NY Zoning Law Mandating Contributions Deemed an Unconstitutional Taking

A few years ago, on December 15, 2021, the City of New York (the City) amended §143–13 of the City Zoning Resolution (the ZR Amendment). A portion of this ZR Amendment required property owners to pay a mandatory, nonrefundable contribution to the SoHo–NoHo Arts Fund (Arts Fund), as a precondition to ling for a permit to convert joint living-work quarters for artists (JLWQA) to unlimited residential use.
What is the problem with the ZR Amendment, you may ask? Well, according to the recent
Appellate Division decision in Coalition for Fairness in Soho and Noho, Inc. v. City of New York, 233 A.D.3d 433 (1 Dept 2024); 221 N.Y.S. 3d 89 (the Soho/Noho case), it constituted an excessive exaction, which rose to the level of an unconstitutional taking under prevailing eminent domain laws.
In the context of eminent domain, exactions are conditions imposed by the government on a property owner that require the transfer of money or property as a prerequisite for the government’s approval of a proposed development plan.
Sometimes, when exactions are excessive or unrelated to the development's impacts, they can potentially constitute a "taking" under the Fifth Amendment of the United States Constitution and Article I §7 of the New York Constitution, requiring just compensation. That is exactly what happened in the case of this ZR Amendment.
In Soho/Noho, the New York Appellate Division held that the portion of the ZR Amendment requiring payments to the Arts Fund, as a condition precedent for permit ling, was an unconstitutional taking without just compensation.
The ZR Amendment established the Special SoHo–NoHo Mixed Use District, and provided JLWQA property unit owners a pathway to convert the use of their units to residential uses; provided that they rst make a nonrefundable, mandatory contribution, calculated at $100 per square foot of oor area to be converted, to the Arts Fund, with annual increases, as a “…precondition to ling for or issuing of any building permit allowing the conversion [of] a joint living-work quarters for artists to a residence.” See ZR §143–13.
In concluding that this mandatory contribution to the Arts Fund constituted an unconstitutional taking, the Soho/Noho court explained that the permit condition contained in the ZR Amendment had failed the “two-part test modeled on the unconstitutional conditions doctrine,” as most recently outlined by the Supreme Court of the United States (SCOTUS) in Sheetz v. County of El Dorado, 601 U.S. 267 (2024), and colloquially known as the Nollan/Dolan standard(s). See Soho/Noho, id., citing Sheetz v. County of El Dorado, id.; see also Nollan v. California Coastal Commn., 483 U.S. 825 (1987); Dolan v City of Tigard, 512 US 374 (1994).
In Sheetz, SCOTUS referred to the Nollan/Dolan decisions and held that in order to not be deemed an unconstitutional taking, a permit condition: (1) “must have an ‘essential nexus’ to the government's land-use interest,” which “ensures that the government is acting to further its stated purpose;” and (2) the condition “must have ‘rough proportionality’ to the development's impact on the land-use interest.” See Sheetz, id. at 275-276 quoting Nollan, 483 U.S. 825; see also Dolan v City of Tigard, 512 US 374.
The Soho/Noho court, after applying the two-part test, found that the mandatory Arts Fund contribution fee requirement constituted a taking without just compensation in violation of both the Fifth Amendment of the United States Constitution, and Article I §7 of the New York Constitution. Soho/Noho, 221 N.Y.S. 3d 89; U.S. Const. amend. V; NY Const, art I, § 7.
First, the Soho/Noho court found that the City did not meet the rst prong of the Nollan/Dolan and Sheetz test(s) because it failed to “identify an essential nexus to its land use interest” in the ZR Amendment, since the City had itself described the JLWQA use restrictions as “outdated,” had expressed goals of allowing a broad range of mixed uses in the new Special Soho-Noho district (which had previously been zoned industrial prior to the passage of the ZR Amendment), and had banned the creation of new JLWQA units (indicating a long-term land use goal of phasing out JLWQA units altogether).
The court held that the language of the ZR amendment, which stated that money from the Arts Fund “shall be allocated ... to support arts programming, projects, organizations, and facilities that promote the public presence of the arts within the [SNX] District and surrounding neighborhoods,” with priority given to “under-resourced organizations and under-served areas,” did not support the City's alleged goal of supporting art and local artists. See Soho/Noho, id.; see also Sheetz, 601 U.S. at 275, quoting Nollan, 483 U.S. at 837; ZR §143–02; and Dolan v City of Tigard, 512 US 374.
Second, the Soho/Noho court held that the City did not meet the second prong of the
Nollan/Dolan and Sheetz test(s) because it failed to demonstrate that the mandatory Arts Fund contribution condition had “rough proportionality” to the conversion of the JLWQA units’ development impact on the land-use interest at issue.
 Specically, the court held that “there is no evidence of negative impacts on certied artists
arising from the changes in zoning,” because, as the City had represented, there was a “scarcity of certied artists able to purchase” JLWQA units in the rst place, due to an “ever-decreasing number of annual artist certications” over the last decade. See Soho/Noho, id.; see also Sheetz, 601 U.S. at 275, quoting Nollan, 483 U.S. at 837; ZR §143–02; and Dolan v City of Tigard, 512 US 374.
As we saw in Sheetz, and now in the Soho/Noho decision, the Nollan/Dolan test for whether a land use permit condition is a taking applies regardless of whether the condition requires the landowner to relinquish property, requires them to pay a monetary exaction instead of relinquishing the property, or requires them to pay a monetary exaction pursuant to a legislative or administrative precondition for acquiring a permit. See Soho/Noho, 221 N.Y.S. 3d 89; Sheetz, 601 U.S. 267.
Although not all exactions rise to the level of an constitutional taking, the Soho/Noho decision reinforces the core tenets of Sheetz and the Nollan/Dolan decisions—all of which, when taken together, demonstrate that courts take the protection of property rights very seriously, just like the Fifth Amendment intended. See Soho/Noho, 221 N.Y.S. 3d 89; Sheetz, 601 U.S. at 275,; Nollan, 483 U.S. at 837; Dolan v City of Tigard, 512 US 374; see also U.S. Const. amend. V; NY Const, art I, §7.

By Jennifer Polovetsky (212-692-1062)
March 10, 2025
New York Law Journal