Quad Cities Homeowners Could Finally Recover Lost Equity After Illinois Passes Property Tax Foreclosure Reform

A Supreme Court ruling finally gets Illinois compliance — and Quad Cities homeowners caught in the tax debt system could see their lost equity returned

Illinois lawmakers passed a sweeping property tax reform bill Saturday night that could change the fate of homeowners across the Quad Cities who have lost their homes to tax foreclosure.

The Illinois House approved House Bill 4537 by a vote of 80-35 along party lines. The measure now heads to Gov. JB Pritzker's desk for his signature.

The bill brings Illinois into compliance with a 2023 U.S. Supreme Court ruling in Tyler v. Hennepin County. The court found that when governments foreclose on a property for unpaid taxes, any equity above the debt owed must be returned to the property owner. Illinois was the last state in the nation without reforms to match that ruling.

"This bill is going to help a lot of people. For too long, families who fell behind on their taxes risked losing not only their homes, but all the equity they spent years building."

— Cook County Treasurer Maria Pappas, who helped push the legislation

How the old system stripped homeowners of equity

Under the previous Illinois law, counties sold delinquent property tax debt to private investors at annual tax sales. Those tax buyers received a lien on the property. If the homeowner could not pay the debt within a redemption period of two and a half years, the tax buyer could petition the court for the deed to the home.

Once the tax buyer secured the deed, the property was auctioned. The proceeds paid off the tax debt. Any surplus equity the homeowner had built up over years of mortgage payments disappeared. The homeowner walked away with nothing.

State Sen. Celina Villanueva, D-Chicago, who sponsored the bill, called that outcome unconstitutional.

"This legislation is about upholding Illinoisans' constitutional rights and ensuring our state's tax sales process places fairness over profit."

— Sen. Celina Villanueva, D-Chicago

What changes under the new law

The new system replaces private tax buying with a tax deed auction model used successfully in many other states. Here is how it works:

• If a homeowner falls behind on taxes, the county still places a lien and sells the tax certificate
• The homeowner gets a redemption period extended from two and a half years to three years
• If the homeowner cannot redeem the debt, the property's deed goes to public auction
• The starting bid is set at the total amount of delinquent taxes, interest, and fees
• If the winning bid exceeds the debt, the surplus equity goes to the former homeowner
• Homeowners can also participate in the public auction themselves

For tax certificates that go unpurchased at the tax sale, the county will offer those homeowners the opportunity to enroll in a payment plan — an option that did not exist under the old system.

A pilot program for Cook County

The legislation includes a special provision for Cook County, which has significantly more outstanding tax certificates than any other Illinois county.

Cook County will run a pilot program during the next six annual tax sales, with the final one expected in 2030. During that period, the county can withhold up to 100 delinquent tax certificates at each sale. Those certificates must be for properties where the owner claimed a homeowner exemption and have the lowest tax debt.

The county would enroll those homeowners into payment plans with longer payback periods and reduced interest rates, according to Justin Kirvan, policy director for the Cook County Treasurer's Office.

After the sixth sale, private tax buying will no longer be allowed in Cook County. Other counties could adopt the same phaseout but are not required to do so.

"Cook County initially wanted the ability to take all tax certificates. The pushback was to allow them to have a pilot program."

— Rep. Curtis Tarver, D-Chicago, the bill's House sponsor

A surplus equity fund for those already displaced

The bill also creates a surplus equity fund for property owners who lost their homes in the past two years. Homeowners can file a claim to recover lost equity from the fund.

The fund is financed through fees charged to tax buyers:

• Buyers in counties with more than 3 million residents (essentially Cook County) must pay 5% of total taxes, interest, and penalties for a certificate, capped at $1,000, plus an additional 5%
• Buyers in smaller counties must pay a flat $20 fee
• When the certificate is issued, buyers in large counties must pay $1,000 and those in smaller counties must pay $500

The bill also modifies existing regulations to automatically declare current outstanding certificates as sales in error. Those sales will be reversed, tax buyers will be refunded, and the process will restart under the new statute.

Opposition and concerns

Not everyone supports the bill. Sen. Chapin Rose, R-Mahomet, voted against it. He questioned whether the new fee structure would drive tax buyers out of the state entirely.

"If the tax buyer doesn't get repaid their money, who's going to ever buy taxes?"

— Sen. Chapin Rose, R-Mahomet

The Illinois Tax Purchasers Association opposed the bill, arguing the surplus equity fund fees would damage their business model. Rep. Steven Reick, R-Woodstock, raised that concern on the House floor Saturday night.

Sen. Willie Preston, D-Chicago, voted present. He expressed concern that the changes may not be enough to protect homeowners in practice.

Why this matters for the Quad Cities

While Cook County dominates the national conversation on this issue, the reforms apply statewide. Quad Cities homeowners in Rock Island County, Henry County, Clinton County, and Scott County will see the same protections.

The extended redemption period, the payment plan option, and the guarantee of surplus equity return all apply to every county in Illinois. Counties in the Quad Cities region can choose to adopt the Cook County model of phasing out private tax buying, though they are not required to do so.

Cook County Board President Toni Preckwinkle called the legislation a step toward equity in a statement.

"This bill sunsets the practice of private tax buying in Cook County and replaces it with a more equitable process that better protects property owners."

— Toni Preckwinkle, Cook County Board President

A federal judge ruled in May that the Cook County Treasurer's office is liable to refund money to property owners who lost equity in tax sales between the Tyler decision and now. John Bouman, the lawyer for the plaintiffs in the class-action lawsuit, said the legislation could prevent more homeowners from being added to the case.

"If the legislation is successful in eliminating the source of the constitutional violation, if it fixes that, then there won't be any more people entering into our class who need to get their money back."

— John Bouman, attorney for plaintiffs

The bill now awaits the governor's signature. If signed, it marks the most significant homeowner protection measure enacted in Illinois in decades.