While Minnesota is often called the land of 10,000 lakes, local governments today treat it as the land of 10,000 takes. Between 2014 and 2020, Minnesota counties took thousands of homes and millions of dollars in savings from residents struggling to pay their tax bills. This was unjust and unconstitutional.
Consider the story of Ms. Geraldine Tyler, a 92-year-old widow who could not pay the property taxes on her Minneapolis condo.
In 2010, Geraldine’s neighborhood was experiencing a troubling increase in violence and crime. Concerned about this trend and seeking a more secure environment, Geraldine decided to rent an apartment in a safer neighborhood. Focused on paying rent at her new residence, she could no longer pay the property taxes she owed on the condo. She ended up accumulating $2,311 in tax debts to Hennepin County.
The County pounced. It took ownership of Geraldine’s condo and sold it for $40,000. Rather than retaining what was needed to satisfy the debt — $15,000 after accounting for penalty fees, interest, and costs — and returning the rest of the proceeds to her, the County kept every penny. In other words, it stole $25,000 — the difference between Geraldine’s debt and the sales price of her condo.
From Geraldine’s perspective, the situation is even worse: Although the County sold it for $40,000, the true value of her condo was estimated to be $93,000. That’s $78,000 in lifetime savings that Hennepin County extinguished.
While government generally has the power to seize and sell homes in order to collect unpaid taxes, that doesn’t mean it can take more than it’s owed. But believe it or not, governments routinely commit home equity theft in Minnesota — one of a dozen states across the U.S.
A new study by Pacific Legal Foundation reveals that between 2014 and 2020, more than 1,200 homeowners across 12 Minnesota counties lost their homes — and all the savings stored in those homes — through home equity theft. For the 570 homeowners for whom complete data is available, total losses amounted to about $118 million in home equity.
In other words, Minnesota counties sold off residents’ homes and kept all the proceeds, even though the tax debts were worth, on average, just 8% of their home values. That means that victims of this predatory tax foreclosure scheme lost 92% of their home equity.
Fortunately, the Geraldine has bravely chosen to stand up for her rights and those of her fellow Minnesotans. With help from PLF, she is challenging Hennepin County’s predatory tax foreclosure scheme in court.
While home equity theft is permitted under the state’s tax code, the state and federal Constitutions represent higher law. The Fifth Amendment to the U.S. Constitution prohibits the government from taking private property for public use without just compensation. And while government can impose penalties to punish the late payment or nonpayment of taxes, the Eighth Amendment to the Constitution prohibits excessive fines. Analogous provisions of the Minnesota Constitution place similar limitations on government power.
Around the nation, to paraphrase Minnesota native Bob Dylan, the times are already “a-changing.” The Michigan Supreme Court recently invalidated that state’s home equity theft regime in Rafaeli v. Oakland County. PLF represented Uri Rafaeli, who lost his house — and all of its equity — over a tax debt of $8.41. The Court held that “government shall not collect more in taxes than are owed, nor shall it take more property than is necessary to serve the public.”
PLF is working to help Geraldine end home equity theft in Minnesota through litigation, but final court rulings take time and might provide only limited relief. In addition to righting past wrongs, Minnesotans should demand that their state and local legislators adopt reforms like those recently enacted in other states to stop this appalling injustice now.
Just as citizens should follow the law and pay their property taxes, government must also abide by the law and stay within its constitutional limits. Local governments shouldn’t get to take a mile when they’re only owed an inch, and homeowners like Geraldine shouldn’t be victimized by government-orchestrated theft.
It’s time to end home equity theft now.
Carol Park is strategic research analyst, and David Deerson is an attorney, at Pacific Legal Foundation, a nonprofit legal organization that defends Americans’ liberties when threatened by government overreach and abuse. They are co-authors of the new report, Looking Up: Ending Home Equity Theft in the North Star State.
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