A first-time buyer who moves the search north from Montgomery County into Frederick gives up one option without seeing it go. Montgomery's moderately priced dwelling unit program sells price-controlled new and resale homes to first-time buyers with moderate household incomes. Frederick County has a similar rule in its code. Since 2011, though, it hasn't produced a single home like that, because every developer has paid a fee instead of building them.
The county's affordability help still exists. It goes to the buyer as a loan, and you can only apply once you already have a signed contract. That changes how a first purchase in Frederick has to be planned.
The help starts after you sign
The county's Division of Housing runs the Frederick County Homebuyer Assistance Program, known as HAP. It offers first-time buyers a zero percent deferred loan for down payment and closing costs, with no monthly payments. The loan comes due when the home is sold or transferred, or once it stops being the buyer's primary residence. According to the program sheet revised July 1, 2026, the loan is $15,000 for households earning 51% to 80% of area median income. Households at 50% or below may qualify for $18,000, depending on available funding.
The friction is in the order of steps. The applicant needs a ratified sales contract before an application can be submitted. The lender sends the package to the county, staff review applications first come, first served, and the county asks for 21 days for processing, approval and settlement once the package is complete. Several other requirements come with it, and each one has to fit inside that same window:
- First-time buyer status, plus currently living or working in Frederick County and buying a home in the county
- Household income at or below 80% of the Washington MSA median, as set by HUD
- First-time homebuyer education from a HUD-approved counseling agency, which the City of Frederick offers locally
- Approval for a 30-year fixed-rate mortgage, with at least $500 of the buyer's own money in the purchase
- A one-year home warranty and a licensed home inspection before closing
- A lead paint risk assessment by a Maryland-certified inspector if the home was built before 1978, with the results delivered to the Division of Housing before loan approval
All of this happens while the seller waits. In Montgomery, a buyer in the MPDU program has the affordability built into the price. A Frederick buyer on HAP is asking the seller to hold a contract open while county financing is processed.
Why the lower-priced homes don't get built
On paper, Frederick County's rule looks a lot like Montgomery's. Under Frederick County Code Chapter 1-6A, to record a subdivision plat or get a building permit, a developer has to sign an agreement to build at least 12.5% of the homes as MPDUs, matched to the bedroom mix of the market-rate homes and built on the same schedule. The next section of the code lets the developer pay instead. The fee is $2.00 per square foot as of October 18, 2022, and it applies to every home in the development.
As an illustration only, a 2,000-square-foot new home would carry about $4,000 in fee under that rate. The median sold price in Frederick County in September 2026 was $481,145, according to Maryland REALTORS. Next to prices like that, the fee is a small line item. Building the MPDUs means selling one home in eight below market and recording covenants that limit future sales. The code does offer a bonus to builders who build the units, with extra density when at least 12.5% are constructed. A builder who pays the fee loses that bonus.
Builders have chosen the fee every time. Vincent Rogers, director of Frederick County's Division of Housing, told WYPR that every developer in the past 15 years has chosen to pay. The county's own Housing Needs Assessment and Affordable Housing Strategic Plan compared Frederick with Anne Arundel, Prince George's, Montgomery and Howard counties and the City of Baltimore. It found Frederick is the only one of them that gives developers complete discretion to pay or build.
The fee money pays for affordable housing, mostly rentals
The payments don't disappear. They go into the county's Housing Initiative Fund. The fund pays for programs such as the Deferred Loan Program, which supports 4% Low-Income Housing Tax Credit developments. The study calls this one of the main ways the county has been able to produce affordable housing.
That is also why the fee is hard to drop. Over the last seven years, more than 40% of the fund's revenue came from these payments. The study warns that removing the option completely, without another revenue source to replace it, could undercut other parts of the housing plan. So the money each new subdivision pays in Frederick does help with affordability, mostly through tax-credit rental developments rather than starter homes for sale.
