DOI's Investigation into Arverne by the Sea Homeowners
Department of Investigation · report
After a 2018 referral from HPD, DOI investigated whether homeowners in Arverne by the Sea, an HPD homeownership development in Rockaway, Queens, violated the program's primary residence requirement while collecting a 20-year property tax exemption. DOI identified 15 homeowners who did not comply with the requirement, some renting or operating their homes as investment properties or a hotel, and calculated that they received about $1.092 million in tax exemptions through Fiscal Year 2021. DOI found the City lacked an adequate system of accountability, faulting weak HPD oversight and poor coordination with the Department of Finance, and made 11 recommendations.
- Released
- 2022-02-08
- Kind
- Investigation
Key findings
- DOI confirmed that 15 Arverne by the Sea homeowners violated the primary residence requirement; 11 owned multiple homes (31 properties total) and four owned a single home they did not continuously occupy. p. 7
- Eight of the 11 multiple-property owners used some homes as rentals or investment properties, and in one case as a hotel registered with the City to collect occupancy taxes and listed on Airbnb, Orbitz, and other booking sites. p. 8
- The 15 noncompliant homeowners received approximately $1.092 million in tax exemptions through Fiscal Year 2021, and the evidence indicates nearly half of the exemptions related to periods of noncompliance. p. 9
- HPD, which administers the homeownership program, had no system to identify and audit program-violation risks, did not track resales, and did not coordinate with the Department of Finance, which said it was unaware the exemptions carried a primary residence requirement. p. 10
- DOI referred information about one renting homeowner to HPD in 2009 and again in 2011, but HPD did not pursue enforcement until 2017 after DOI followed up; that owner sold the property in 2020 after receiving about $77,000 in tax exemptions. p. 11
- HPD paid $176,500 in Section 8 benefits over nine years for the rental of one homeowner's Arverne by the Sea home without identifying that the owner was not permitted to rent it. p. 11
What DOI recommended
- HPD should create a list of initial home buyers in any owner-occupancy program, track secondary buyers on resale, and review the list to prevent multiple ownership. p. 14
- HPD should use DOF deed transfer reports to compare purchasers of tax-exempt homes against owners of homes requiring owner occupancy. p. 14
- HPD should use DOF reports of tax-exempt properties whose tax bills are sent elsewhere to support compliance audits. p. 14
- HPD should pursue enforcement, including potential tax exemption revocation and recoupment, against noncompliant homeowners. p. 15
- HPD should require homeowners in owner-occupancy programs to submit an annual attestation defining primary residence and warning that false information may result in criminal charges, civil action, or penalties. p. 15
- HPD should include primary-residence definitions and provisions conditioning tax exemptions on program compliance in future UDAAP resolutions, LDAs, purchase agreements, and deeds. p. 15
- DOF should regularly provide HPD with lists of deed transfers for tax-exempt residential properties and of homeowners who receive tax statements at a different address. p. 15
- DOF should confirm that a residential property is not receiving an HPD program tax exemption when processing hotel occupancy tax applications. p. 15
Entities in this report
- Housing Preservation and Development Subject
- Department of Finance Subject
- Benjamin Development Company
- Beechwood Organization
- AIRBNB, Inc.
- Orbitz
- Booking.com