Housing and Land Use

ALEC Policy Champions: South Dakota Sen. Jim Stalzer and Rep. Kirk Chaffee Eliminate Home Equity Theft

We are honored to recognize two South Dakota state legislators as our first ALEC Policy Champions. The ALEC Policy Champion award recognizes state legislators who not only embody the ALEC principles of free markets, federalism, and limited government but who also advance principled policy solutions in their states.

Today, we recognize the leadership and effort of South Dakota’s Senator Jim Stalzer and House Majority Whip Kirk Chaffee, who have led the charge in the Mount Rushmore State to address and finally eradicate a practice known as home equity theft.

SD Sen. Jim Stalzer and Rep. Kirk Chaffee

As explained in a previous article, home equity theft occurs when a local government keeps any remaining profit when a home is sold to satisfy delinquent property taxes or fees. While the discrepancy can sometimes seem negligible, other times, the outstanding equity claimed by government can be significant. In one noteworthy example, the state of Michigan profited $24,500 after seizing a home for an outstanding $8.41 in underpaid property taxes.

This instance and others like it formed the backbone of the Tyler v. Hennepin County, which was ultimately taken up by the Supreme Court. In May 2023, the Court released a unanimous ruling, declaring the practice of home equity theft unconstitutional.

While the Supreme Court’s ruling was decisive, it falls on state legislators to ensure that their state complies with the ruling. Senator Stalzer and Representative Chaffee took up that challenge in South Dakota and sponsored HB 1090. The bill definitively ends home equity theft by requiring that “any surplus proceeds of the tax deed sale that remain after payment of the taxes, penalty, interest, and other costs, must be returned to the prior owner of record.”

ALEC’s Statement of Principles on Ending Home Equity Theft likewise takes a stand against the practice. It allows a government entity to “collect the debt with interest, penalties, and reasonable costs associated with selling the property—but nothing more.” Additionally, it provides guiding principles that states can consider as they reform their home seizure processes.

South Dakota Governor Kristi Noem signed HB 1090 into law earlier this month on February 12. It is the “first of its kind to be introduced and passed” since the Tyler v. Hennepin County ruling, and so it is more than fitting to celebrate Senator Stalzer and Representative Chaffee’s great success and role as ALEC Policy Champions.