Governor J.B. Pritzker has signed legislation that guarantees property owners will receive any surplus after a government takes their home to settle a tax obligation.
Earlier this year, a federal court determined that Cook County, Illinois, ran afoul of the Constitution by confiscating residents’ homes to satisfy delinquent property taxes, leaving them with nothing. The phenomenon commonly called home equity theft sounds horrifying, and the actuality is even starker when weighed against a U.S. Supreme Court ruling that unanimously condemned the practice almost three years earlier.
Last week, Illinois Gov. J.B. Pritzker enacted legislation aimed at bringing the state into step with contemporary standards. The new law ensures homeowners will receive the surplus proceeds when a government takes their residence to satisfy a tax debt and creates a pathway for those with prior claims to obtain compensation.
In May 2023, the Supreme Court, in Tyler v. Hennepin County, ruled that the government could not justify keeping the profit after seizing and selling an elderly Minneapolis resident’s condo to cover a modest tax debt. The plaintiff, Geraldine Tyler, had moved to a retirement community following a series of neighborhood incidents, including a shooting, which left her feeling unsafe. Yet she struggled to pay both her new rent and the property’s taxes. What began as a $2,300 tax bill swelled to roughly $15,000 once penalties, interest, and fees were added—after which the government seized the home, sold it at auction, and retained 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 decision rested on the Takings Clause of the Fifth Amendment, which promises “just compensation” when private property is taken for public use.
Yet Illinois stood as an example of how a state could sustain home equity theft through cynical practices. Local governments there would sell tax liens to private investors. After a redemption period, if the debtor could satisfy what was owed—including steep interest and fees—then the investor would petition for the deed to the home, effectively purchasing the property for the value of the debt. With limited exceptions, the former owner was 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.”
