Ruling shows Illinois must address home equity theft

A federal judge found Cook County liable for damages to taxpayers who lost the equity in their homes because of an unconstitutional state law.

A ruling against Cook County highlights Illinois’ status as the only state still unconstitutionally allowing governments to confiscate entire properties without compensation, even when the fair market value far exceeds the amount in taxes owed.

Two bills pending in the General Assembly propose solutions to end this predatory practice.

On May 11, a federal judge found Cook County liable for damages to taxpayers who lost their property under Illinois’ property tax collection provisions.

Under the Illinois Property Tax Code, homeowners can lose their entire property for owing a small fraction of its value in unpaid property taxes. When the government sells a house to pay those taxes, the homeowner gets none of the proceeds, no matter how little was owed in taxes.

This policy is not only unfair but unconstitutional. Not changing it will result in litigation costs for local governments and the state.

In 2023 the U.S. Supreme Court ruled unanimously in Tyler v. Hennepin County that governments cannot seize private property for unpaid taxes, sell it and then not give the owner any surplus over the taxes owed.

States across the country passed legislation to comply with the ruling. According to a survey by the Pacific Legal Foundation, Illinois is the only state with this unconstitutional practice still on the books.

With the Illinois General Assembly scheduled to adjourn the 2026 regular session at the end of the month, lawmakers are running out of time to change the state’s unconstitutional property tax law.

Without reform, the law leaves local governments without a clear constitutional means to enforce collection of delinquent taxes. They are open to litigation and liability if they take more than they are allowed.

Senate Bill 3494, sponsored by Willie Preston, D-Chicago, would:

• Force a judicial sale of a delinquent taxpayer’s property and allow the taxpayer to recover the surplus.
• Increase notice and redemption timelines and requirements.
• Establish a competitive bidding process.

Senate Bill 3940, sponsored by Celina Villanueva, D-Chicago, would:

• Require Cook County and allow downstate counties to purchase delinquent properties for the total amount of tax owed, then sell them at a county tax deed auction, with the taxpayer is entitled to the surplus.
• Increase notice requirements, with additional requirements for Cook County.
• Create a surplus equity fund for paying damages for loss of home equity due to property tax sale.

Each of these proposals has its merits, but regardless of the method, lawmakers must change the law to comply with the U.S. Constitution and remove the uncertainty hanging over homeowners and local governments alike.