(The Center Square) – Local governments or lienholders have taken more than 8,950 homes with more than $860 million in equity from 2014 to 2021 under laws that allow them to seize properties for unpaid property taxes, according to a new report.
Pacific Legal Foundation, which is working to ban the practice, found that taking property to pay property tax debts can be ruinous for people with small tax debts.
“For tax debts of less than 1% of a property’s value, these laws have allowed officials to take homes that have been in families for generations and even to leave people homeless,” according to the report.
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 found “the elderly, sick, and poor, along with the mentally ill and racial minorities, are especially at risk.”
Twelve states and Washington D.C. allow the practice. The states are Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon and South Dakota, according to the foundation.
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 SCOTUS Blog.
“[Geraldine Tyler] failed to pay her property taxes,” said Christina Martin, a senior attorney at Pacific Legal Foundation. “The property taxes owed were about $2,300. After adding in penalties and interest and fees, she owed $15,000. The county took her condo, sold it at auction for $40,000 and then kept all $40,000. In other words, the county got a $25,000 windfall at Ms. Tyler’s expense.”
The foundation’s report shows Tyler, 94, is not alone.
Angela Erickson, strategic research director at Pacific Legal Foundation, said the problem goes beyond the 8,950 homes identified in the report, which represent “a fraction of the scope of home equity theft in the nine states studied,” according to the report. Researchers only collected information from a fraction of the jurisdictions and only focused on sold homes, she said.
“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,” Erickson said. “That’s devastating. It’s ruining these people’s lives.”