The development of New Square was obstructed by Ramapo's zoning regulations, which forbade the construction of multi-family houses and the use of basements for shops and stores. Multiple families sharing single-family houses said that they belonged to extended families, and businesses in private homes had to be secret. In 1959, the community asked for a building permit to expand its synagogue, located in the basement of a Cape Cod-style house. The Ramapo town attorney requested condemnation of the entire New Square community, claiming that it threatened sewage lines. In response, the community requested incorporation as a village, but Ramapo town officials refused to allow it. In 1961, a New York state court ruled in favor of New Square, and the village was incorporated in July of that year.