Supreme Court Leaves New York City’s SoHo/NoHo Arts Fee in Place

The U.S. Supreme Court declined to hear a challenge to a New York City law that requires certain property owners to pay a substantial fee to convert their properties to unrestricted residential use. On October 13, the Supreme Court denied review in The Coalition for Fairness in SoHo and NoHo, Inc. v. City of New York, leaving in place a New York Court of Appeals ruling for the city. NAHB filed a brief urging the Supreme Court to review the case.

The dispute arises from the unusual zoning history of SoHo and NoHo, neighborhoods near Houston Street. Many local lofts are legally classified as “Joint Living-Work Quarters for Artists,” a designation dating to the 1970s. A 2021 rezoning allowed owners to convert these units to unrestricted residential use, but those who do so generally must pay $100 per square foot into an arts fund. The fee can exceed $250,000.

Property owners challenged the fee, arguing that it violated the Fifth Amendment’s ban on taking private property without just compensation. A lower New York appellate court agreed, finding that the arts fee lacked a sufficient connection, or nexus, to the effects of the conversions.

New York’s highest court reversed that decision. It found that owners had no existing property right to convert artist-designated units to unrestricted residential use. The court also ruled that charging owners for the opportunity to convert was not the type of government property demand subject to heightened scrutiny under the Supreme Court’s land-use decisions.

The Supreme Court’s refusal to hear the case does not endorse the New York court’s reasoning. It simply leaves that ruling — and the city’s fee — in place. NAHB will continue to engage in cases involving arbitrary and onerous government land-use conditions.