The owners of the space, which includes a bar, restaurant and hotel rooms, signed a deal with DHS to rent its rooms to homeless families since at least Monday, an official said.
"We are currently renting rooms in this location to help meet our legal and moral obligation to shelter homeless families with children," DHS spokeswoman Lauren Gray said.
An employee of the motel said the city booked a block of rooms for 10 days this past Monday, but it's not clear how many families are staying at the motel, which only has around a dozen rooms.
Earlier this week, Commissioner Steve Banks, who oversees the city's outreach to the homeless, said there were currently 6,000 residents living in rooms rented by the city, which is used as a "stopgap" before providing more permanent shelter.
Banks made the comments after the city announced it would rent rooms at a Maspeth Holiday Inn Express, a change in the original plan to convert it into a full shelter.
Playland Bar's manager, Dan Cipriani, notified members of the Rockaway Beach Civic Association about its closure this week.
"All future operations and decisions will be handled by Cayuga Capital," he said. Cayuga Capital's owner Jamie Wiseman bought the site before Hurricane Sandy in 2012.
Cipriani told DNAinfo New York that he backed out of managing the restaurant and bar after summertime enforcement from multiple city agencies forced the closure of the space's backyard.
The bar's neighboring restaurant, Whit's End, also took a hit during the Aug. 19 raid from multiple city agencies including the NYPD, Department of Buildings and the FDNY.
Owner Whitney Aycock was arrested on a slew of charges that included resisting arrest and marijuana possession. That restaurant closed, with Aycock focusing on Riis Park and Arverne restaurants.
"I feel now is time to make a graceful exit from the property with my bank account and good name intact," Cipriani said. The bar's last day will be Oct. 31.
"Please drop on by and say hello, my love for the Rockaways, surfing, and fishing will keep me around the neighborhood, so no need to say goodbye."
Cayuga Capital, which owns the building, said the site will not be turned into a permanent homeless shelter and that it is looking for new retail tenants.
"We are reviewing and discussing several recent offers to take over the former tavern and Whit's," it said in a statement.
Playland Motel opened in 2013 after a major renovation of the original space, the Tap and Grill, following Hurricane Sandy. It was seen as a sign of a changing peninsula, offering rooms designed by a different artist with a spacious backyard that drew large summer crowds.
In 2014, the building was listed for sale at $3.8 million, which the developers said was a way to recoup their investments into the building.
It has remained under the ownership of Cayuga Capital, although under different limited liability companies, records show.
Cipriani took over the bar and restaurant in 2015, vowing to change its rowdy party reputation which had been an issue for neighbors.