New York’s highest court on Tuesday upheld the city’s ability to charge owners a fee when converting apartments reserved for artists, reversing a lower court’s ruling that the practice was unconstitutional.
The New York Court of Appeals, in a 6-1 decision, found that a state Appellate Court wrongfully concluded that a portion of the 2021 Soho and Noho rezoning violated the Fifth Amendment’s takings clause.
As part of the rezoning, new rules were applied to so-called Joint Live-Work Quarters for Artists, which are reserved for artists certified by the city. Owners of such units must pay $100 per square foot to an arts fund run by the city before receiving approval from City Planning to convert the apartments for other use.
Critics of the fee argued that it stood in the way of owners bringing their properties into compliance with the law. The state’s multiple dwelling law was amended in 2022 to allow non-artists who lived in JLWQA units on or before the rezoning was approved to continue to inhabit the apartments legally. But if a non-artist tries to buy such a property, they would need to convert the artist units before legally occupying them or renting them out to non-artist tenants.
The Coalition for Fairness in Soho and Noho, a group representing owners and residents of the neighborhoods, filed a lawsuit in February 2022, seeking to annul the rezoning, which allowed more residential and commercial use within a 50-block area.
When a state Supreme Court sided with the city, the coalition appealed, but focused on the artists’ fee rather than the entire rezoning. A panel of Appellate Division judges reversed the lower court’s decision in December 2024, finding the fee to be unconstitutional and without any legitimate land-use rationale.
But the Court of Appeals found that hitting a property owner with a standalone fee doesn’t invoke the takings clause. Such a “monetary exaction” must be in lieu of a transfer of a private property interest to qualify as a violation of the clause.
“Petitioners may desire a property interest in a more valuable and less restrictive form, and they may want it without strings attached, but the opportunity to relinquish one form of property to acquire another, in exchange for a monetary payment to an arts fund, is not a taking,” Judge Jenny Rivera wrote.
Attorneys for the coalition, along with Judge Michael Garcia, the lone dissenting opinion, argue that the fact that the government is making a monetary demand tied to a specific property interest as a condition of receiving permits is enough to constitute an illegal taking.
“It’s a false distinction between real property and money that the court drew,” said Chris Kieser, an attorney for the coalition.
He said his clients are considering whether to ask the Supreme Court to hear the case.
The city legalized JLWQAs in the manufacturing districts of Soho in the 1970s. As the area transformed, turning into a sought-after residential neighborhood, technically illegal ground-floor retail and residential lofts sprouted up as the number of certified artists in the city declined. As of 2022, only 36 of the city’s 1,636 JLWQA units were occupied by certified artists, and the city had certified fewer than 100 artists in the preceding decade.
The city rarely enforced the artist units’ residency requirements, and the Adams administration stopped efforts to increase penalties for violations.
Kieser said the city is holding conversions of these units hostage, even as it wants to end the program (new JLWQA units can’t be created) and make way for affordable housing. The Soho and Noho rezoning was supposed to pave the way for more than 3,000 units of housing over the next decade, though progress has been slow.
A spokesperson for the city’s Law Department said he was pleased by the decision.
Read more
Court throws out fee for converting artists’ units in Soho
Group sues to annul Soho rezoning, citing artist fee
City Council approves Soho and Noho rezoning, several others
