04/16/2024
SCOTUS Rules in Favor of Owners in Property Fee Dispute REALTOR® Magazine Real Estate News April 15, 2024
Land Use & Property Rights, Legal By: Melissa Dittmann Tracey
The U.S. Supreme Court ruled unanimously on Friday that the government cannot demand hefty development fees from property owners in exchange for building permits. The case is being hailed by the National Association of REALTORS®, and other housing groups, as a major victory for property rights in a fight against what’s been called “exorbitant fees” tacked onto permit approvals in new development projects.
The Supreme Court’s ruling stems from a 2016 lawsuit filed by a California landowner, George Sheetz, after laws through his county government required him to pay more than $23,000 for a “traffic impact fee study” while he tried to obtain a permit to build a 1,800-square-foot manufactured home on his property. The county fees were implemented to help pay for roadwork and infrastructure in the community. Sheetz and his attorneys called the fees “unconstitutional” (specifically saying they violate the Takings Clause of the Fifth Amendment, which bars the government from taking private property for public use without “just compensation.”). After the lower courts sided with the county, Sheetz and his attorneys asked the U.S. Supreme Court to weigh in.
NAR and other housing groups sent letters of support regarding the case to the justices. “Impact fees have real consequences for homeownership in America, particularly with today’s high interest rates and limited housing affordability. Many prospective home buyers are priced out of the market by the tens of thousands of dollars in impact fees imposed on the average property owner,” NAR, the American Property Owners Alliance, the REALTORS® Land Institute, and the California Association of REALTORS® wrote in the amicus brief, filed with the court last year. Nationally, they said, the average impact fee on single-family homes exceeded $13,627 in 2019, while the costs in some states stretched much higher. In California, for example, impact fees average more than $37,000. Also, the housing groups cited housing studies showing how a $1,000 increase in the median price of a new home pushes about 140,000 households out of the real estate market.
The court’s decision will now allow developers and home builders to challenge fees that are commonly imposed by cities and counties to pay for new public improvements and infrastructure. Justice Amy Coney Barrett wrote: “In sum, there is no basis for affording property rights less protection in the hands of legislators than administrators. The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.”
Sheetz’s case will now be sent back to the state courts for further review, given the Supreme Court’s ruling.
NAR vows to continue to advocate for the property rights of homeowners in cases such as these. “Costly and burdensome requirements imposed on property owners, such as obtaining land-use permits as a condition of using or developing their property may be unrelated to the externalities of the development, may artificially increase the cost of real estate,” the association noted in its Washington Report about the case late last year. “At a time when many buyers are struggling to afford or find properties, government action must create certainty and stability in the housing market to promote development, support homeownership, and protect private property rights, which is why NAR is engaged in these various challenges.”
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