Pacific Legal Foundation demands states change home equity theft laws, counties stop stealing equity

Washington, D.C.; May 30, 2023: Today, Pacific Legal Foundation (PLF) sent letters to 21 states plus Washington D.C., demanding that they change their laws to comply with the recent Supreme Court ruling in Tyler v. Hennepin County, declaring home equity theft to be unconstitutional. 

“Last Thursday, in a major victory for property rights, the Supreme Court ruled that home equity theft is unconstitutional,” said Jim Manley, state legal policy deputy director at Pacific Legal Foundation. “This ruling has immediate implications for states that allow home equity theft. If these states don’t change their laws to comply with the Court’s ruling, they could face damages in the millions in future lawsuits.” 

Pacific Legal Foundation has published guidelines and model policy to help states reform their laws, and pledges to offer legal assistance to legislators who request it. 

PLF also plans to send letters to tax collectors that routinely profit from home equity theft, warning them to stop stealing property owner’s equity or face the consequences in court—including monetary damages and attorney fees. 

A recent study by PLF found that 21 states plus Washington, DC allow home equity theft in some form:  

• Twelve states currently allow home equity theft: Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, South Dakota, and the District of Columbia. 
• Nine states permit home equity theft in limited circumstances: Alaska, California, Idaho, Montana, Nevada, Ohio, Rhode Island, Texas, and Wisconsin. 

Writing for the Supreme 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.” 

North Dakota had changed its laws to ban home equity theft in advance of the Tyler decision. Montana and Wisconsin had enacted legislation banning most residential equity theft, but still left loopholes for abuse. The remaining states should follow their lead and end the practice of home equity theft.