Illinois enacts bill protecting homeowners from government seizure

Springfield, Illinois; July 14, 2026: Illinois Gov. J.B. Pritzker signed legislation on Friday requiring the government to return surplus home equity to homeowners when it sells their property to collect a property tax debt. HB 4537 establishes mandatory auction and notice requirements for tax-delinquent properties going forward, provides a way for homeowners previously impacted to receive funds owed, and ensures that any equity above what is owed goes back to the homeowner — not the government.

“Thousands of Illinois homeowners have lost an average of 85 percent of their equity due to unconstitutional property tax forfeiture laws — over unpaid tax bills that amounted to a fraction of their property’s value — together exceeding $303 million,” said Kileen Lindgren, senior state policy manager with Pacific Legal Foundation. “This new law recognizes that the government is entitled to collect what it is owed, and not a dollar more.”

Home equity theft occurs when a government forecloses on a property, either keeps it or sells it at auction, and retains all value or proceeds beyond the property tax debt. The practice has devastated homeowners across the country who have lost equity over relatively small tax delinquencies — one as low as a miscalculation of $8.41. Three years ago, the U.S. Supreme Court ruled the practice unconstitutional in Tyler v. Hennepin County — in a case brought by Pacific Legal Foundation — and Illinois was the last state to respond.

HB 4537 is a big step forward in ensuring that Illinois homeowners keep what is theirs. Pacific Legal Foundation has worked for years to end home equity theft through litigation and policy reform nationwide and is continuing that effort in states where homeowners remain at risk.