A new report by Pacific Legal Foundation has found that local governments and lienholders have seized more than 8,950 homes with over $860 million in equity from 2014 to 2021 under laws that allow them to seize properties for unpaid property taxes. The report reveals that taking property to pay property tax debts can be ruinous for people with small tax debts, and even for those who owe less than 1% of a property’s value, officials have taken homes that have been in families for generations, leaving people homeless.
The report highlights several cases, including a county in Michigan that took a man’s house over an $8.41 underpayment. Oakland County later sold the property for $24,500. That case eventually went before the Michigan Supreme Court, which found the practice unconstitutional. The report also found that “the elderly, sick, and poor, along with the mentally ill and racial minorities, are especially at risk.”
Currently, 12 states and Washington D.C. allow the practice, including Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, and South Dakota. The U.S. Supreme Court is set to take up a Minnesota case, Tyler v. Hennepin County, that focuses on whether taking and selling a home to satisfy a debt to the government, and keeping the surplus value as a windfall, violates the Fifth Amendment’s takings clause.
According to Christina Martin, a senior attorney at Pacific Legal Foundation, local governments are keeping the surplus value as a windfall. In one case, a woman failed to pay her property taxes, and the county took her condo, sold it at auction for $40,000 and then kept all $40,000. The report shows that the problem goes beyond the 8,950 homes identified in the report, which represents “a fraction of the scope of home equity theft in the nine states studied,” according to the report.
The foundation is working to ban the practice, which it says is ruining people’s lives. “These laws aren’t just taking family homes. They’re stealing family nest eggs or generational wealth and so I want to take a moment to have us imagine you’ve saved for decades, using your home as this device for your savings. And then you discover that in an instant you have no place to live and no safety net or wealth to pass on to your children,” said Angela Erickson, strategic research director at Pacific Legal Foundation.
