Commencing on July 1, 2025, investment funds may find it more difficult to purchase certain residential properties in New York State. On May 9, 2025, Governor Hochul signed into law Assembly Bill A3009C that, among other things, (i) imposes a 90-day waiting period on the purchase of one- and two-family residences for certain institutional investors, (ii) restricts the use of certain tax deductions for such investors, and (iii) requires the Secretary of State to provide public notice when creating cease and desist zones.1
A3009C's restrictions are directed at the purchase of Single- and Two-Family Residences.2Subject to limited exceptions, these restrictions generally apply to entities or combined groups that directly or indirectly (i) own ten or more Single- or Two-Family Residences, (ii) manage or receive funds pooled from investors and act as fiduciaries with respect to those investors, and (iii) have at least $30 million in net value or assets under management on any day during a given taxable year ("Covered Entities").3
Under the 90-day waiting period, Covered Entities may not "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.4Further, 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.5Failing to comply with these requirements can result in civil damages and penalties of up to $250,000 for violations of the waiting period and up to $10,000 for violations of the notice requirement.
A3009C also prohibits Covered Entities, as well as their partners, members, and shareholders, from claiming depreciation or interest tax deductions with respect to Single- and Two-Family Residences when calculating their income for state tax purposes.6Further, the law requires the New York Department of State to provide public notice on its website when it creates "cease and desist zones." Homeowners that opt into the coverage of a zone cannot be solicited to sell their homes. The 90-day waiting period and cease and desist zone rule take effect July 1, 2025, while the prohibition on deductions takes effect immediately.
Institutional investors should note that these restrictions are not the only limitations on their ability to acquire residential property that have been proposed to the New York legislature. Senate Bill S1572, the "End Hedge Fund Control of New York Homes Act," would require certain pooled investment vehicles to divest of all currently owned residential properties that consist of one to four dwelling units over ten years, with limited exceptions.7S1572 would also impose an excise tax on pooled investment vehicles' future purchases of certain residences consisting of one to four dwelling units equal to 50 percent of the fair market value of the residence.
While S1572 remained in the Senate Committee on Investigations and Government Operations without any action during the 2025 legislative session, the bill may move forward during the 2026 legislative session. If S1572 does not pass during the 2025-2026 legislative term, it could be reintroduced in 2027.8
New York is not the only state considering restricting the ability of investment funds to purchase residential property. There are bills being considered by at least six other states, as well as the US Senate, that would enact various limitations, ranging from constraining the maximum number of properties that may be owned to requiring the divestiture of residences.9
Since these efforts are unlikely to diminish in the near-term, institutional investors should remain cognizant of the evolving legal landscape and take these proposed restrictions into account when making investment decisions.
Footnotes
1 A.B. A3009C, N.Y. Assemb. (N.Y. 2025), available at https://www.nysenate.gov/legislation/bills/2025/A3009/amendment/C.
2 A3009C does not apply to a residence that (i) is "constructed, acquired, or operated with federal, state, or local appropriated funding sources" or (ii) is intended to be used as the "principal residence of any person who has an ownership interest in the covered entity that seeks to purchase the single-family residence."
3 The 90-day waiting period also applies to entities that receive funding from Covered Entities to purchase a Single- or Two-Family Residence.
4 If a seller changes the asking price for the property, the 90-day waiting period restarts.
5 Such notice must be filed with the Department of Law within three days of submitting it to the seller or the seller's agent.
6 A3009C does not affect Covered Entities' ability to claim these deductions for federal tax purposes.
7 S.B. S1572, N.Y. S. (2025), available at https://www.nysenate.gov/legislation/bills/2025/S1572.
8 A version of this bill was previously introduced during the 2023-2024 legislative term as Senate Bill S9096.
9 S. 788, 119th Cong. (2025), available at https://www.congress.gov/bill/119th-congress/senate-bill/788; S.B. 722, Cal. S. (Cal. 2025), available at https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB722;H.B. 305, Ga. Gen. Assemb. (Ga. 2025), available at https://www.legis.ga.gov/legislation/69982; H.B. 237, Ky. Gen. Assemb. (Ky. 2025), available at https://apps.legislature.ky.gov/record/25rs/hb237.html; H,B, 149, Utah H. of Reps. (Utah 2025), available at https://le.utah.gov/~2025/bills/static/HB0149.html; S.B. 1140, Va. S. (Va. 2025), available at https://lis.virginia.gov/bill-details/20251/SB1140; S.B. 1424, Va. S. (Va. 2025), available at https://lis.virginia.gov/bill-details/20251/SB1424; S.B. 5496, Wash. S. (Wash. 2025), available at https://app.leg.wa.gov/billsummary/?BillNumber=5496&Year=2025&Initiative=false.
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