Impact of the Sheetz victory is highlighted in new NY case
In one of the first legislative exactions opinions issued since the U.S. Supreme Court decided Sheetz v. County of El Dorado, the New York Supreme Court’s Appellate Division just struck down a provision of New York City’s rezoning plan that would have imposed “Arts Fund” fees on certain landowners.
New York’s SoHo and NoHo districts have long been known as epicenters for the city’s artist community, with many artists living and working in artist lofts, which are technically called Joint Living-Work Quarters for Artists (JLWQA). These lofts are commercial or manufacturing spaces that double as artists’ studios and their living spaces. To occupy a unit, an artist must be certified by the city’s Department of Cultural Affairs. With few qualifying artists available to rent the lofts and with housing shortages across the country, many JLWQA owners have sought to convert some of these spaces into condominiums but have found themselves up against the City’s rezoning laws.
Under the guise of creating more affordable housing, then-Mayor Bill de Blasio crafted a rezoning plan that was later adopted by state legislators in 2021. The plan for the SoHo and NoHo districts involved rezoning laws that prohibited the creation of new artist lofts in order to make room for new housing out of those spaces. But the plan went even further, implementing an “Arts Fund” fee for all landowners who wished to turn artist lofts into private condominiums.
For every square foot of floor area that was to be converted, landowners would be forced to pay $100.00. This would result in would-be builders paying hundreds of thousands of dollars in Arts Fund fees in addition to the millions it would take to physically convert these lofts into residences.
If these fees were going toward helping displaced artists find new homes and workspaces, that would be one thing, but the Arts Fund instead just promises to fund “arts programming projects” and “facilities that promote the public presence of the arts.” Not only are these vague, but they have nothing to do with the goals of the rezoning plans, which were supposed to create “a broad range of residential, community facility, commercial, and light manufacturing uses as of right.” These fees serve only to steal money from and punish landowners who are trying to create solutions to the housing shortage.
SoHo and NoHo residents and property owners see the Arts Fund fee for what it truly is: extortion and a clear-cut example of government overreach. The Coalition for Fairness in SoHo & NoHo, a group of SoHo and NoHo artists, residents, and property owners, challenged the fees in court, claiming they were unconstitutional government takings as they failed to satisfy the two-part “essential nexus” and “rough proportionality” test, often called the Nollan/Dolan test.
Named for two important Supreme Court cases, including PLF’s 1987 landmark case Nollan v. California Coastal Commission, the Nollan/Dolan test clarified that an exaction fee of this kind is legal only if it has a direct connection to some harm caused by the development project in question.
The trial court wasn’t sold on the Nollan/Dolan claims, but the appellate court felt differently—and rightly so. Because the Arts Fund fee failed the Nollan/Dolan test, the New York Supreme Court unanimously struck it down as an unconstitutional taking, in violation of the Fifth Amendment.
Pacific Legal Foundation is proud to have helped lay the early foundation for this legal victory, not only with our win in Nollan, but also with the 2013 win in Koontz v. St. Johns River Water Management District, where the Supreme Court confirmed that the Nollan/Dolan test also applies to certain demands for money in the permitting context.
And crucial to the New York Supreme Court’s decision was PLF’s most recent win in the 2024 Supreme Court case Sheetz v. County of El Dorado, where the court ruled that the Nollan/Dolan test applies to any exaction fee, whether imposed by legislation or by a permit officer. Because the Arts Fund fee was part of the rezoning laws adopted by the state legislature, it might not have been held to the same standard as exactions imposed by permit agencies if PLF hadn’t established the Sheetz precedent.
Coalition for Fairness v. City of New York marks a significant moment in the post-Sheetz era as it is one of the first legal victories to come as a direct result of the 2023 ruling. With each PLF legal victory, we strive to lay the foundation for future victories that help restore property rights and protect individuals. We are happy to see Sheetz already making an impact and look forward to all the subsequent victories to come.
