How One State Is Unlawfully Stripping Wealth From Homeowners and Handing It Over to Private Investors

“A taxpayer must render unto Caesar what is Caesar’s, but no more,” Chief Justice John Roberts wrote in the U.S. Supreme Court’s unanimous 2023 decision in Tyler v. Hennepin County.

The landmark ruling reaffirmed a basic constitutional principle: When the government takes a home to settle a tax debt, it cannot keep more than what’s owed.

And yet in Illinois, that’s exactly what keeps happening.

Since 2019, more than 1,000 owner-occupied homes in Cook County have been seized through property tax foreclosure, according to a joint investigation by Injustice Watch and the Investigative Project on Race and Equity Partnership. More than half of those homeowners owed $1,600 or less in back taxes, and in some cases, as little as $200.

Altogether, $2.3 million in tax debt triggered the loss of homes valued at an estimated $108 million, stripping families of more than $100 million in equity. Much of that wealth has ended up in the hands of private investors.

“Illinois is still confiscating more than what’s owed in property taxes,” says Christina Martin, senior attorney at the Pacific Legal Foundation, and one of the lawyers who originally argued the Tyler case.

When a homeowner falls behind on property taxes in Illinois, the county places a tax lien on the home for the amount owed. That lien gives the holder the right to seize and sell the property to recover the debt.

“State law requires that the asset be auctioned off, essentially to try to recoup their overdue taxes,” explains Bryce Hill, director of fiscal and economic research at the Illinois Policy Institute.

But things take a troubling turn next.

Instead of the county collecting the debt itself, counties sell those tax liens to third-party investors, often private equity firms.

“Typically, [the state is] giving it over to private investors who are purchasing these tax liens and sort of acting as a tax collector,” says Martin.

Once they own the lien, those investors can foreclose on the home and sell the property to recoup the overdue taxes. But they’re not just keeping what’s owed. They’re keeping everything, including any equity the homeowner had in the property.

That means if someone owed $1,000 in taxes on a $300,000 home, they could lose their home, and the investor could pocket the other $299,000 in equity.

What makes this issue especially urgent in Illinois is the state’s disproportionately high property tax burden. According to the Tax Foundation, Illinois has the highest property taxes in the nation when measured as a percentage of owner-occupied home value, making it easier for homeowners to fall behind on their bills.

That strain is taking a toll, says Hill. Among Illinoisans considering a move, high property taxes rank consistently as the top motivating factor. And since the 2020 census, more than 418,000 people have left Illinois.

The burden of Illinois’ tax foreclosure system doesn’t fall evenly.

“Minority communities in Chicago and Cook County, specifically in the south and southwest sides, are overwhelmingly going to be those who are most at risk,” says Hill.

The numbers back that up. In 2023, the property tax collection rate in Ford Heights, a predominantly Black community on Chicago’s South Side, was just 31.4%, according to Hill. Other nearby communities, including Harvey, Phoenix, and Robbins, had collection rates of 61% or lower—well below the county average.

Seniors are also especially vulnerable. Across the country, older homeowners are struggling to keep pace with rising tax bills. In Illinois, that pressure is amplified by the nation’s highest effective property tax rate and few property tax exemptions for senior homeowners.

In 2024, more than 800 senior homeowners in Cook County had their unpaid tax debts sold at auction—the highest number in at least a decade, according to Injustice Watch. If they’re unable to repay their new creditors with interest, they risk losing their homes and the equity they’ve built over a lifetime.

When the Supreme Court handed down its Tyler v. Hennepin decision in 2023, it sent a clear message: States cannot seize more than what’s owed in tax foreclosure cases. In response, most states with similar laws took action to bring their policies in line with the Constitution.

“Illinois is the only state in the nation that has failed to fix this law after Tyler,” says Martin. “Some of the fixes have been questionable in other states. … But at least the other states have tried,” she adds. “I think they have an obligation to fix their law, to comply with the Constitution, and the fact that they haven’t is really sad.”

In other states—such as Michigan, New York, New Jersey, Arizona, and Alabama—reforms are at least underway. Some have shifted the burden to property owners to come forward before their property is sold. Others are working on refund mechanisms or restitution programs.

Meanwhile, Illinois continues to allow private investors to profit from home equity seized through tax lien foreclosures.

To make matters worse, most of the money collected from these high tax bills isn’t going toward improving local services. 

“Since 1996, fewer than 50 cents of every additional property tax dollar collected has gone toward the provision of services,” says Hill. “The rest has gone to debt servicing, whether that be bond debt or pension liabilities.”

That means that homeowners are paying more and getting less.

Without action, Illinois remains out of step, not just with the Constitution, but with the growing number of states attempting to protect their most vulnerable homeowners from losing everything over small debts.

The best way to avoid losing your home to a tax lien foreclosure is to stay informed, act early, and know your rights.

“Pay your property taxes for sure,” advises Martin. “And if there’s no way you can get your taxes paid, reach out to an Illinois lawyer … who can hopefully help you protect your constitutional rights.”

Set reminders for due dates, and take advantage of early payment discounts or installment plans if your county offers them. If you are a senior, are on a fixed income, or have recently fallen behind, check to see whether you qualify for tax relief programs, deferrals, or exemptions in your area.

Don’t assume you’ll be notified if something goes wrong. Mistakes and missed mail happen. Check your county treasurer or tax assessor’s website to track your account status. Some counties even offer email alerts if your tax bill becomes delinquent, so sign up if you can.

If you know you’re unable to pay your tax bill in full, don’t wait for a lien sale to be scheduled. Call your local tax office to ask about payment plans or temporary hardship programs. Then consult with a legal aid organization or a property attorney who understands the foreclosure process.

While Tyler v. Hennepin clarified what’s unconstitutional, that doesn’t mean every state or investor is complying.

“They’re feigning compliance with Tyler so they can keep bleeding people dry,” Martin warns of some bad actors still profiting from equity theft. That’s why it’s essential to get legal help if your home is at risk, especially in a state like Illinois, where the laws have yet to catch up.

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