The Supreme Court’s 5-4 Defense of Marriage Act decision is going to change real estate and mortgage lending. More people are going to come into the marketplace as buyers and borrowers, and that will be good for everyone.
The point is very simple: For generations an unknown number of people have not entered the real estate marketplace as buyers or borrowers because the barriers were complex and costly.
In contrast, when my wife and I buy property as a married couple, we buy as a “tenancy by the entireties.” We each have a 100-percent interest in the property — if one of us dies the property automatically belongs to the other. There is no transfer tax or inheritance tax because the legal theory is that each spouse already owns 100-percent of the property.
Until recently the legal benefits of marriage were largely off-limits to same-sex couples. Federal law did not recognize their relationships and to this day that is the case with more than 30 states.
In such a situation buying real estate has been difficult for same-sex couples. There has been a need for partnership agreements, wills, living wills, and other costly legal paperwork. For VA mortgage borrowers, the financing available to a married couple with a man and a woman has been unavailable to same-sex couples on an equal basis. With FHA loans the story is different: lenders cannot consider marital status, gender, gender identity or sexual orientation when reviewing a loan application. In effect, the FHA program seems consistent with the DOMA decision.
“When New York adopted a law to permit same-sex marriage,” said the Windsor decision, “it sought to eliminate inequality; but DOMA frustrates that objective through a system-wide enactment with no identified connection to any particular area of federal law. DOMA writes inequality into the entire United States Code. The particular case at hand concerns the estate tax, but DOMA is more than a simple determination of what should or should not be allowed as an estate tax refund. Among the over 1,000 statutes and numerous federal regulations that DOMA controls are laws pertaining to Social Security, housing, taxes, criminal sanctions, copyright, and veterans’ benefits.
“DOMA’s principal effect,” the decision continued, “is to identify a subset of state sanctioned marriages and make them unequal. The principal purpose is to impose inequality, not for other reasons like governmental efficiency. Responsibilities, as well as rights, enhance the dignity and integrity of the person. And DOMA contrives to deprive some couples married under the laws of their State, but not other couples, of both rights and responsibilities. By creating two contradictory marriage regimes within the same State, DOMA forces same-sex couples to live as married for the purpose of state law but unmarried for the purpose of federal law, thus diminishing the stability and predictability of basic personal relations the State has found it proper to acknowledge and protect.”
How will real estate change after the DOMA decision?
First, lawfully-wedded same-sex couples will more readily be able to consider real estate ownership as a housing option because they will now have the same federal protections and benefits as other married couples. There will be more demand, more pressure to raise home values.
Second, with lower costs of ownership — because special legal papers will no longer be required — real estate will become a more attractive housing option for same-sex couples. Again, more demand and more pressure to raise home values will result.
Third, states which now deny recognition to same-sex couples will surely notice the number of home sales — and dollars — lost to current policies. Major corporations are likely to prefer states where same-sex couples are welcome. Because of the Supreme Court decision public views will change.
Think it won’t happen? In 1948 President Harry Truman desegregated the Armed Forces. However, schools on military bases continued to be segregated until 1953 when they were desegregated by President Dwight Eisenhower – including schools on bases in states where segregation was still practiced.
As with school segregation, over time fewer and fewer states will make any distinction among wedded couples. The end result will be a financial windfall, with more home sales and bigger local mortgages.