Wisconsin just took a huge step in protecting private property

April 18, 2022 | By DANIEL DEW
Optimized HET

Wisconsin has become the latest state to end the unconstitutional practice of equity theft.

Equity theft is a scheme that allows governments to settle an unpaid tax debt by taking a person’s private property—and all the equity it has accumulated. Governments often sell that property to private investors, who make windfall profits at the owner’s expense without giving them a dime.

This appalling process often comes in the form of “home” equity theft, where an unpaid property tax bill can result in homeowners losing everything.

In many home equity theft cases, the debt owed is less than 1% of the home’s total value. This means that for every dollar local government rightfully collects, it takes another ninety-nine.

To put this absurdity into perspective: Our client Uri Rafaeli—an 83-year-old engineer and great-grandfather living in Michigan—lost his home after he unknowingly underpaid his property taxes by $8.41. His home was then sold to private investors for $24,500.

Fortunately, the Michigan Supreme Court ultimately ruled against the government’s actions.

Wisconsin property owners can now breathe a huge sigh of relief, as they are now protected against this predatory process.

Governor Tony Evers signed SB 829, which forbids localities from taking more than they are owed in property tax foreclosure sales. In a very partisan world, SB 829 received bipartisan support and was championed by the Wisconsin Realtors Association.

While this is a victory for Wisconsin property owners, those who fell prey to equity theft before the passing of the new law suffered greatly.

In 1996, Elmer and Hellen Ritter had their Wisconsin property foreclosed for $84.43 in unpaid property taxes and lost all their invested equity when the county sold the property valued at over $37,000 for $17,345.

With the passage of SB 829, Wisconsinites like the Ritters are entitled to the surplus proceeds when a property is foreclosed.

Wisconsin joins the growing list of states that protect property rights even in cases of foreclosure.

  • North Dakota unanimously passed equity theft reform in 2021.
  • In 2020, the Michigan Supreme Court held that Michigan’s tax foreclosure law violated the State Constitution’s Takings Clause.
  • Montana eliminated equity theft for properties with dwellings in 2019.

Home equity theft is a violation of the Takings Clause of the Fifth Amendment. The Takings Clause forbids governments from taking private property without giving the owners just compensation. Keeping more than is owed is unconstitutional.

Unfortunately, these schemes are all too common in the states that allow them.

Pacific Legal Foundation is currently representing Deborah Foss, a 67-year-old woman with severe health problems who is now living in her car after she lost her home and roughly $210,000 in equity in Massachusetts. (Deborah’s family has launched a GoFundMe to help her secure housing while she continues her fight against this unconstitutional practice.)

Our research shows that governments took home equity totaling over $97 million in Massachusetts, $118 million in Minnesota, and $140 million in New Jersey from individuals between 2014 and 2020. The true cost is likely much higher than these figures, as we covered only a partial list of counties in each state.

There are 11 states that still allow equity theft: Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, and Oregon. Five other states have loopholes allowing for equity theft in specific instances: California, Louisiana, Montana, Ohio, and Texas.

We will continue to fight for people hurt by these unjust and unconstitutional laws until we end home equity theft for every person in every state.