Ending 40 years of judicial deference to administrative agencies’ interpretations of ambiguous statutes governing them, the Supreme Court of the United States finally pulled the plug on this experiment that it, just five years earlier, had placed on “life support.” Overruling Chevron v. Natural Resources Defense Council, the Court held that courts should no longer defer to an agency’s interpretation of an ambiguous statute. Instead, according to the Supreme Court in its recent opinion in Loper Bright Enterprises, Inc. v. Raimondo, judges must interpret statutes independently, as it is the province of the courts to determine the law.

The petitioners in Loper, small fishing companies, challenged a rule that required them to pay for monitors to accompany their fishing boats. Lower courts upheld the rule under the Chevron doctrine, which required a two-step framework: (1) if a court finds a statute ambiguous, then (2) the court must defer to the agency’s reasonable interpretation, rather than discerning for itself the correct interpretation of Congress’s language. Because it overruled Chevron, however, the Supreme Court sent the case back down to the lower courts to consider the rule without giving the agency any deference.

Penning the Supreme Court’s majority opinion, Chief Justice Roberts began with a constitutional and historical survey of the province of the judiciary. Article III of the U.S. Constitution assigns the power to adjudicate disputes to the federal judiciary, and the Framers structured the Constitution to allow judges to do so independent from political branches’ influence.

Chief Justice Roberts also reviewed the Administrative Procedure Act (“APA”), which prescribes procedures for agency action and delineates the basic contours of judicial review of such action, directing that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” But the APA prescribes no standard for courts to employ in answering those legal questions, even those involving ambiguous laws. Courts fulfill their role by ensuring that agencies engage in reasoned decision-making within the boundaries of their delegated authority.

Thus, the deference that Chevron required of courts reviewing agency action — that is, to defer to the agency if it offers a permissible construction of an ambiguous statute — cannot be squared with the APA. Instead, Chevron forbade the court from exercising its independent judgment to determine what Congress’ language means by demanding deference to agency interpretations, even where they have been inconsistent, and even where judicial precedent holds that an ambiguous statute means something else.

In overruling Chevron, Loper marks the end of an era in administrative law. Now, the public will enjoy a more level playing field when challenging government actions. Chevron had sometimes insulated agency rulemaking from judicial scrutiny, even where the agency relied on a new interpretation of an unchanged statute to implement policy that departed from the historical interpretation and application of the statute. Loper will make it more difficult for an agency to change its legal interpretations of statutes in response to changes in political leadership because the judiciary, not the agency, will determine the statute’s meaning. At the same time, the decision gives some weight to an agency’s statutory interpretations. While Loper clearly instructs courts to exercise independent judgment and not defer to agency rulemaking, an agency’s statutory interpretation may still be considered persuasive based on factors such as whether its interpretation was adopted contemporaneously with the statute’s enactment and its consistency over time.

Impact on Affordable Housing

Similar to other federal agencies, the United States Department of Housing and Urban Development (“HUD”) and Department of Agriculture (“USDA”) rely heavily on federal rulemaking to implement regulations authorized through legislation passed by Congress. Examples of major pieces of legislation that have impacted the affordable housing industry and led to HUD and USDA rulemaking include:

• The Housing Act of 1937 (Wagner-Steagall Act)
• The Fair Housing Act (Civil Rights Act of 1968)
• Low-Income Housing Preservation and Resident Homeownership Act
• Emergency Low Income Housing Preservation Act
• Multifamily Assisted Housing Reform and Affordability Act of 1997

Due to the overturning of Chevron, any rulemaking proposed by HUD or USDA may be more vulnerable to lawsuits than in years past. For instance, many of HUD and USDA’s policies are authorized through the Fair Housing Act, which contains fairly broad and vague language but is often applied by HUD and USDA to implement new federal rules. Proposed rules such as “Reducing Barriers to HUD-Assisted Housing,” published on April 10, 2024, changes the requirements for owners of HUD-assisted housing when screening applicants based on prior criminal records. Prior to the Loper decision, a court would have provided deference to HUD’s interpretation of the Fair Housing Act in implementing this proposed rule, but now a court might view HUD’s new screening requirements as an overreach of HUD’s authority under the Fair Housing Act or the Housing Act of 1937. The Loper decision could have an impact on HUD and USDA federal rulemaking in a variety of areas such as eviction procedures, tenant selection, prepayment of Section 515 mortgages, design and construction standards under the Fair Housing Act, and any other federal rules that might be seen as an overreach of agency authority.

AGG’s Affordable Housing team will continue to monitor the industry’s legal reaction to the Loper decision and its impact on federal rulemaking.