In May of this year, a federal judge ruled that Cook County, Illinois, is liable for constitutional violations when it seized people’s homes over property tax debts and left them with nothing. That scheme—sometimes referred to as home equity theft—sounds nightmarish. The reality is harsher, however, when you consider the U.S. Supreme Court unanimously ruled the practice unconstitutional nearly three years before this recent ruling.
Illinois Gov. J.B. Pritzker last week signed a bill into law that finally brings the state into the present. The legislation promises homeowners will receive the surplus proceeds when the government takes their home to satisfy a debt and paves the way for those with previous claims to receive compensation.
In May 2023, the high court said in Tyler v. Hennepin County that the government could not justify keeping the profit after seizing and selling an elderly Minneapolis woman’s condo to collect on a modest tax debt. The plaintiff, Geraldine Tyler, had relocated to a retirement community after various neighborhood incidents, including a shooting, left her feeling unsafe. But she struggled to pay both her new rent and the taxes on her property. A $2,300 tax debt became about $15,000 with penalties, interest, and fees—after which the government took possession of the home, sold it at auction, and kept the surplus.
“A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” wrote Chief Justice John Roberts for the Court. “The taxpayer must render unto Caesar what is Caesar’s, but no more.” The ruling was grounded in the Takings Clause of the Fifth Amendment, which promises “just compensation” when private property is taken for public use.
Yet Illinois was an example of how a state could cynically keep home equity theft on life support. Local governments there would sell tax liens to private investors. After a redemption period, if the debtor could satisfy what is owed—including steep interest and fees—then the investor would petition for the deed to the home, having effectively purchased the property for the value of the debt. With limited exceptions, the former owner was then left with nothing.
“Thousands of Illinois homeowners have lost an average of 85 percent of their equity due to unconstitutional property tax forfeiture laws — over unpaid tax bills that amounted to a fraction of their property’s value — together exceeding $303 million,” said Kileen Lindgren of the Pacific Legal Foundation, which represented Tyler, in a statement. “This new law recognizes that the government is entitled to collect what it is owed, and not a dollar more.”
