The Supreme Court of the United States could have a more conservative makeup soon, and while it’s purely an exercise in speculation at this point, it could likely be a mixed bag for the real estate industry and consumers.
The Supreme Court of the United States could have a more solidly conservative makeup soon. While it’s purely an exercise in speculation at this point, and while the cases such a court would take on are still to be determined, a more conservative bloc of justices would likely be a mixed bag for the real estate industry and consumers.
According to news reports, all indications are that President Donald Trump will name the next Supreme Court justice to replace the soon-to-retire Anthony Kennedy sometime next week.
The nomination, pending Senate approval, would reaffirm the court’s 5-4 conservative majority and possibly push it even further right, as Kennedy was often a crucial swing vote, despite leaning conservative and being appointed by President Ronald Reagan in 1988. This could result in more pro-business policies, while potentially opening up consumers to carry more risks in transacting.
If Trump’s nomination is approved and Senate Democrats don’t obstruct the process, there are a number of potential things that real estate agents should keep an eye on:
Powers of government regulatory agencies
Earlier this year, PHH Mortgage decided not to take its case against the Consumer Financial Protection Bureau (CFPB) to the Supreme Court after the full Court of Appeals in Washington, D.C., ruled the structure of the bureau was constitutional. PHH Mortgage originally brought the case after former director Richard Cordray greatly increased the fine the department was going to levy against the company.
A more conservative Supreme Court could weaken some of those broad enforcement powers wielded by government regulatory agencies down the road and that could be a big win for real estate, according to Robert Butters, equity partner at Saul Ewing Arnstein & Lehr LLP and the former deputy general counsel to the National Association of Realtors.
“This is an area of the law — deference to regulatory agency decisions — where I think you may well see a shift in which the court does not give the same degree of deference as it has historically to decisions of administrative agencies,” Butters said.
That means an agency like CFPB could become a “more normal” regulatory body with less enforcement power, unlike the one created under the Obama administration that levied massive fines against companies like Wells Fargo and the aforementioned PHH Mortgage, he said.
It could also roll back some of the enforcement power for the U.S. Department of Housing and Urban Development (HUD) — although Butters said the Trump administration is already cutting back on its regulatory rigor. It recently rolled back an Obama-era anti-segregation rule and was promptly sued by New York State and a trio of nonprofits.
“The same could apply to the Environmental Protection Agency,” Butters said. “Certainly their enforcement activities can impact on land use, and that can, in turn, impact the marketability of real estate.”
Butters said one trend that was already starting to occur with the last makeup of the court was less aggressive antitrust enforcement — looking specifically to a recent ruling in favor of American Express that doesn’t allow retailers to steer customers away from American Express due to its higher fees.
“The court as currently constituted not too long ago took a much more conservative line on antitrust enforcement and that will certainly continue assuming a more conservative justice replaces Justice Kennedy,” he said.
Kennedy was the swing vote in the landmark 2015 ruling that gave same-sex couples the right to marry. With a more conservative judge on the bench and pressure from some conservative religious groups, that historic decision could theoretically at some point be re-examined.
“That would be very concerning for property rights for LGBTQ individuals who are already married and have legal binding property titles and things set forth,” said Jeff Berger, the founder of the National Association of Gay and Lesbian Real Estate Professionals (NAGLREP). “That can be concerning for people who feel those rights are now in jeopardy and those contracts are now in jeopardy as a married couple.”
Housing discrimination for LGBTQ individuals
Berger said he’s also concerned about a case that would test LGBTQ discrimination law even more broadly than the Supreme Court’s recent narrow ruling in favor of a baker that refused to make a cake for a same-sex couple’s wedding.
LGBTQ individuals are currently not one of the classes protected by the landmark 1968 Fair Housing Act. Under the guise of religious freedom, the court could set a precent with a broad ruling that LGBTQ individuals can be discriminated against in regards to housing, according to Berger.
“If there is a ruling passed for religious freedom — freedom to discriminate — that’s what’s really on our radar,” Berger said.
In 2015, Kennedy sided with judges appointed by Democratic presidents to rule 5-4 that disparate impact laws — practices by businesses or organizations that disproportionately impact a protected class, despite the business not engaging in overt discrimination — are an applicable part of the Fair Housing Act.
“This particular case hinged on a rule adopted by HUD in 2013 which formally recognized the long-held understanding at HUD that the Fair Housing Act forbids housing practices that discriminate on the basis of race, sex, religion, disability and other federally protected status — whether the discrimination is a stated goal or not,” Matthew Gardner, chief economist at Windermere Real Estate, said. “The Supreme Court confirmed this reading of the Fair Housing Act.”
Under Secretary Ben Carson, HUD has already formally announced it will be seeking public comment about the disparate impact rule that the department adopted in 2013, and whether it’s consistent with the 2015 Supreme Court ruling.
It’s possible that there could be additional cases on this front that make their way back to the Supreme Court and that a more conservative block would strike down HUD’s ruling or limit its effectiveness, which could ease business regulatory compliance but also exacerbate some inadvertent discrimination practices.