The Supreme Court Rules Impact Fees Can Violate Your Property Rights Too
Happy Tuesday, and welcome to another edition of Rent Free. This week’s stories include:
- Minnesota’s zoning reform bills stall in the Legislature.
- New York’s housing deal does little for new supply and leaves everyone unhappy.
- Colorado bans laws regulating how many unrelated people can live together.
But first, we have this week’s lead item about the unanimous U.S. Supreme Court decision that protects property owners and builders from local government impact fees.
Supreme Court Rules Impact Fees Can Violate Your Property Rights
This past Friday, in the case of Sheetz v. County of El Dorado, the U.S. Supreme Court ruled that impact fees charged to property owners can amount to unconstitutional takings of property, regardless of whether those fees are imposed by elected officials or unelected bureaucrats.
“The Constitution’s text does not limit the Takings Clause to a particular branch of government,” wrote Justice Amy Coney Barret in a unanimous opinion. “There is no basis for affording property rights less protection in the hands of legislators than administrators. The Takings Clause applies equally to both.”
The Sheetz case got started back in 2016 when the plaintiff, California retiree George Sheetz, sued his local county government over a $23,000 traffic impact fee he had to pay in order to get permits to build a single-family home on his property.
Impact fees can add tens of thousands of dollars to the costs of building a single unit of housing.
The county had said explicitly the fee it slapped on residential development was intended to pay for the traffic impacts caused by commercial development the county was trying to encourage.
Sheetz argued the impact fee was an unconstitutional taking of his property because it wasn’t tied to individual impacts his new home would cause. His lawsuit contended that, under the “unconstitutional conditions” doctrine, he could only be charged fees that had an “essential nexus” with impacts his individual project produced and those fees had to have a “rough proportionality” to those impacts.
A California appeals court had dismissed Sheetz’s case on the grounds that the “unconstitutional conditions” doctrine only applied to local bureaucrats imposing ad hoc conditions on building permits. “Legislative exactions” adopted by local elected officials on broad categories of properties were exempt from such challenges, it decided.
The Supreme Court’s decision on Friday provides much-needed clarity that impact fees imposed by a local legislature can still be a taking in violation of the “unconstitutional conditions” doctrine, says Brian Hodges, an attorney with the Pacific Legal Foundation that litigated the case.
“It’s been going on for over 20 years, courts have been exempting legislative demands from the [required] scrutiny,” says Hodges. “This divide has festered in state courts for way too long.”
What the Supreme Court did not decide on Friday is whether Sheetz’s $23,000 impact fee was in fact an unconstitutional taking, or even if it was a taking period. The narrow decision determined that simply because a fee is established by a legistalure, it does not mean that the fee is not considered a taking.
The court also didn’t spell out how individualized local governments’ impact fees will have to be.
It left all those questions for state courts to sort out.
In a concurring opinion, Justice Neal Gorsuch argued that all impact fees, whether adopted for a specific development or imposed on whole categories of development, would still need to be specifically tailored to the impacts of an individual project.
“Whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbors’ property too,” wrote Gorsuch.
In a contrasting concurring opinion, Justice Brett Kavanaugh wrote that nothing in the Sheetz opinion would prevent local governments from adopting fee schedules for broad classes of property.
Minnesota Zoning Reform Bills Killed, Watered Down
Sweeping zoning reforms introduced in the Minnesota Legislature earlier this year have had a rough time in the state Legislature.
A “middle housing” bill, H.F. 4009, that would have allowed two units of housing on all residential land (and four units in larger cities), in addition to legalizing accessory dwelling units, paring back minim
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