US Supreme Court deals blow to impact fees
April 18, 2024
TheThe US Supreme Court (SCOTUS) recently dealt a blow to impact fees in a major case for landowners, homebuilders, and those in the residential home-building business.
In a unanimous decision with several concurring opinions, the Court ruled that legislatures no longer have carte blanche to require arbitrary, exorbitant fees as a condition of a building permit. Legislatively imposed fees are subject to the requirements of any other government taking per the Takings Clause of the Fifth Amendment.
“This decision gives Washington builders an opportunity to challenge impact fees they believe don’t meet the heightened constitutional scrutiny,” said BIAW General Counsel Ashli Tagoai. “Our members will no longer have to settle for the “that’s just the way it is” explanation when a city or county wants to exploit builders for money to pay for projects unrelated to their building impacts.”
One California homeowner’s fight benefits property rights nationwide
The US Supreme Court’s ruling in Sheetz v. El Dorado County sets a precedent for homebuilders, landowners and developers nationwide.
It started when George Sheetz, a 65-year-old retiree in El Dorado County, California, decided to build a small manufactured home on his property. The county told him he would have to pay a $23,420 traffic impact fee to receive a building permit.
Pointing to local legislation approved to shift the cost of road maintenance and repair onto new development, the county imposed the fee without identifying any link between the man’s new home and the impacts he was being forced to mitigate.
Sheetz lost twice in lower courts before the US Supreme Court ultimately ruled in his favor.
Additional clarity on takings
The court examined two previous landmark property rights cases (Nollan v. California Coastal Comm’n, 483 U. S. 825, and Dolan v. City of Tigard, 512 U. S. 374) to resolve the question of whether the US Constitution’s Fifth Amendment Takings Clause exempt building permits from scrutiny if a legislature imposed them.
Many lower courts previously understood Nollan and Dolan and their tests (i.e., “essential nexus” and “rough proportionality”) were only applied to permit conditions when the exaction was done by an administrative official, not the legislature.
SCOTUS makes clear in Sheetz that this is incorrect. It clarifies that the “Takings clause does not distinguish between legislative and administrative permit conditions.”
Unanswered questions
The concurrences filed by Justice Sonia Sotomayor (joined by Justice Ketanji Brown Jackson), Justice Neil Gorsuch, and Justice Brett Kavanaugh (joined by Justice Elena Kagan and Jackson), each discuss the Court’s decision not to address specific questions.
These include the question of whether “a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development (like impact fees).”
Both Gorsuch and Kavanaugh suggest that impact fees may next be on the proverbial “chopping block” should an impact fee case come before the Court, with Justice Gorsuch stating:
A governmentally imposed condition on the freedom of speech, the right to assemble, or the right to confront one’s accuser, for example, is no more permissible when enforced against a large “class” of persons than it is when enforced against a “particular” group.
If takings claims must receive “like treatment,” ante, at 10, whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbors’ property too.
A blow to impact fees in Washington?
SCOTUS’ clear confirmation that legislative permit conditions are subject to Nollan/Dolan scrutiny is important to Washingtonians who have significant permitting fees in most cities and counties.
Washington homebuilders should expect to see courts apply the Nollan/Dolan tests to both legislative permit conditions and ad hoc decisions by administrative officials.
Additionally, BIAW continues to work to alleviate the effects of impact fees on the American dream of home ownership.
For questions about how this case affects you, please contact BIAW General Counsel Ashli Tagoai. You can reach her at Ashlit@biaw.com or (360) 352-7800 x 118.
In the news
- The government had George Sheetz ‘over a barrel.’ He took his case to the Supreme Court—and won
- Supreme Court decides case of California man charged $23,000 by county to build on his own land
- Preliminary analysis: Sheetz decision has broad implications for cities, developers
- Supreme Court rules that legislation does not protect improper impact fees