Montgomery County’s planning department is recommending the county change its “rent stabilization” law, saying it has had a chilling effect on housing development.

The recommendation comes after a recent survey of area developers and an analysis of the county’s housing pipeline.

There are about 27,000 unbuilt housing units in the pipeline. Nearly half of those have received all necessary approvals from the county Planning Board and have to secure financing and permits to start building.

But developers say that rising project costs and local policies are keeping them from building homes in Montgomery County.

They cited high construction costs and increasingly low returns on investments as the No. 1 barriers to building. But they also pointed to county policies, including rent stabilization, a 2-year-old law that caps annual rent increases.

In presenting their report to the county planning board on Thursday, planning department staff provided several policy recommendations that will be forwarded to the County Council.

Among their recommendations was expanding the financial incentives available to developers and lowering local impact taxes. They also recommended that council members change the rent stabilization law.

The law is expected to be at the center of political debates in the county in the months leading up to next year’s election cycle, and top Democrats have already been debating whether it will help or hurt renters and how it will influence the pace of growth in the county.

County planners say the law has had a chilling effect, preventing developers from choosing Montgomery County for their projects.

Developers have particularly taken issue with a part of the law that exempts properties less than 23 years old. While rent stabilization laws in some jurisdictions include a fixed date, Montgomery County has a rolling exemption date. As a result, more housing units are subject to rent stabilization every year.

Developers say they’ve been turned off by the prospect of having to cap rent increases and losing profit 23 years after opening to Montgomery County tenants.

County planners have recommended that the council set a fixed date — likely around 2002 — to determine which properties are subject to rent stabilization.

Montgomery County Planning Director Jason Sartori said that doing so will be an incentive for developers to seek building opportunities in Montgomery County.

The planning department also cited the low number of permits approved for multi-family homes. For its population, Montgomery County has a modest number of approved and unbuilt units compared to neighboring jurisdictions, according to a recent planning department report.

But amid a national housing crisis, and at a time when rent and housing costs are the top issue for county residents, permitting for new multi-family housing in the county has ground to a halt.

Between January and August, Montgomery County issued 54 permits. Permitting has also declined regionally, but neighboring jurisdictions have issued hundreds or even more than a thousand permits for multi-family housing structures during the same time period.

The county’s housing problems could be compounded if planners and elected officials don’t find a way to incentivize developers to pull permits for their approved projects.

“That’s going to be a concern,” Sartori said of the sharp decline in permitting. “We may not see the units come online, being ready to be occupied, if units aren’t getting permitted now.”