Letter Report On The Department Of Finance’s Administration Of The Disability Rent Increase Exemption Program

Executive Summary

This audit determined whether the New York City Department of Finance (DOF) has adequate controls in place to ensure that property tax abatement credits (TACs) are issued to only those landlords whose tenants meet the Disability Rent Increase Exemption (DRIE) program’s eligibility requirements.

DOF administers a broad range of programs that offer tax credits, one of which is the DRIE program.  This program provides an exemption to eligible tenants from future rent increases by keeping the rent at either the applicants’ prior rent amount, or one-third of their monthly income, whichever is greater.  At the same time, the program offers landlords an equivalent credit on their property taxes.  This amount, issued on behalf of eligible tenants, is applied quarterly to the landlord’s property tax bill in the form of a TAC, to offset any taxes due in the next tax period.  Tenants who apply and are determined to be eligible are legally entitled to DRIE benefits.  To become eligible for DRIE, one must meet the following eligibility criteria:

• Be at least 62 years of age;
• Have no more than $50,000 per year in household income;
• Be listed on the lease/rent order or have been granted succession rights in a rent-controlled, rent-stabilized, or rent-regulated hotel apartment;
• Spend more than one-third of the monthly household income on rent; and
• Have been awarded one of the following: Federal Supplemental Security Income (SSI); Federal Social Security Disability Insurance (SSDI); a U.S. Department of Veterans Affairs disability pension or disability compensation; Disability-related Medicaid for previous recipients of SSI or SSDI; or a United States Postal Service (USPS) disability pension or disability compensation.

Landlords, tenants, and families of tenants are required to notify DOF within 30 days when there is a change in the tenant’s circumstances, such as a death or a permanent move from the apartment.  In such instances, DOF is to determine whether another household member is eligible for the exemption and, if so, approve a benefit transfer.  If there is no other eligible household member, DOF is required to revoke the benefits and  retrieve previously issued TACs—in the form of a debit adjustment—going back to the first day of the month following the change in circumstances.

Results

The audit found that the DOF has adequate controls in place to ensure that TACs issued to landlords are appropriate.  A review of DOF’s electronic database of TAC expenditures posted from July 1, 2016, through February 28, 2018, found that DOF: correctly determined the eligibility of tenants to participate in the DRIE program; appropriately issued TACs to landlords on behalf of those tenants; and appropriately revoked the benefits of ineligible tenants.  DOF also correctly issued prior period TACs to landlords within the current audit scope period.  Additionally, the audit found that DOF revoked tenants’ benefits or retrieved TACs from landlords when tenants passed away or moved subsequent to DOF’s issuance of TACs to their landlords.