For decades, New York City’s SoHo and NoHo neighborhoods have flourished as creative hubs for pioneering artists, many of whom live in Joint Live-Work Quarters for Artists (JLWQA). This adaptive reuse of abandoned industrial lofts in former manufacturing buildings became a model for reviving city centers worldwide, successfully replicated in cities from Berlin to Melbourne.
Under a 1971 New York State law, artists and their families received limited permission to live and work in an industrial zone. Legislators limited the use for artists certified by New York City’s Department of Cultural Affairs out of concern for the noxious impacts of industrial activity on residential uses and residential development displacing industrial jobs.
Over the years, the City never enforced the JLWQA occupancy restriction, and it has virtually stopped certifying artists. The City essentially abandoned the program and liberally granted special permits for residential and retail developments. As a result, SoHo and NoHo have become largely residential and commercial neighborhoods.
In 2021, Mayor de Blasio’s administration pushed through a controversial zoning overhaul that it claimed would modernize outdated zoning and help produce more housing in SoHo and NoHo. The rezoning allowed unlimited residential use to anyone, except for JLWQA residents. Instead of simply ditching the obsolete JLWQA occupancy restriction, the rezoning increased enforcement and dangled “conversion” permits that would become necessary for JLWQA residents to change their land-use to general residential. But there was a catch—residents could apply for a conversion permit only if they paid an upfront, non-refundable “Arts Fund fee” of more than $100 per square foot into the City’s new public Arts Fund.
The State Legislature, realizing that the rezoning and increased enforcement threatened mass displacement, rushed remedial legislation that allowed current JLWQA residents to remain in their homes without a conversion. But because every resident eventually will have to move out or die, the rezoning still means that each residence will ultimately have to be converted, and owners will be subject to the Arts Fund fee. As the City no longer certifies a substantial number of artists, no market exists for JLWQA homes. For the average JLWQA homeowner, the rezoning imposes a forced payment of $250,000 to have any ability to transfer their home, which imposes on their home equity and life savings. All for a “conversion” that is just a ministerial act—each JLWQA home is already suitable for residential use, according to the Department of Buildings, and holds a certificate of occupancy.
Worse still, the new Arts Fund has nothing to do with housing or land use. It does not support any certified artists who supposedly may be displaced or fund affordable homes for them, or homes for anyone else. It is a loosely defined public fund designed to finance “arts programming projects” and “facilities that promote the public presence of the arts” in an area 20 times larger and with 100 times the population of the neighborhoods where JLWQA residents paying the fee live. And SoHo and NoHo will be excluded and not benefit at all from this fund. The Arts Fund fee is totally unrelated to the rezoning goal of increasing housing stock, and it has no connection to any impact caused by a conversion of a JLWQA home to general residential use.
The Coalition for Fairness in SoHo & NoHo, a non-profit community organization of artists and residents, together with several homeowners, challenged the fees in state court. They argued the fees were unconstitutional permitting conditions under two landmark Supreme Court cases, including Pacific Legal Foundation’s 1987 win in Nollan v. California Coastal Commission.
The Nollan ruling, paired with 1994’s Dolan v. City of Tigard, established that all permit conditions imposed on land development must be both related and proportionate to the actual impacts caused by the development. Then two more PLF victories—2013’s Koontz and 2024’s Sheetz—made clear that Nollan and Dolan applied to conditions demanding monetary payments (Koontz), even those imposed legislatively (Sheetz).
Nevertheless, the state trial court rejected the JLWQA residents’ petition. The trial court effectively defied Koontz, holding that the Arts Fund fee was not subject to Nollan/Dolan scrutiny because it is a standalone monetary demand unrelated to land use. This, despite the fact that residents must pay the Arts Fund fee to apply for a land-use permit. The residents appealed to the Appellate Division, New York’s intermediate appellate court. Last December, a five-judge Appellate Division panel unanimously held not only that the Arts Fund fee was an exaction subject to Nollan/Dolan scrutiny, but that the City could not establish either an essential nexus or rough proportionality. The Appellate Division ruling prohibited the City from enforcing the Arts Fund fee.
New York City has appealed its loss to New York’s highest court, the New York Court of Appeals. With free representation by Pacific Legal Foundation, the Coalition for SoHo-NoHo and a group of homeowners will defend their rightful victory and protect the constitutional principle affirmed in Nollan, Dolan, Koontz, and Sheetz: Governments cannot force residents to pay exorbitant sums of money for problems they do not create.
What’s At Stake?
- The U.S. Supreme Court has held repeatedly that government cannot require a property owner to give up money or land as a condition of permit approval, unless the government’s demand is directly related and proportional to the permission being sought. New York City’s rezoning scheme fails both requirements.
- New York City can’t force homeowners, many of whom are the very pioneering artists who revived the neighborhood, to pay massive fees to solve a public problem these homeowners didn’t create. Mandating contributions to a public art and culture fund in exchange for permits to remove an obsolete zoning restriction is flatly unconstitutional.
