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By Jon Coupal and Jim Manley
In May of last year, the United States Supreme Court ruled that home equity theft — the practice of governments taking not just what is owed, but the entire property when they collect a property tax debt — is unconstitutional. Yet almost a full year later, several states have failed to change their laws to comply with that decision.
California is one of those states — and by continuing to allow local governments to seize property without compensation, the state will likely face serious monetary liabilities for damages in future lawsuits from wronged property owners. We urge state legislators to move swiftly to end home equity theft in the Golden State once and for all.
Under normal circumstances, when a homeowner fails to pay property taxes, the government can seize the property and sell it off at public auction to satisfy the tax debt. Once that debt is paid, any surplus funds from the sale, less interest and penalties, should be returned to the property owner. However, in many states, local governments keep the entire sum, leaving the homeowner with nothing.
Unsurprisingly, the victims of these shady tax foreclosure laws are all too often citizens who fell behind on their taxes because of health issues, job losses or other unforeseen events — vulnerable people with limited means to fight back. In many cases, governments seize homes from aging seniors in cognitive decline, or individuals with mental disabilities, often based on relatively small amounts of tax debt, leaving the homeowner destitute.
And the losses to homeowners are considerable: a nationwide study by Pacific Legal Foundation found that from 2014-2021, home equity seizures led to at least 8,600 lost homes and more than $780 million in lost life savings.
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