After several rounds of tough negotiations and under the weight of mounting lawsuits, the Illinois General Assembly voted last week to overhaul the state’s property tax sale laws.
Backers of the reform bill say it will finally bring Illinois into compliance with a groundbreaking 2023 U.S. Supreme Court ruling, which held that homeowners who lose their properties through tax foreclosure are owed any surplus equity that exceeds their tax debt.
Delinquent property taxes in Illinois have for decades been sold to private investors, known as tax buyers. Under previous state law, they could foreclose on properties and keep all of the equity if the original homeowners failed to pay their debt in time.
The bill’s passage came a year after an investigation by Injustice Watch and the Investigative Project on Race and Equity found that Illinois’ tax sale system had siphoned generational wealth from homeowners across Cook County, especially in majority-Black communities, and into tax buyers’ pockets. Since 2019, tax buyers have taken more than 1,000 owner-occupied homes in Cook County worth more than $100 million. Most of the homes had an initial tax debt of $1,600 or less, the investigation found.
House Bill 4537, sponsored by prominent Chicago Democrats, state Sen. Celina Villanueva and state Rep. Curtis Tarver II, will:
- Establish a new public auction for all properties in tax foreclosure. If the property sells for more than the amount of tax debt, the original homeowner would get the surplus;
- Extend the period for homeowners to pay off their delinquent taxes from 30 months to 36 months;
- Create a temporary fund to compensate homeowners who lost equity in a tax foreclosure during the past two years, as well as those already in the tax foreclosure process under the old rules;
- Terminate tax sales to private investors in Cook County in 2030. For every tax sale until then, the county can take over the tax debt for 100 owner-occupied homes to test the effectiveness of its new system and report back the results to the legislature.
The bill passed the legislature with bipartisan support and was endorsed by a coalition of more than a dozen fair housing advocates and community groups. Advocates expect Gov. JB Pritzker to sign the bill into law, but the governor’s office declined to commit, saying only that Pritzker would “carefully review everything that comes across his desk.”
In an email, Kileen Lindgren, senior state policy manager at Pacific Legal Foundation — the public interest law firm that successfully argued the case leading to the 2023 high court ruling — said the bill included the most essential reform elements. The “processes are still more complicated in Illinois than other states, but [the bill creates] a clear path for owners to obtain” equity, she wrote.
Still, lawmakers didn’t adopt reforms implemented in other states that better protect homeowners that were outlined in a March article by the Investigative Project and Injustice Watch. An analysis of the reform bill also shows that it fails to guarantee former homeowners will receive any equity back and also dumps additional fees and potentially higher interest rates on Cook County residents digging themselves out of tax delinquency.
Public auctions to help homeowners keep equity
The new public auction for all properties in tax foreclosure will substantially reshape the tax foreclosure process across the state.
But the bill sets the auction’s starting bids in Cook County at the amount owed in taxes and fees. Other counties can set the minimum bid at that amount, as well. This could undercut homeowner’s chances for fair compensation, said Mallory Verez, a fellow at Impact for Equity, a public interest law firm in Chicago and the author of a recent report analyzing tax foreclosure reforms nationwide.
Verez pointed to similar auctions in Massachusetts and Oregon, in which bids begin at two-thirds of the foreclosed property’s estimated fair market value.
“What we’ve seen in other states is that it’s really possible to set that [starting bid] higher,” Verez said in an interview. “Setting [the auction] at simply what is owed just reduces the opportunity for homeowners to get the full value of their home back.”
Still, Verez said the introduction of a public auction in Illinois is one of the “biggest wins” in the reform bill, which on the whole “takes a lot of really wonderful steps in the right direction.”
A temporary fund to repay homeowners’ lost equity
The new public auction will only be available for properties whose taxes are purchased moving forward.
The next Cook County tax sale is scheduled in December. Given that homeowners will have 36 months to pay off, the county’s first auction will not take place until 2030 at the earliest, said Justin Kirvan, policy director for the Cook County Treasurer’s Office.
Until then, the bill offers relief to those who already lost property to tax foreclosure within the last two years — and to those who enter foreclosure before the new auction system kicks in — through the so-called “surplus equity fund.”
