(Practical Law Real Estate) On May 9, 2025, New York Governor, Kathy Hochul, signed the State budget bill (Assembly Bill A3009C, Senate Bill S4009, 2025 Sess. Laws, Ch. 59 (N.Y. 2025) (the bill)). Part F of the bill creates a new Article 16 of the New York Real Property Law, which took effect on July 1, 2025 (N.Y. Real Prop. Law §§ 520 to 522). Article 16 places restrictions on the purchase of single- and two-family residential homes by certain real estate investors.
National Trend
In an effort to combat the housing affordability crisis, the federal government, and states across the country, are introducing laws that restrict institutional investors’ ability to acquire residential real estate. Institutional investors own and control a growing amount of the housing market, which drives up purchase prices and rental rates for residential properties and makes it harder for families to purchase and rent homes.
Laws aimed at restricting institutional lenders’ ability to purchase residential properties have been introduced in the United States Congress (S.788, H.R.1745), and multiple states, including California (2025 Cal. SB 722), Georgia (2025 Ga. HB 305), and Virginia (2025 Va. SB 1140).
New York Restrictions on Institutional Real Estate Investors
90-Day Waiting Period
The bill requires single- and two-family residential properties be listed for sale to the general public for 90 days before a covered entity can purchase, acquire, or offer to purchase or acquire the property. The waiting period resets if the sale price changes. (N.Y. Real Prop. Law § 521.) Covered entities include institutional real estate investors, which are defined as entities that, directly or indirectly:
- Own ten or more single- and/or two-family residences.
- Manage pooled investor funds as a fiduciary.
- Have $30 million or more in net value or assets under management on any day during the taxable year.
(N.Y. Real Prop. Law § 520(2)(a), (3).)
However, the following entities are not included as covered entities:
- Organizations that qualify as tax exempt under I.R.C. § 501(c)(3).
- Land banks.
- Community land trusts.
- Creditors acquiring the property through foreclosure.
(N.Y. Real Prop. Law § 520(2)(b).)
Required Notices
When making an offer to purchase a single- or two-family residence, a covered entity must submit to the seller a signed and notarized form stating that the purchaser is a covered entity. The statute includes a form of notice. (N.Y. Real Prop. Law § 521(4), (5)).
Penalties
The law includes significant civil damages liability and penalties for non-compliance, including that:
- Violations of the 90-day waiting period may incur penalties of up to $250,000.
- Failure to provide the required disclosure that the purchaser is a covered entity is punishable by penalties of up to $10,000.
(N.Y. Real Prop. Law § 521 (3), (5)).
Tax Amendments
The bill amends sections of the New York Tax Law, affecting certain depreciation and interest deductions available to covered entities. Most notably:
- Covered entities cannot claim depreciation on single- or two-family residences.
- Covered entities cannot apply the federal interest deduction contained in I.R.C. § 163 on single- and two-family residences when computing their New York adjusted gross income.
(N.Y. Tax Law §§ 208(9)(c-4), 612(y), and 1503(b).)
Practical Implications
Institutional real estate investors must understand the applicability of New York’s newly passed restrictions when considering purchasing residential real estate in the state. Multi-family buildings, which are common investment vehicles, are not impacted by the restrictions. In addition to the 90-day waiting period, New York has removed certain tax benefits of investing in residential real estate making it more difficult, and less desirable, for institutional investors to purchase and own residential real estate.