Federal Judge Dismisses Winnetka Lakefront Construction Lawsuit

A federal judge dismissed a lawsuit filed by a group of Winnetka homeowners against the village over new regulations on lakefront construction, dealing a temporary blow in the legal battle over the contentious ordinance.

The homeowners brought the lawsuit in May 2024 in response to a Winnetka ordinance that restricts constructions on the bluffs along the lakefront. The ordinance creates a setback limiting development from the toe of the property’s bluff or 50 feet from Lake Michigan’s high water mark, whichever is farther from the high water mark.

The lawsuit, joined by more than a dozen homeowners, argued that Winnetka’s ordinance amounted to an unconstitutional taking of their property without compensation. They argued the ordinance may reduce property values “in the hundreds of millions of dollars” cumulatively along the lakefront.

U.S. District Judge LaShonda Hunt ruled Oct. 3 that it was too early for the homeowners to claim damage from the ordinance. The judge said that because none of the plaintiffs had submitted development plans or been denied permits under the new rules, the court could not determine if any harm had actually occurred. Two other counts in the lawsuit alleged violations of the Illinois Constitution, but the judge ruled only on the federal claim.

“The village is pleased that the court granted the village’s motion to dismiss the only federal claim in the complaint,” Peter Friedman, Winnetka’s village attorney, said in a email.

The plaintiffs have until Oct. 30 to file a new complaint in response to the judge’s ruling. An attorney for the homeowners did not immediately respond to a request for comment.

Jena Radnay, a broker with @properties Christie’s International Real Estate who deals in multimillion-dollar lakefront homes, said she expects the homeowners to file an amended complaint to keep the lawsuit going.

Radnay told The Real Deal she knows at least six lakefront homeowners who have considered selling but are worried their home values could fall by millions of dollars apiece because they don’t have modernized amenities in the areas that they’re now restricted from building in. Houses with such features, like pools, recreational facilities and stunning waterfront viewing rooms, are what buyers are after in the North Shore power town, Radnay said.

“There is a whole silent slew of lakefront owners sitting back waiting to see what the lawsuit is going to do,” Radnay said, adding she fears there could be cuts by as much as 30 to 40 percent at some properties.

Even though Winnetka’s lakefront homes reached unprecedented values for Illinois this year, as Radnay recently brokered the $31 million waterfront sale of a former Goldman Sachs executive’s house, that’s only because such properties had been recently updated and “optimized” before the ordinance took effect, she said.

Plus, the sellers of the record-breaking deal this year spent far more assembling the land on which their property sits and improving it over the years, with their investment in the home likely exceeding $60 million.

The village has maintained that the regulations are necessary to protect the bluffs from erosion and are in the interest of public safety. The ordinance was passed unanimously in February following heated public meetings.

The passage of the ordinance, along with a separate ordinance from December limiting lot consolidation, was largely in reaction to billionaire Justin Ishbia’s sprawling construction project in the village. In 2023, Ishbia pieced together multiple properties in order to create a 68,300-square-foot megamansion. The properties and construction cost $78 million.

Ishbia’s project included removal of greenery and destruction of the lakefront bluffs, which caused controversy in the village and prompted the new restrictions on lakefront constructions.

Other North Shore towns with high-end lakefront property have long had restrictions on development along the lakeshore bluffs. Highland Park and Evanston require 40-foot setbacks from the property’s bluff, while Kenilworth requires a 35-foot setback and Glencoe’s requires setbacks on a case-by-case basis. Lake Forest requires a 75-foot setback from bluffs.