Government is Stealing the Homeowner’s Equity

Last week, Reason published an article and a video by liberty advocate and former consumer reporter John Stossel on the ongoing issue of home equity theft — a tax policy loophole that costs homeowners hundreds of thousands of dollars for just a few thousand in back taxes.

The process works like this: when a property owner misses tax payments, the government — or, in some states, private entities — can take ownership of that debt, foreclose on the property, and sell it to recover the outstanding balance. The issue is that any excess proceeds from the sale often go to the holder of the tax debt, not to the original homeowner.

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Fortunately, the Supreme Court recently ruled unanimously (9-0) that these practices are unconstitutional. Yet, the battle is far from over. Many counties and private organizations continue using their financial resources to delay justice, keeping the funds from reaching victims by extending the legal process.

Stossel highlights the struggles of several individuals harmed by this policy, including Uri Rafaeli, who lost $24,500 over a minor interest miscalculation of just $8.41, and sixty-seven-year-old Deborah Foss, who lost her $242,000 home and was left living in her car.

To learn more about this critical issue, read Stossel’s article and check out the work being done by the Pacific Legal Foundation.