On an otherwise sleepy Friday one year ago, we saw the United States Supreme Court issue a landmark ruling significantly narrowing one of the most litigated issues in housing: impact fees.
One year later, the Sheetz v. El Dorado ruling remains a game changer for housing affordability, the true impact of which has yet to be tested.
Enter Sheetz
Sheetz v. El Dorado, like so many other state and federal court precedents related to development, began when a permitting entity asked for too much from a principled person willing to push back.
In this case, George Sheetz bought a parcel of land on which he hoped to place a manufactured home. Before Sheetz could get a building permit, the county conditioned approval of the permit on the payment of a $23,000 traffic impact fee. With the help of the Pacific Legal Foundation, Sheetz sued, arguing that the county’s fee schedule sidestepped the Constitution’s Fifth Amendment clause and the Nollan-Dolan standard.
The result was a unanimous ruling that brings impact fees into the scope of the Fifth Amendment.
Victory Built on Solid Foundation
As our recent white paper on impact fees published by Housing Affordability Institute points out, over-reliance on impact fees and creative methodologies has led to litigation.
Legally, the Sheetz victory was a game-changer for both sides of the housing debate; it is also a victory built on a solid foundation. Just like the cumulative impact overregulation has on affordability, the cumulative impact of previous regulatory takings legal precedents has led to a major change in the legal landscape of housing and development.
Without Nollan v. California Coastal Commission’s standard of essential nexus, Dolan v. Tigard’s rough proportionality, and Koontz v. St. John’s inclusion of money as property in regulatory takings claims, Sheetz would not have been possible.
While Sheetz’s impact has yet to be fully tested, its impact already extends beyond the courtroom and city halls and into state Capitols.
In California, which sees among the highest levels of impact fee charges in the nation, housing advocates have used the ruling as an attempt to rein in impact fees. Additionally, groups seeking expansion of impact fee powers are likely to face headwinds in a post-Sheetz world as the constitutionality of these fees will be carefully examined by state lawmakers.
Beyond Sheetz
While the law of the land, this case was not the finishing move the housing industry was hoping for, nor the cataclysmic event local governments feared – at least for the time being. Authorized impact fees remain, albeit significantly narrowed to the Nollan-Dolan standard.
From an affordability standpoint, this critical and long-overdue narrowing could be a tunnel, the other side of which is a world without impact fees except in very limited circumstances. Like Nollan decades ago, Sheetz could be the first in a new round of legal precedents protecting affordability by ensuring costs for future infrastructure improvements are equally shared.
One year on Sheetz remains a powerful precedent, yet its true impact remains to be tested. The development community’s overall question about the constitutionality of impact fees remains to be answered.
If history is any indicator, an aggrieved project applicant or property owner will eventually feel they are being asked to pay more than the law allows. And when that happens, the limits of impact fees may be tested.
