The Court held unanimously that a Louisville, Kentucky, city ordinance prohibiting the sale of real property to blacks in white-majority neighborhoods or buildings and vice versa violated the Fourteenth Amendment's protections for freedom of contract.

Previous state court rulings had overturned racial zoning ordinances on grounds of the "takings clause" because of their failures to grandfather land that had been owned before enactment.

The Court, in Buchanan, ruled that the motive for the Louisville ordinance—separation of races for purported reasons—was an inappropriate exercise of police power, and its insufficient purpose also made it unconstitutional.

In 1915, William Warley, the prospective black buyer and an attorney for the National Association for the Advancement of Colored People (NAACP), made an offer to Charles H. Buchanan for his property in a predominantly white neighborhood.

The Supreme Court unanimously agreed with Buchanan: "The effect of the ordinance under consideration was not merely to regulate a business or the like, but was to destroy the right of the individual to acquire, enjoy, and dispose of his property.