Michigan's highest court this month dealt another blow to the practice known as home equity theft, further chipping away at the state's ability to seize people's homes and keep the profits when owners accrue modest tax debts.
That such a decision was necessary is troubling for a few reasons. There is, of course, the perversion of the practice itself, which has seen the government rob people effectively of everything they have when they're already down on their luck. Michigan woman Tawanda Hall, for example, fell $900 behind on her property taxes; with penalties, interests, and fees, she owed $22,642. So Oakland County, Michigan, seized her home and sold it. The final price exceeded $300,000, about $286,000 more than what she owed. She didn't get a dime.
Also vexing is that the Michigan Supreme Court ruled home equity theft unconstitutional in 2020. The plaintiff in that case, Uri Rafaeli, underpaid his tax bill by $8.41, setting in motion a series of events that saw the government seize his property, sell it, and keep the surplus equity. That violated the Takings Clause of the Fifth Amendment, the court said, which pledges that people must receive "just compensation" when the government usurps private property. Put more plainly, the government can take property to satisfy a debt, but it cannot then pocket the profit. (In 2023, the Supreme Court confirmed this principle in Tyler v. Hennepin County, a case brought by a Minnesota woman who lost her condo and all of its equity over a modest tax debt.)
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