Few things draw as much sentimental reverence as a family home. Those walls often hold more than any other building: the people we’ve loved, the rough patches of growing up, the milestones we’ve reached, and memories of both the living and the departed.
For many Americans, a home also represents a person’s life savings in equity. But what occurs when that equity is effectively erased overnight by government action?
Every year, thousands of Americans face this question in one form or another. A new direction may be on the horizon: the Supreme Court on Tuesday reaffirmed that when the state seizes a residence to satisfy a property tax debt, the owner is owed the surplus proceeds from a tax sale—where sale prices are often suppressed—rather than the home’s fair market value.
At the heart of the dispute are the Pung family from Isabella County, Michigan, who found themselves at odds with local authorities over a $1,600 tax bill that the Michigan Tax Tribunal had previously determined they did not owe. The local assessor pressed on, regardless. “I don’t care what he says,” Patricia DePriest, tax assessor for Union Township in Isabella County, remarked about the judge who ruled for the family. During oral arguments, Justice Amy Coney Barrett likened DePriest to Inspector Javert from Les Misérables, noting that it was even stricter because Jean Valjean hadn’t stolen bread.
With penalties tacked on, the total debt the family disputes—$2,242—remains contested to this day. The government confiscated the Pungs’ $195,000 home and sold it at auction for $76,000.
“The proper baseline under the Takings Clause is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country’s history of tax sales,” wrote Justice Samuel Alito for the Court. “We also hold that, following a tax sale, the Eighth Amendment Excessive Fines Clause does not require the government to return more than the surplus proceeds. Neither the Fifth nor the Eighth Amendment requires the government to compensate former owners based on the hypothetical fair market value of their property.”
But the Pungs may still have options. Emphasis on a “fairly conducted” process matters. “Just compensation ordinarily requires paying the owner the fair market value of their property,” noted Justice Clarence Thomas in a concurring opinion. He pointed out that Supreme Court precedent has long required this standard. “I agree that enough historical evidence can justify an exception to the fair-market-value rule, and I join the Court’s opinion on that basis. But any exception grounded in history cannot extend beyond what that history supports. And, in my view, the historical record of tax foreclosure sales shows a greater respect for the principle of just compensation than the county showed the Pungs here.”
In essence, the tax sale must satisfy a certain threshold. The concurrence by Thomas, joined by Justice Gorsuch, concludes the circumstances surrounding the Pungs’ sale were likely unconstitutional. The Sixth Circuit will determine whether it shares that assessment.
“Historical tax foreclosure procedures included robust notice requirements, designed to ensure the foreclosed homeowner had a real chance to preserve their property,” Thomas wrote. “Yet here, the township foreclosed after sending the Pungs’ bill, and the Pungs say they never received notice of their delinquency and would have promptly paid it—had they been informed.” He added that history also calls for processes ensuring that auction prices mirror the property’s fair market value as closely as possible—an outcome that, in this case, did not clearly occur.
“There are tens of thousands of homes foreclosed and sold each year for unpaid property taxes,” Larry Salzman, vice president for litigation and strategy at the Pacific Legal Foundation (PLF)—which represented the Pungs—told me earlier this year. “People aren’t asking the government to act as a real estate agent. They want fair treatment in how homes are sold. When auctions are not publicly advertised, inspections aren’t allowed, and purchases must be in cash, the sale prices tend to fall far short of the properties’ true value.”
For much of American history, a large share of local officials treated property owners who fell behind on taxes as if their only recourse was to lose their homes and forfeit any equity—often described as home-equity theft. A homeowner’s hardship, in that view, became the government’s profit.
That approach began to change in theory not long ago. In 2023, the Supreme Court ruled in Tyler v. Hennepin County that it was illegal for the state to seize Geraldine Tyler’s Minneapolis condo to satisfy a $15,000 debt and keep $25,000 of the proceeds. Chief Justice John Roberts, writing for the Court, stated: “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. The taxpayer must render unto Caesar what is Caesar’s, but no more.”
Tyler served as a compelling benchmark. She was in her eighties when she moved from her condo to a retirement community, increasingly frail and uneasy amid reports of neighborhood crime. Carrying a modest tax debt of $2,300, the remaining $13,000—roughly 85 percent of the total—came from penalties, interest, and fees. “Most people who lose their property this way are dealing with medical issues, or they’re elderly,” noted Christina M. Martin, a senior attorney at the PLF who represented Tyler, in 2022. She later argued the case before the Supreme Court in the following year. Tyler was 94 when the decision bore her name.
Initially, the government kept the profit from the Pungs’ sale as well. It only returned the surplus after losing that claim in federal court. Even so, that gesture was far from comforting. “For them, this wasn’t merely a house,” Salzman commented. “This was the family’s financial security.”
Isabella County had assessed the Pungs’ three-thousand-square-foot home at about $194,400; in 2020, the year after the auction, it sold on the open market for $195,000. Accordingly, the family had effectively lost roughly $118,000 in equity, vastly exceeding the disputed tax amount.
And in a twist of fortune, the property changed hands again last year, this time for $342,000.