Montgomery, Frederick County and the City of Frederick
The City of Frederick has its own MPDU policy, separate from the county's. A city handout issued in 2017 says projects of 25 or more homes must provide 12.5% MPDUs, pay a fee in lieu, or combine the two. The city is reviewing that fee and policy this fall, so its current terms should be checked directly with the City.
| Montgomery County | Frederick County | City of Frederick | |
|---|---|---|---|
| Share of homes required as MPDUs | Program sells new and resale MPDU homes | At least 12.5% | 12.5% for projects of 25+ homes |
| Option to pay instead | Not covered here | By right, $2.00 per sq ft as of Oct 2022 | Fee in lieu or a mix, per the 2017 handout |
| What a first-time buyer finds in new construction | Price-controlled homes for moderate-income buyers | No MPDUs built since 2011 | MPDU program and fee under council review, fall 2026 |
The fall 2026 calendar for the rule
The by-right payment option has been under formal review since the study came out, and the steps are on a calendar.
- February 19, 2026. County Executive Jessica Fitzwater released the housing study, which WYPR reported says Frederick needs 31,000 new housing units by 2035. Rogers said the county would propose removing the by-right part of the option, so developers could still pay but would have to build some units. That change would have to be proposed and voted on.
- April 15, 2026. The county code required this date for the first three-year recalculation of the $2.00 rate and of the "Affordability Gap" it is based on. The code says the report may propose an adjustment to the County Council.
- July 15, 2026. Mayor Michael O'Connor's Affordable Housing Task Force released "Opening Doors in Frederick: An Action Agenda for Affordable Housing," which draws on the countywide Housing Needs Assessment's finding that Frederick will need close to 13,800 new housing units by 2035. Its recommendations include streamlining development review, revising the Adequate Public Facilities Ordinance and creating an Affordable Housing Commission.
- September through November 2026. The City Council work plan sets this window for reviewing the city's MPDU program, including its fee-in-lieu rate and the effects of allowing a fee at all.
- November 2026 through January 2027. The same work plan schedules the review of the Adequate Public Facilities Ordinance next.
The study's recommended change would keep the $2-per-square-foot calculation but allow developers to pay only after building part of the 12.5%. A full buyout would still be possible, but only through a negotiated agreement with the county. Even if the council adopts something like that, MPDUs would appear only in subdivisions approved under the new rules. A first-time buyer shopping in Frederick this year is buying under the current ones.
What that means for a contract this fall
Frederick County had 333 settled sales in September 2026, up 8.8% from a year earlier, with an average sold price of $535,885. Maryland REALTORS notes the figures come from Bright MLS, were current as of October 12, 2026, and are revised regularly. In a market where sales are rising, the 21-day county processing window and the inspection, warranty and lead-assessment steps all have to fit inside the contract's settlement date from the start.
HAP isn't the only assistance available. The Maryland Mortgage Program offers 1st Time Advantage loans with down payment assistance, and its Flex product is open to first-time and repeat buyers, subject to eligibility and lender approval. MMP says buyers using its 1st Time Advantage 6000 or Flex 6000 products can have eligible assistance from an MMP partner matched up to $2,500.
A few questions that come up
Are there any MPDUs for sale in Frederick County new construction?
The county's housing study says the by-right payment option has resulted in no moderately priced units being built since 2011.
Can the HAP loan be used on a new-construction home?
Yes. The program sheet lists existing homes and new construction as eligible, including townhouses, detached and semi-detached homes, condominium units, and qualifying modular or manufactured homes.
Does the developer's fee raise the price of a market-rate home?
The county documents don't say whether the fee is passed on to buyers. What they show is that it is paid when the building permit application is filed and that it goes into the Housing Initiative Fund.
This post is general information, not legal, tax or financial advice. Program terms, income limits and funding change, so please confirm your own situation with your lender, the Frederick County Division of Housing, or another qualified professional.
If you're a first-time buyer comparing Frederick with Montgomery County and want help building a contract timeline around HAP or a Maryland Mortgage Program loan, Rosie Tomlinson can walk you through the steps in order, so the county's timing and the seller's both work. You can also read more about Frederick on her Frederick neighborhood page. Let's Connect.