The new fund will pay out former homeowners who successfully prove in state court that their homes were worth more than what they owed at the time of foreclosure. The award amount will be determined by the property’s value, minus the tax debt and any outstanding liens and mortgages.
In Cook County alone, more than 800 properties were taken by tax foreclosure in 2025, around 200 of which were owner-occupied, public records show. Another 8,000 properties in the county have had their tax debts sold but have yet to go into foreclosure, according to Cook County Treasurer Maria Pappas’ office.
The new fund is meant to alleviate pressure on the indemnity fund, which was created in the 1970s to aid only a fraction of people who lost property to tax foreclosure. Cook County’s indemnity fund has struggled to keep up with claims made against it; as of late May, nearly 300 former homeowners with claims worth more than $38 million — some from as far back as 2019 — were waiting to be paid, records show.
Money for the new fund will mostly come from fees charged to tax buyers. But Cook County homeowners paying off delinquent taxes will also shoulder the burden of setting up the fund; they will be responsible for paying 5% of their delinquent taxes into the fund — on top of another 5% they will continue to pay into the indemnity fund.
In case the new fund runs dry, the bill mandates all counties to pay all successful claims against the fund out of their own coffers within 12 months of a judgement. That puts additional financial burden on county governments, which already face class-action lawsuits filed by former homeowners for their lost equity.
In May, a federal judge ruled that Cook County was liable to pay back lost equity to a class of more than 2,500 former homeowners. The settlement agreement would likely include a multimillion-dollar payout, according to reports. Pappas, one of the named defendants in the lawsuit, has filed an appeal in the case.
DuPage, Kane, Lake and six other counties face a similar class-action lawsuit in federal court. The counties have argued that it should be tax buyers who should give equity back to former homeowners. In March, the judge rejected the counties’ argument, but the counties filed an amended version in June.
Former homeowners have also recently sued two of Cook County’s largest tax buyers — Wheeler Financial Inc. and Newline Financial LLC — in state court. Those cases remain ongoing.
More time to pay, but no targeted protections for vulnerable homeowners
The bill also helps homeowners at risk of tax foreclosure by extending the time they have to pay off their delinquent taxes by six months.
But legislators didn’t take up many other possible reform measures adopted by other states that help protect homeowners from tax sales and increase tax affordability and fairness.
One example is the tax sale exemption given to seniors, veterans or adults living with disabilities, as adopted by New York City in 2011.
In states like Minnesota, property tax circuit breaker policies also provide refunds to homeowners when their property tax payments exceed a certain percentage of their household’s income — increasing fairness and equity in taxation, experts say.
Illinois lawmakers introduced at least two comparable circuit breaker bills in the past year and a half. But the legislature did not pass those bills or other measures proposing property tax relief to lower-income or senior homeowners.
Without investors, payment plans — and possibly higher interest rates — for homeowners
Lastly, the bill terminates tax sales to private investors in Cook County, a move that will allow county officials to administer property tax payment plans and let homeowners to pay in installments rather than by one lump sum for the first time.
On the flip side, cutting out investors may mean many homeowners at risk of foreclosure face a higher interest rate of 9% over the three-year redemption period. The previous system incentivized tax buyers to charge a low or 0% interest rate.
Under a law passed last year, however, counties are permitted to reduce interest rates for homeowners on payment plans.
Shutting down private investment in Cook County drew criticism from national groups representing tax buyers. In a letter to legislators, Brad Westover, executive director of the National Tax Lien Association, warned that it would be difficult for Cook County to replace the money received from private tax sales. “Taxpayers will ultimately bear the cost of replacing that capital, administering the larger county-controlled system, and carrying the added maintenance, notice, auction and litigation burden,” he said.
But for Kirvan, taking out tax buyers was crucial. “It’s a relatively, I think, predatory industry that we’re putting an end to — at least it’s got an expiration date now,” he said in an interview.
Pappas declined an interview request. But in a statement, she celebrated the bill’s passage, calling it “the most significant Illinois homeowner protection measure enacted in decades.”
Tax buyers will be able to continue investing in property tax sales in all other counties in Illinois. Lawmakers and supporters of the bill have said that the reforms are a work in progress, and they expect to revisit and amend the new laws as they roll out the new tax foreclosure system.
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