New York Governor Kathy Hochul signed Assembly Bill A3009C into law on May 9, 2025, enacting significant changes aimed at increasing housing affordability and restricting certain institutional investor activities in the residential real estate market. This new legislation introduces a mandatory waiting period and limits specific tax deductions for “covered entities” purchasing single- and two-family residences in New York State.
Who Is Impacted?
This law primarily impacts “covered entities,” which are defined as:
- An institutional real estate investor.
- An entity that receives funding from an institutional real estate investor to purchase a single- or two-family residence.
An “institutional real estate investor” is defined as an entity or combined group that meets all three of the following criteria:
- Directly or indirectly owns 10 or more single- and two-family residences (indirect ownership includes any 10% or more indirect interest in such a residence).
- Manages or receives funds pooled from investors and acts as a fiduciary for one or more investors.
- Has $30 million or more in net value or assets under management on any day during the tax year.
These definitions are subject to several notable exceptions:
- Covered entities do not include 501(c)(3) and 501(a) tax-exempt entities, land banks and community trusts, and creditors and loan servicers acquiring full or partial property ownership to satisfy a secured debt.
- Single- or two-family residences do not include residences constructed, acquired, or operated with federal, state, or local appropriated funding sources, or residences intended to be used as the principal residence of any person with an ownership interest in a covered entity seeking to purchase a property.
Key Takeaways
- 90-Day Waiting Period. Effective July 1, 2025, covered entities generally cannot purchase, acquire, or offer to purchase or acquire any interest in a single- or two-family residence unless that property has been “listed for sale to the general public” for 90 days.
- This 90-day period restarts if the seller changes the asking price.
- Notice Requirement. When a covered entity offers to purchase a single- or two-family residence, it must provide notice of its status as a covered entity to the seller or the seller’s agent and provide notice to the state’s Office of the Attorney General.
- Restrictions on Tax Deductions. Effective immediately for taxable years beginning on or after January 1, 2025, covered entities, as well as their partners, members, and shareholders, are prohibited from claiming depreciation or interest tax deductions for single- and two-family residences owned by the covered entity when calculating their income for New York State tax purposes. (This does not affect federal tax deductions).
- Civil Penalties. Noncompliance can result in substantial civil damages and penalties:
- Up to $250,000 for violations of the 90-day waiting period.
- Up to $10,000 for violations of the notice requirement.
- Cease and Desist Zones. The law also requires the New York Department of State to provide public notice when it creates “cease and desist zones,” where homeowners can opt in to avoid solicitation to sell their homes. These rules also take effect July 1, 2025. Notably, this provision does not specify an explicit enforcement mechanism for violations.
This legislation marks a significant shift in New York’s approach to residential real estate investment. We encourage all clients engaged in or considering investments in single- and two-family residences in New York State to review their strategies and consult with legal counsel to ensure compliance.
Please contact Alston & Bird for specific advice on how this new law may affect your operations.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
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