Supreme Court Hears Arguments in Landmark Impact Fees Case

The U.S. Supreme Court heard arguments Tuesday in a case brought by a California home owner regarding a $23,000 traffic impact fee required to put a manufactured home on a small parcel of land. The case directly addresses jurisdictions trying to skirt the Takings Clause when seeking impact fees.

The case, Sheetz v. El Dorado County, involved George Sheetz, a California resident who in 2016 applied for a permit to build an 1,800-square-foot manufactured home on a residential-zoned lot he owned. The county imposed a $23,420 “traffic mitigation fee” on the permit. Sheetz protested the fee but ultimately paid it, and then immediately sued the county arguing the fee was improper.

At state court, Sheetz argued that the fee was not closely connected to or proportional to the actual impact his new residence would have on the roads, key tests laid out by precedent in two prior Supreme Court cases (commonly called the Nollan/Dolan test). The county countered that the test does not apply because the impact fee was authorized by legislation — from the county council in this case — rather than by bureaucracy.

A small number of state courts, including California’s, have carved out legal exceptions to the proportionality test if the fees in question are authorized by a legislative body. The Sheetz case directly addresses the constitutionality of such carve outs.

California state courts agreed with the county in this case, writing that the Nollan/Dolan test only applies to fees imposed on an individual basis, rather than fees — such as the traffic impact mitigation fee — authorized by legislation.

Sheetz further appealed the decision to the Supreme Court, noting there was disagreement on the question across states. NAHB and the California Building Industry Association (CBIA) supported Sheetz with an amicus brief urging the Supreme Court to take the case. After the Court agreed to hear it, NAHB and CBIA submitted a second brief supporting Sheetz on the merits of the case.

At oral arguments Tuesday, the justices — and even defendant’s council — seemed to agree with NAHB and CBIA on the pertinent question of legislative action shielding a government from the Takings Clause. NAHB and CBIA wrote that the Supreme Court has an opportunity to “make clear that there is no such ‘loophole’ in the prohibition against governmental demands for unconstitutional conditions.”

Justice Gorsuch noted that with such uniform agreement on the question, the case should simply be remanded to the lower courts so they can determine if the traffic fee falls under the Takings Clause.

An opinion is expected this spring. NAHB VP of Legal Advocacy Tom Ward also discusses the case and the Supreme Court arguments in the latest episode of NAHB’s podcast, Housing Developments.