VOICES: Ohio needs to close its unjust tax foreclosure loophole

Homeownership is a direct investment in families and communities across the Buckeye State and throughout our nation. It’s the “American dream” — owning a home provides unmatched value and wealth-building opportunities for individuals, families and future generations.

Protecting Ohioans on the path to building equity through homeownership is critical. Protecting their equity long after it’s been accrued is just as important. Unfortunately, here in Ohio, many homeowners are at risk of losing their equity due to a loophole allowing local governments to take more than what is owed in property taxes — otherwise known as home equity theft.

State law typically protects the equity of Ohioans who have fallen behind on their property taxes, allowing a foreclosure sale to collect back taxes, but returning any money left after taxes and penalties are paid to the homeowner. However, the rules change when a government agency — like a county-sponsored land bank — requests the property for public use. When this occurs, the government is legally allowed to keep the whole property, draining the savings the former owner earned and worked so hard to build.

One Cuyahoga County resident, Elliot Feltner, fell victim to this predatory process following the death of his wife a few years ago.

When Feltner inherited a family-owned mechanic shop in Cleveland, he discovered the property had accumulated tax debts, so he decided to put the shop up for sale to pay it off. Before he could do so, Feltner experienced severe medical complications and, despite his best efforts, the county moved forward with filing documents to have a government organization foreclose on the shop and the land.

Valued at $144,500, the county took the land and shop to satisfy an original debt of $65,000. Yet the county never actually collected the debt. Instead, it gave the property to a land bank for a discounted price of $15,000. Feltner’s family lost everything.

Home equity theft has financially and emotionally devastated not only Feltner, but numerous Ohio residents and a multitude of households throughout the country.

What’s more, as property values rise across America, property taxes are too. In Montgomery County, property values are set to increase anywhere from 20% to 30%, leading property taxes to experience a 4% to 6% increase. This rise places a larger tax burden on property owners, especially individuals living on a fixed income, inching them closer to home equity theft’s devastating pathway.

Today, home equity theft laws remain on the books in 10 states and Washington, D.C., and like Ohio, eight additional states allow this practice in certain circumstances.

According to a study by Pacific Legal Foundation, from 2014 to 2021, 8,600 homes and more than $780 million in savings were lost to home equity theft throughout the country. To prevent these numbers from rising, policymakers must implement solutions that will end home equity theft altogether.

According to a recent survey from the American Property Owners Alliance, 74% of people living in states allowing home equity theft view the practice as unfair. What’s more, 77% of respondents agree that state law should be changed to allow the government or private investors to acquire only the amount owed in property taxes, interest and penalties, and nothing more.

On May 25, the Supreme Court ruled 9-0 in favor of a 94-year-old Minnesota woman who fell victim to home equity theft. The Court’s ruling was based on the simple principle that the government may not take from a taxpayer more than what is owed. This unanimous decision is a win for property owners — allowing them to challenge their state’s tax foreclosure laws.

Fortunately, a solution exists in Ohio to end home equity theft across the board. Under consideration right now is House Bill 153, legislation that would close the home equity theft loophole when land is transferred without a sale.

Introducing this policy is a commonsense first step. It is now time to ensure its passage in this legislative session.

By ending home equity theft not only in Ohio, but everywhere it occurs, Americans can live without worry that a small tax debt could deprive them of their home and life savings.

Colin Allen serves as executive director of the American Property Owners Alliance — a nonpartisan, nonprofit organization focused on advancing solutions to improve protections for homeowners and address housing affordability issues across the nation.

Jim Manley is the state legal policy deputy director at Pacific Legal Foundation, a nonprofit legal organization that has defended Americans’ liberties when threatened by government overreach and abuse for the last 50 years.

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