OCEAN CITY — A program established two years ago to incentivize new homeownership in the resort was renewed this week, but not before concerns were raised whether those receiving the relief package were actually making Ocean City their primary residence.
Two years ago, the Mayor and Council approved a two-pronged incentive program to encourage potential year-round residents to make Ocean City their permanent home. The program was borne out of concerns the town’s building permit fees were higher than neighboring communities and discouraging some potential year-round residents from building new homes on the island.
After complex debates, the Primary Residence Incentive Program (PRIP) provided $7,500 in relief from building permit fees and another $2,500 in property tax rebates, or a total of $10,000 in relief to encourage new full-time homeownership in the resort.
The PRIP was established as a two-year pilot program and the town budgeted $50,000 per year for the relief package. The two-year pilot program is set to expire at the end of June, and Planning and Community Development Bill Neville appeared before the Mayor and Council on Tuesday seeking guidance on extending it.
“Two years ago, the Mayor and Council adopted a resolution creating a program to incentivize primary residency,” he said. “It was a pilot a program and it expires at the end of June. Generally, the program was a success and has met our desired goal.”
Neville said the PRIP included eligibility for establishing primary residence in Ocean City for fiscal years 2020, 2021 and 2022. The program was budgeted at $50,000 per year in incentives and tax rebates. The administration of the program has resulted in 28 applications over the two-year pilot program, which has provided just under $146,000 in financial incentives to new year-round homeowners.
The recommendation from staff was to extend the program, a recommendation the council ultimately approved. While there were 28 new primary homeowners in the resort that took advantage of the program, the number of year-round residents in the resort has remained fairly consistent, or even declined somewhat. After the 2010 census, there were 7,100 year-round residents in Ocean City. After the 2020 census, that number had dropped slightly to 6,844.
Council Secretary Tony DeLuca questioned if the program was providing enough incentive for new homeownership in the resort.
“With the $7,500 in permit fee relief and the $2,500 tax rebate, is $10,000 enough of an incentive to get people to move here?” he said. “Is budgeting $50,000 per year enough? I certainly support extending the program.”
Neville asked what the Mayor and Council’s expectations were for the program.
“What measure of success would you like to review?” he said. “We didn’t see any increase in the year-round population, but maybe the program lessened the decrease. I think we’ve seen that occur with the folks that participated.”
DeLuca made a motion to extend the program, a motion seconded by Councilman Mark Paddack. That led to a discussion of who qualifies for the primary residence incentive program. The standard has been the Homestead Tax Credit qualification. Under the Homestead tax credit, a homeowner establishes his or her primary residence and is eligible for relief from property tax increases despite increases in property assessments.
Under the PRIP, new homeowners are supposed to apply for and get approval for the Homestead tax credit in order to establish Ocean City as their primary residence. A property owner cannot apply for the Homestead credit for their Ocean City property if they are already receiving the credit for another property in a different county in Maryland, for example.
Under the PRIP, new homeowners participating in the program are required to establish their Homestead status in Ocean City within the first 12 months. Councilman John Gehrig questioned if that threshold was appropriate.
“Is 12 months the right way to do this?” he said. “What’s the best way to determine if it’s a primary residence. Is Homestead the best way to determine that?”
Neville said there were ways to enforce participation in the PRIP.
“If someone was found not to be a primary resident, they would have to refund the relief they got to the town if they participated in the program,” he said.
Gehrig said he wasn’t entire comfortable with the 12-month standard for gaining the Homestead credit as a means of establishing primary residency. He said there should be other checks and balances in place to ensure a property owner getting the relief from permit fees and tax rebates is actually living in Ocean City and not renting or using the property on a short-term vacation rental platform such as Airbnb, for example.
“I think that needs to be addressed,” he said. “I’m not sure what the answer is. Is 12 months the right number? If they’re not done getting the Homestead credit in place in 12 months, they are in violation and owe the money back.”
Mayor Rick Meehan said he supported the program, but raised concerns some might be utilizing it to get the permit relief and tax rebate without establishing Ocean City as their primary residence.
“We need to make sure they are following the rules,” he said. “We need to do that today. If they haven’t filed for the Homestead, they have probably filed somewhere else. This is an incentive program. It’s a five-year commitment. They have to play by the rules.”
With that said, the council voted unanimously to extend the PRIP and directed staff to ensure those participating are genuinely establishing Ocean City as their primary residence.
