Making a federal case out of Long Island zoning

Daily Point

Developer increases pressure on Hempstead Town over zoning Blakeman had supported

In what could be a precedent-setting case with far-reaching implications for housing development and municipal zoning, Heatherwood Communities, a Commack-based developer, has sued the Town of Hempstead in U.S. District Court for the Eastern District of New York over its battle to build housing in Inwood.

The lawsuit stems from the decision by Hempstead officials to establish — and then repeal — a transit-oriented development district overlay zone in Inwood and North Hempstead. The zone, first proposed and promoted in 2019 by then Hempstead Councilman and current Nassau County Executive Bruce Blakeman, was approved by the town board in 2019, leading Heatherwood to spend $30 million on the purchase of land for 300 apartments, combined with some retail.

But Heatherwood never came close to being able to break ground. Town officials first instituted a moratorium on the zoning in 2022, which they subsequently renewed. By 2024, the town board repealed it altogether. Originally, they were going to grandfather in existing proposals like Heatherwood's, but ultimately chose not to do that, either.

Heatherwood, which has built thousands of units across Long Island and New York City, fought the town — and won — in state Supreme Court, but the town has continued to battle and refused to allow the developer's plans to move forward. Town officials have indicated a plan to appeal the state case.

But the choice to file suit in federal court allows the builders to make far more sweeping arguments and possibly become a national test case in challenging restrictive zoning practices. The state builders association and the National Association of Home Builders are involved, with NAHB's legal fund contributing to the effort. The case is part of a more widespread effort to link such zoning changes to the "takings" clause in the Fifth Amendment, suggesting that it falls under the prohibition of taking private property for public use "without just compensation." The lawsuit also suggests that the town's decisions violate the 14th Amendment's equal protection clause, noting that the town "inexplicably" treated properties and zoning differently in Inwood when compared with Baldwin. In that community, a new overlay zone and development opportunities have not been stymied by a moratorium or repeal.

Heatherwood's lawsuit seeks $30 million in compensatory damages, but also adds $160.5 million in lost profits, in addition to attorney fees and punitive damages. It names Hempstead Town, the town board and 10 anonymous individuals labeled John and Jane Doe, who the suit says "utilized their power and influence with the Town's public officials to substantially assist and/or conspire with the Town Defendants ..."

A Hempstead Town spokesman declined to comment, citing the "ongoing litigation."

Heatherwood president Christopher Capece noted that beyond the impact on his company, the idea that a municipality could undo zoning after a developer committed to a project creates a significant risk to any developer and the lenders that might back them. Lenders, for instance, could decide not to finance projects if they think the zoning could change. Ultimately, if Hempstead's backtracking is allowed to stand, it could hamper future development and housing construction across the Island and beyond, Capece and others said.

"This precedent could have a catastrophic effect on the housing industry," Capece told The Point.

Mike Florio, CEO of the Long Island Builders Institute, said the Heatherwood case has drawn widespread attention.

"This isn't just one developer in one little municipality on Long Island," he said. "This is the industry — with ramifications that are as far-reaching as the entirety of the state and the rest of the country."

The U.S. Supreme Court has taken up similar cases, ruling in 2023, for instance, in favor of the landowner in a case where lower courts had suggested the takings clause did not apply to legislatures' decisions, only administrative ones. The Supreme Court said that the takings clause "does not distinguish between legislative and administrative land-use permit conditions."

Even with the larger implications and questions, Capece still has a more immediate goal in mind.

"We're hopeful that we can find a resolution with the town so we can build," he said.

— Randi F. Marshall randi.marshall@newsday.com

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