Final SCOTUS Argument of the Term Should Be Big Win for Property Rights

All the justices were skeptical of a practice 14 states allow: seizing the entire value of a home -- the owner's "equity" -- to pay off tax debts.

Yesterday, the Supreme Court heard its last argument of the term. Tyler v. Hennepin County scrutinizes the dubious practice of “home equity theft,” where state and local authorities take full title to homes that have been foreclosed upon for tax sales, no matter how small the amount of taxes due or how large the amount of equity accrued.

As I described the case in my Washington Examiner piece previewing the argument:

Geraldine Tyler, a 93‐year‐old woman on a limited income, owned a condominium in the Minneapolis area. When she was unable to pay her $2,300 property tax bill, which eventually turned into nearly $12,700 with interest and fees, Hennepin County seized and sold her property to pay the bill. But instead of keeping just the $12,700 that was owed and returning the rest, the county kept the entire $40,000 from the sale — because Minnesota is one of 14 states that allows itself to take all the proceeds from tax foreclosures.

This practice often affects the poor and elderly who own their homes free of a mortgage but don’t have enough discretionary income to pay property taxes, which means stories of clear injustices, such as Tyler’s, are common. Another example: A Michigan family underpaid their property taxes by $144, spurring Wayne County (Detroit) to take two homes and sell them for $108,000, with the county pocketing the entire amount .

After Minnesota seized her assets, Tyler sued, arguing that the county unconstitutionally took her property without just compensation in violation of the Fifth Amendment’s Takings Clause. The 8th U.S. Circuit Court of Appeals affirmed the district court’s dismissal of her case because Minnesota law declared that the home equity was not Tyler’s private property and so there was no taking. The Supreme Court agreed to take the case, which has brought together advocates from across the ideological spectrum, and trade associations that normally butt heads, to oppose home equity theft.

Progressive groups such as the Constitutional Accountability Center are aligned with conservative groups such as the Claremont Institute’s Center for Constitutional Jurisprudence. The American Civil Liberties Union is on a brief with the Cato Institute. The National Taxpayers Union Foundation, AARP, Chamber of Commerce, National Association of Home Builders, National Association of Realtors, National Consumer Law Center, and Public Citizen have all weighed in to help Tyler, as have disability advocates and four of Minnesota’s congressional representatives. Hennepin County, meanwhile, is supported mainly by state and municipal governments and related associations.

My organization, the Manhattan Institute, joined the Buckeye Institute, the National Federation of Independent Business, and three other groups on a brief supporting Tyler . We presented a historical argument that explains how (1) the Magna Carta and colonial law established the just-compensation requirement; (2) the framers and succeeding generations held the requirement to be categorical and fundamental; (3) English and American law have long recognized that the government may take no more than is necessary; and (4) subsequent developments establish that equity in land is a form of personal property.

That sort of argument is likely to prevail. Having listened to oral argument, I agree with the conventional wisdom that Ms. Tyler will prevail. Here’s more detail about how I would define the limits of government power here, as taken from my Examiner piece that in turn summarizes my brief.