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New York state court has ruled that the city's practice of charging owners a $100 per square foot fee to convert apartments reserved for artists is unconstitutional. The Appellate Division judges sided with the Coalition for Fairness in Soho and Noho, finding that the city's arts fund fee was an "unconstitutional taking without just compensation." The court determined that the city's goal of supporting art and local artists did not justify the fee, which was imposed as part of a 2021 rezoning plan. The judges noted that the city wants to phase out these units but the arts fund doesn't provide housing for artists.

    The Coalition for Fairness in Soho and Noho had challenged the conversion fee and sought to annul the entire rezoning. A state judge initially sided with the city, but the group appealed, focusing on the art fund fee. The coalition argued that the mandatory contribution would "undermine financing, upset mortgage applications, and devalue property." City officials estimated that the rezoning plan would add 3,500 new apartments to the neighborhood.

    The court's decision was unanimous, requiring the city to file a motion seeking permission to take the case to the state's highest court. The city's Law Department has indicated that it is standing by "the challenged provision and is reviewing its legal options."