Impact Fees Stuck Down by Supreme Court

Harstad v. Woodbury: A Landmark Victory For Housing Affordability, Industry

The Minnesota Supreme Court issued a landmark decision that is a major victory for the housing industry and housing affordability. In its much-awaited decision in the Harstad v. Woodbury case, on Aug. 15 the Court upheld 20 years of legal precedent, saying cities have limited authority to tax new housing developments.

In the Court’s ruling, Justice G. Barry Anderson wrote: “Put another way, the pearl of great price here is approval of the subdivision agreement. A developer who fails to make a ‘voluntary’ payment in an amount Woodbury finds acceptable faces the prospect of denial of the subdivision application. The infrastructure charge is thus a requirement and Harstad is correct that there is nothing voluntary about it.”

The ruling is welcome news to Minnesota’s housing industry, as these fees increase the cost of new homes by thousands of dollars.

“Housing First Minnesota commends the Minnesota Supreme Court for its ruling and the positive effect it will have for homeowners,” said David Siegel, executive director of Housing First Minnesota. “This decision provides much-needed clarity on cities’ illegal fees, which add to the housing affordability crisis.”

The City of Woodbury told media outlets it is “interpreting the decision, gathering information and evaluating our next steps.” Twin Cities developer and Housing First Minnesota member Marty Harstad sued the City of Woodbury in 2016 contending the city’s Major Roadway Assessment (MRA) fees, which are used to pay for traffic-related improvements throughout the city, were not permitted under state law. The city was withholding approval of his 183-home project unless he consented to the city’s $1.4 million MRA fees. Washington County Court sided with Harstad.

In September 2017, the Court of Appeals upheld a lower court’s ruling that these fees are unlawful, upholding the district court ruling. The Minnesota Supreme Court granted Woodbury’s petition for review in November, after the League of Minnesota Cities took the unusual step of filing an amicus brief (friend of the court) encouraging the Supreme Court to accept Woodbury’s appeal.

In February, Housing First Minnesota submitted an amicus brief in support of Harstad’s suit. In the brief, cosigned by Rochester-area developer and Housing First Minnesota member Frank Kottschade and the National Association of Home Builders, the industry says the previous court decisions, which ruled that Woodbury’s MRA fees represented impact fees not authorized by the State of Minnesota, should be upheld.

“This win for the housing industry would not have been possible without Marty Harstad’s willingness to stand firm and the legal team at Larkin Hoffman. I also want to thank Frank Kottschade and the National Association of Home Builders for partnering with Housing First Minnesota,” said Tom Weiner, president of Housing First Minnesota.