A controversy stemming from New London’s bid to take a slew of homes to make way for a private development had its day in front of the nation’s highest court Tuesday, and the decision regarding a community’s right to take property by eminent domain will have nationwide repercussions.

The Supreme Court heard the case in which the city is squaring off against several residents who don’t want to give up their homes to make way for private economic development, which city officials say will provide a much-needed shot of tax revenue.

The court’s decision could include a new test that would be applied to a city’s or town’s right of eminent domain. But justices Tuesday expressed some doubts that the court has the authority to protect the residents fighting to keep their homes.

The homeowners may be asking the court to “second-guess” governments’ right of eminent domain, said Justice Sandra Day O’Connor, according to the Associated Press.

But O’Connor also asked some pointed questions of the lawyer for New London, Wesley Horton.

If a city wanted to seize property in order to turn a “Motel 6 into a Ritz-Carlton, that would be OK?” she asked.

Horton replied that it would.

‘An Abuse’

The city already has taken homes on 90 acres of land near the Thames River, but met resistance from a group of homeowners led by Susette Kelo. The city intends to take the homes to make way for a convention center and hotel, and will lease the land to a private developer for a dollar a year.

The city’s position has raised the ire of many real estate agents. The National Association of Realtors, along with the National Association of Home Builders, filed an amicus curiae, or friend of the court, brief with the Supreme Court siding with the homeowners.

Both NAHB and NAR long have fought for affordable housing and property rights. In the brief, NAHB recognized the economic development benefits of commercial uses, but questioned using economic development as a sole reason for exercising the right of eminent domain.

“If economic development as a sole justification for public use is decided using a rational basis test with deference to local legislative bodies, then the door is left open for local governments to abuse their eminent domain powers and take developable land from NAHB members as they could from any other property owner,” according to the brief. “Therefore, NAHB must adhere in this case to its long-standing objective to protect private property rights from abuses by local government.”

NAR echoed the importance of private property rights.

“NAR was created to promote and encourage the highest and best use of the land, to protect and promote private ownership of real property, and to promote professional competence,” according to the brief. “Its members contribute to such activities as safeguarding real property rights, promotion of equal opportunity in housing, real estate licensing, neighborhood revitalization, public service and cultural diversity. Like NAHB, NAR and its members embrace a deep appreciation for the value of homeownership in American society, and the importance of safeguarding private property rights.”

Neither the New London Association of Realtors nor the Connecticut Association of Realtors took an official position on the issue, but some local real estate professionals did speak out against the city’s position.

“I think it’s an abuse,” said John Bolduc, executive director of the New London Association of Realtors. “Eminent domain should be reserved for public uses [like for schools or highways]. That’s something for the public good.”

He also called the taking of land for private economic “an infringement on personal property rights.”

But some justices recognized New London’s need for increased tax revenue.

“More than tax revenue was at stake,” Justice Ruth Bader Ginsburg said, according to the Associated Press. “The town had gone down and down [economically].”

Despite the strong opinions being expressed across the country, the case in front of the Supreme Court might not have an expansive effect on the law, said Dwight Merriam, a real estate lawyer with Robinson & Cole in Hartford.

“It could very well be that the takings in New London are upheld, but that the rules are changed a little bit,” he said.

It could tighten the standards, but Merriam pointed out a “labyrinth of underlying factors.” One is Connecticut’s current position on eminent domain. All 50 states lie on a continuum that give more power to either the government or to landowners. Connecticut lies far to one side, with six other states which allow taking land for economic development, according to Merriam. There are eight states on the other end, which expressly do not allow taking land for economic development. Connecticut is also unique in its laws in that it says the government does not have to find blight to take land – an issue in the Kelo v. New London case.

The issue is further complicated by a 23-year-old, precedent-setting case in Michigan that the Michigan Supreme Court overturned in July 2004. The case upheld the city of Detroit’s taking of the homes and businesses of 4,200 people in order to make way for a General Motors Assembly plant, according to Merriam.

It is possible the U.S. Supreme Court’s decision on the Kelo case will give cities and towns across the country more guidance in cases of eminent domain, Merriam said.

If the city is allowed to take the homes, the public purpose requirement will be expanded, according to Eugene Marconi, counsel for the Connecticut Association of Realtors.

“The public purpose is, ‘We’ll be able to generate more tax revenue,'” Marconi said.

If the Supreme Court allows the city to take the homes, “then there is really no definition to public purpose,” he said.

The court is expected to come to a decision in June.