Justice Kavanaugh, The Supreme Court, and the Real Estate Industry
- Jason Gordon
While pundits have analyzed how the new makeup of the court may affect high profile issues, such as immigration and abortion rights, little has been written concerning what impact the “new” court will have on the real estate industry. Specifically, how might Kavanaugh’s confirmation and the courts conservative shift, in general, affect the real estate sector?
One area where Kavanaugh’s impact could be felt is in environmental regulations versus the rights of property owners and builders. In an article in Realtor.com, July 2018, “What Supreme Court Nominee Brett Kavanaugh Could Mean for Real Estate,” it is noted that Kavanaugh, as a committed conservative, is a believer in limiting what he feels is government overreach particularly by the Environmental Protection Agency. “Loosening or rescinding various federal and environmental regulations could make more land available to builders and could give property owners more control over their land,” says Clare Trapasso.
In the same article, Robert Thomas, an attorney at the Honolulu-based law firm of Damon Key Leong Kupchak Hastert, who specializes in land use and eminent domain (the right of the government to seize private property for what they deem to be for the greater public good with payment of just compensation), adds that “With clearer regulations, fewer permits required, and fewer accompanying fees, developers would be more likely to explore putting up homes and entire communities on this land.” And that, “While it’s impossible to know just how Kavanaugh would vote on every issue, there are indications from the circuit court judge’s substantial legal record that he may favor looser environmental and financial regulations.”
Shortly after Kavanaugh’s nomination on July 9, 2018, Politico obtained a memo sent from the White House to certain industry stakeholders Politico July, 2018. The document stated in part: “Judge Kavanaugh protects American business from illegal job-killing regulation. Kavanaugh helped kill President Obama’s most destructive new environmental rules and has led the effort to rein in unaccountable independent agencies.” As the White House reached out for support for the nomination from the business community, “Several groups – including … the National Association of Home Builders – declared a preference for Kavanaugh.”
Another area where Kavanaugh’s addition to the Supreme Court may affect rulings pertinent to property owners and builders concerns eminent domain. Unlike his views on environmental safeguards, Kavanaugh’s opposition to government overreach vis a vis private property rights could be concerning to the real estate industry, especially developers. In the Realtor.com’s Casey Pipes an attorney in Mobile, Alabama, specializing in eminent domain, land use, and zoning issues, stated that, “Homeowners would be more secure in their property. The types of reasons homes could be taken would be reduced.”
Now, before the non-lawyers start rolling their eyes in horror, I need to cite a bit of case law which I think would be enriching to the legal and title professional.
When most Americans thought of eminent domain, they understood that the “public good” meant the seizure of private property for better infrastructure such as roads, public buildings, parks, utilities, etc. But in a landmark case (kelo v. the City of New London), the Supreme Court, with Kennedy as the swing vote, decided that a city could use its eminent domain authority if it resulted in an economic improvement to the locality. The precedent here is that private property could be transferred to a developer, for example, to build a new shopping center, factory, or hotel. The city argued that this would create many new jobs and substantially increase tax revenue. In short, the transfer of private property from one owner to another for what the municipality deems is for the greater public good.
Given Kavanaugh’s strong views concerning private property rights, many legal experts believe this decision could be overturned.
In an eye opening article, “New York Touted Real Estate, Eminent Domain in Bid for Amazon,” The Wall Street Journal December 11 reported that, “New York City and state officials dangled prime real estate at the tech giant and offered to use eminent domain to scoop up any necessary properties for a campus, newly disclosed documents revealed.” In the exact words of the Empire State Development Corporation (ESD,) “Subject to public approvals, ESD is empowered to acquire, encumber and dispose of any real property interest, including through eminent domain.”
In a situation reminiscent of Kelo, Amazon announced that they plan to bring 25,000 new jobs over the next 10 years to their New York headquarters, which would benefit the city, at large. But if eminent domain is employed, opponents may file law suits which may eventually reach the Supreme Court. This time with a new deciding vote.
Environmental regulations and eminent domain are just two of the areas where the Kavanaugh confirmation to the court may be pivotal. This new legal landscape is likely to impact the real estate industry in a multitude of ways for years to come.