I suspect, but do not know for sure, that STRs created after the rule passed but before it goes into effect would not qualify as good, existing STRs.I will also state that it seems the rule definition of a good STR was too vague and would be tough to enforce if the STR was paying the taxes that it should have been paying. 

Both AirBnB and VRBO are funding legal battles every time a city tries to enforce STR regulations.

Then they're really gonna force section 8 down your throat. ..The fed is full of dollars, has a huge backlog actually,  and wants to spend it on people that can't afford rent. ....There's nothing wrong with keeping up with  codes, but the real push for code enforcement and rental registration, I believe, is to force section 8 on more landlords.

@Aaron Lawson there is no perfect solution...its a sh*t situation that regulators are not thrilled to help out with...and law enforcement?...

You will need law enforcement on your side. 

While you are in the Purchase Contract Option period:you can work on getting the SRO/rooming house legal.start working with local non-profits in the city of Newburgh and Orange County who could help you with managing Transitional/Temporary homesnetwork with local government on any community development grants that they have to improve the area where the 3 building parcel is located.The benefit of going the Purchase Contract Option route is that:You get time to legalize the buildingLimit your credit risk if you can't get the property to be legal/permittedYou can improve a down trodden neighborhood in a big way which will further help with gentrification.Installing cameras outside of the building and working with local law enforcement can help with the drug dealers.You can also continue to look for good cash flowing deals that can be financed without having to the work similar to this one.

I would just get an architect(this will cost $)or somebody from the building Dept or code enforcement( if your looking to save money, just know they willLook for violations) come out and look at what you want to do.

CIVIL PRACTICE & REMEDIES CODE §16.035: Contractual Mechanic’s Lien or Mechanic’s Lien Contract: Enforcement by foreclosure is barred 4 years after payment of the contract price became due.Mechanic’s Liens: Involuntary§37, TEX.

Regarding the tenant with expanding business - Is there any way to enforce a limit on the number of people he ad?

If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.6.