorable report.