Opinion: It’s unconstitutional for government to take the entire value of a home to satisfy a smaller tax debt. Yet Arizona law still allows the practice.
Patricia Miller lost her childhood home in 2010 over only $808 in unpaid property taxes.
The mortgage had been paid off many years before, when Patricia’s father, Devoe Poleeson, owned the small Phoenix home.
But less than a thousand dollars of unpaid property taxes was all the government needed to sell the tax debt — and the power to foreclose on the home — to a private investor.
That’s because Arizona law allows counties to sell tax liens on delinquent properties to private investors, who can foreclose on the property three years after a sale.
Investors get to keep all the equity, leaving the homeowner with nothing.
Court found these takings unconstitutional
The U.S. Supreme Court recently ruled that it is unconstitutional for a local government to take the entire value of a home to satisfy a smaller property tax debt.
Yet according to a report by my law firm — Pacific Legal Foundation (PLF) — 20 states and Washington D.C., including Arizona, allow this practice of home equity theft in some form.
PLF sent letters to these states on May 30 demanding that they change their laws to comply with the Supreme Court’s ruling.
PLF also published guidelines and model policy to help these states reform their laws, and pledged to offer legal assistance to legislators who request it.
Arizona should follow Nebraska’s lead.
Legislators there saw the writing on the wall after the ruling and passed Legislative Bill 727, which ended home equity theft in the state.
If states don’t outlaw them, owners can sue
The Supreme Court’s ruling was clear: home equity theft violates the constitution’s takings clause, which bars the government from taking private property without just compensation.
If states like Arizona don’t change their laws to comply with this ruling, property owners can now bring lawsuits to recover equity that is stolen from them.
Writing for the court in a 9-0 decision, Chief Justice John Roberts said, “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.”
Roberts was referring to Geraldine Tyler, a 94-year-old Minnesota grandmother.
In 2010, Tyler fell behind on the property taxes for her one-bedroom condo after she moved into a senior living apartment. As the penalties and interest mounted, Tyler’s debt grew to $15,000.
County officials then seized her condo and sold it for $40,000. Then, rather than refund the $25,000 difference to Tyler, the county kept it all.
At least 117 homes were taken in Arizona
Such stories are surprisingly common.
PLF found that from 2014 through 2021, at least 8,950 homes and more than $860 million in life savings were lost to home equity theft.
In Arizona, at least 117 homes were taken, and homeowners lost, on average, 99% of their equity.
While every story is different, certain patterns are consistent.
For example, the tax debts are typically piddling amounts — in one infamous case from Michigan, county officials seized and auctioned off Uri Rafaeli’s home after he underpaid his property taxes by a meager $8.41.
And in many cases, the targets of home equity theft are vulnerable — seniors on fixed incomes; people struggling with health issues or mental infirmities; families faced with job loss or other economic difficulties.
Lawmakers can end this, once and for all
In taking Tyler’s case to the Supreme Court, PLF was standing up for all victims of abusive forfeiture policies.
PLF has fought to end home equity theft for the better part of the last decade, and we’ve made serious progress in convincing states to end this abuse of their citizens.
The Supreme Court’s unanimous decision has put great pressure on state legislatures to end the practice once and for all.
But states or localities are already attempting to circumvent the Supreme Court’s ruling and are continuing to profit off the misery of citizens.
PLF will continue to shine a spotlight on these abuses, fighting them in court and in state capitals.
Jim Manley is state legal policy deputy director at the Pacific Legal Foundation, a nonprofit legal organization that defends Americans’ liberties from government overreach and abuse. On Twitter: @PacificLegal.