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10/01/2021

John McGinnis on Eviction Moratoriums and the Contracts Clause
Michael Ramsey

At Law & Liberty, John McGinnis: Do Eviction Moratoriums Violate the Contract Clause?  From the introduction: 

The Supreme Court recently held that the Biden Administration’s extension of a moratorium on evictions to combat the pandemic was beyond the limited authority of its Center for Disease Control and Prevention. But twelve states have used their own police power to keep eviction moratoriums in place. These moratoriums are not permitted under the original meaning of the Constitution. They also represent an immoral imposition of social costs on a small class of people—owners who rent out their property. And they will harm people of modest means in the future by discouraging investment in affordable rental property. The continuing popularity of such moratoriums over eighteen months after the appearance of Covid-19 shows how far we have traveled from a key decision of our Founders—to put vested rights, like contractual obligations, beyond the power of government to destroy.

The Contract Clause

The Constitution has a specific provision that prevents states (or their localities operating under state authority) from interfering with existing contracts to the benefit of one party at the expense of the other. It expressly provides that no state may pass a law “impairing the obligation of contracts.” It is hard to argue that an eviction moratorium does not work such an impairment.

Consider the sweeping moratorium passed by the city of Los Angeles, the second-biggest metropolis in the United States. First, the moratorium declares that for the period of the Covid emergency (an emergency that is still ongoing, according to the city) and for twelve months afterwards, the tenant cannot be evicted from the rental property when he cannot pay rent due if he suffered any loss of income related in any way to Covid. The tenant also cannot be evicted for this period for other “non-fault reasons,” such as the property owner’s wanting to occupy the property himself. The law also bars eviction even if the tenant is joined by other occupants or pets that are expressly forbidden by the lease.  

Under any reasonable definition of impairment, the Los Angeles eviction moratorium is a substantial one. While the rental obligation is deferred rather than eliminated, the usual requirement that rent be paid monthly reflects the recognition that deferred payments are less likely ever to be made. Moreover, the requirement that only the tenant and others designated in the lease occupy the property is designed to safeguard against the value of the owner’s property being substantially diminished by excessive wear and tear.  

Nevertheless, the Ninth Circuit summarily dismissed a Contract Clause challenge to the moratorium. And it was right to do so because the controlling precedent of the Supreme Court has gutted the Contract Clause. In Home Building and Loan Association v. Blaisdell, a case decided during the Depression, the Court faced not an eviction but a mortgage moratorium. The statute provided that a mortgagor who was in default could apply to state court for an extension for the mortgage period so long as he paid a reasonable rent for the period. The statute thus took away the essential bargained-for right of foreclosure.  

Although the Court had in the nineteenth century invalidated similar statutes that had diminished core contractual rights, the Blaisdell Court upheld the statute in an opinion notable for its repudiation of originalism. The Court said the statute must be considered “in light of our whole experience and not merely in light of what was said a hundred years ago.” Thus, because of “a growing recognition of public needs . . . the reservation of a reasonable exercise of the protective power of the States is read into all statutes.” Ultimately, the Court reasoned that the statute should be upheld because of the difficult economic conditions.  

In one of the more powerful dissents ever written, Justice George Sutherland observed that the very arguments for state power that the majority made were also offered by the opponents of the Contract Clause at the Convention and were rejected by its adoption. The Clause had been passed to protect against debtor relief legislation adopted when economic conditions were perceived to be harsh—precisely the conditions which the Court was using to permit impairment. As Justice Sutherland dryly concluded, “With due regard for logical thinking, it legitimately cannot be urged that the conditions that produced the rule may now be invoked to destroy it.”

Agreed.  And I hate agreeing with Sutherland, who was not a very good originalist in some other respects.

(Thanks to Michael Rosman [Center for Individual Rights] for the pointer.)