Winds of Change in Chicago: Is the Party Over for Investors Who Profit From Property Tax Foreclosures?

BREAKING NEWS: While the proposal is being considered, Cook County’s spring 2026 tax sale has been suspended.

What’s going on with property tax seizures in Chicago?

First, we know that “legalized equity theft” through foreclosure was finally held unconstitutional by the U.S. Supreme Court in 2023, in Tyler v. Hennepin County. The Court held that government and industry must not scavenge the equity built by borrowers through homeownership when they recoup overdue tax debts.

Illinois has yet to get its state laws on track with the Supreme Court’s ruling. So, State Senator Celina Villanueva of Chicago has proposed a law. And Cook County, home to Chicago and its suburbs, is taking the lead.

Change Is Coming

Up to this point, Illinois law has allowed its counties to sell tax certificates representing overdue debts at annual sales. Investors pay off the taxes, and get their certificates. These certificate holders then charge interest and fees to borrowers who defaulted. They charge high interest rates that compound. And the rate goes up every six months. Some debtors wind up paying as much as 45% by the end of the 30-month period allowed for repayment. Advocates argue these practices should be outlawed.

If the debtors can’t pay up in time, the investors go to court to get their deeds. From 2019 to 2024, investors have taken over more than 1,000 owner-occupied Cook County homes. Seniors and homeowners in minority communities are disproportionately at risk of losing their equity to these investors.

Of course, many homes are stores of built-up equity as well as mortgage debt. That equity enriches the investors who (a) kick the debtors out of their homes; and (b) take the leftover equity after a tax foreclosure. Investors have become accustomed to getting tax deeds together with the equity that can still be squeezed out of the homes.  

Under the newly proposed law, Senate Bill 3940, investors would be barred from purchasing tax debts in Cook County. If a borrower can’t pay the investor back within 30 months, the county would have to go to court to get the deed and then run a foreclosure auction. The mortgage borrower could bid along with anyone else.

Bids would start at the amount of the overdue tax bill. After the back taxes are collected from the sale, the county would have to reimburse the debtors for their surplus equity. Other counties would also be allowed to  follow this same process. It would ensure that people who lose their deeds for tax debts will be able to keep some of the leftover property value.

Champions of the proposal are Cook County officials, as well as senior and housing advocacy groups. But can Villanueva’s proposal survive pushback from the investors who richly profit from the annual Cook County tax sale? This remains to be seen. The Illinois Tax Purchasers Association says it favors “thoughtful, workable solutions.”

The 2023 Tyler Case Pushed This Along

The Tyler of Tyler v. Hennepin County was 93-year-old Geraldine Tyler, whose Minneapolis condo was foreclosed over unpaid property taxes. Tyler had moved out. Neglected tax liens piled up. Eventually, the county opened a foreclosure case.

The county sold off Tyler’s property to resolve the back taxes. Although the condo was worth more than the tax bill, the county did not maximize returns in the sale or return any home equity to the senior. Under Minnesota’s harsh tax lien laws, the county didn’t have to. Minnesota was one of 14 states who treated property tax debtors this way. Like Geraldine Tyler, many of these people were highly vulnerable.

In the case against Hennepin County, the 93-year-old eventually became lead plaintiff in a class-action suit which went all the way to the Supreme Court. The struggling debtors won. The Supreme Court decided that Tyler and similarly situated debtors suffered financial harm by being deprived of their surplus equity. The Court ruled the practice an illegal taking of property, offending the U.S. Constitution.

Fourteen states were required to change their laws. Thirteen have done so. Illinois will be last in the country to protect homeowners from unjustly losing equity.

Cook County got another wake-up call in December 2025. In Kidd v. Pappas, a U.S. District court stated that Cook County’s tax sale procedures violate the U.S. Constitution when taking leftover home equity from tax foreclosure sales. The county has to change its methods, now. And advocates are pressing for much more progress in the future.

Advocates for Robust Reforms Strike While the Iron’s Hot

Why do counties work with private profit seekers to address tax debts? The practice is coming under a wave of scrutiny. The real work should be about helping residents avoid accumulating tax debts—whether unknowingly, or because of financial struggles. For example, Illinois state Senator Willie Preston of Chicago is pressing for refunds to households paying upwards of 5% of their income on property taxes.

Here are some additional policy reforms Illinois lawmakers are being pressed to consider:

• Illinois could adopt a policy forged in New York City. The city bars foreclosures and tax sales involving homes owned by seniors or residents coping with disabilities. Charles Golbert, the Public Guardian of Cook County, supports this reform.

• Homeowners should be allowed up to five years to pay off their debts on payment plans. This is the policy in Milwaukee and Philadelphia. The state of Michigan goes further—with payment plans tailored to the deed holder’s income and capacity to pay.

• Illinois should require bids at tax foreclosure auctions to start at a property’s market value, so surplus equity can be preserved to return to the debtor. Other ways to maximize auction bids is to have bidders turn in sealed bids, so bidders are stating what they’re able to pay—not the lowest they can pay.    

But the key is prevention of overwhelming tax accumulation in the first place. That’s why Senator Willie Preston’s and Charles Golbert’s proposals are so important.

What’s Coming Next From the Supreme Court

Meanwhile, the Supreme Court is deciding another tax sale case arising from a Michigan property: Pung v. Isabella County. Oral arguments took place February 25, 2026. This case is about more than returning surplus equity in foreclosures—the question in Geraldine Tyler’s case. It will tell us how to calculate “just compensation” to the homeowner who loses a deed over a tax debt.

Lawmakers are watching that case closely, in Illinois and other states. We’ll keep you posted.