California voters will be asked this fall to expand rent control with a statewide ballot measure similar to the ones they wisely rejected in 2018 and 2020.
The economics of supply and demand are the same today as they were six years ago. “Rents are high in California because the state doesn’t have enough housing for everyone who wants to live there,” notes the state’s nonpartisan legislative analyst.
To address California’s housing crisis and keep rents low, the state needs to increase supply by encouraging construction. But rent control discourages investment in new housing, which limits supply and drives up the overall cost of housing.
That’s why voters should reject Proposition 33 on the November 5 ballot. At the same time, voters should also reject Proposition 34, a measure that can be described as “revenge of the landlords.”
Funded by the California Apartment Association, Proposition 34 takes direct financial aim at Michael Weinstein and his multibillion-dollar AIDS Healthcare Foundation, which is the primary funder of this year’s rent control measures and the last two, each rejected by about 60 percent of voters.
Proposition 34 is an abuse of the state initiative system to silence a political opponent. It would set a terrible precedent if passed and survived legal challenges.
No to Proposition 33
The state already has rent controls. Through 2030, California law limits increases to 5% plus inflation (up to a total of 10%) per year.
Additionally, local rent control laws cover about a quarter of Californians. In the San Francisco Bay Area, this includes residents of Alameda, Antioch, Berkeley, Concord, East Palo Alto, Half Moon Bay, Hayward, Larkspur, Los Gatos, Mountain View, Oakland, Richmond, San Anselmo, San Francisco and San Jose.
But under the state’s Costa-Hawkins rental housing law, local governments can only cap rents on multi-unit apartment buildings built before Feb. 1, 1995. And they must allow landlords of those older buildings to adjust rents to market rates for new tenants.
Proposition 33 would allow local governments to set rent rules without restrictions. Cities could extend price controls to all types of housing, including those built after 1995, and limit the amount of room new tenants can raise rents.
“None of these changes would increase the supply of housing and, in fact, would likely discourage new construction,” the legislative analyst wrote in 2016, when a similar ballot initiative was being considered that year.
Proposition 33 is so broad that leading Democratic housing advocates, including state Sen. Toni Atkins, the party’s former Senate leader, and Oakland Democratic Rep. Buffy Wicks, oppose it. They worry that the measure gives cities autonomy that they could use to undermine recent state mandates for housing.
Indeed, some city leaders opposed to housing mandates see Proposition 33 as a way out. If it passes, they could set rent limits so strict that no developer will want to consider building.
This would be an extreme example of the underlying principle: expanding rent controls would only exacerbate the state’s housing crisis.
No to Proposition 34
The two previous rent control measures were funded to the tune of $64 million by the Weinstein Foundation, which also funded unsuccessful statewide proposals in 2016 to require adult film actors to use condoms and limit how much the state could pay for prescription drugs.
With Proposition 34, the apartment owners association is seeking to cut off Weinstein’s political money. It’s questionable whether the foundation’s targeting is constitutional. In July, the state Supreme Court declined to block Proposition 34 from the ballot, but could review the measure’s legality if it passes.
Proposition 34 targets the foundation’s drug sales, the main source of its $2.5 billion in annual revenue.
Under a federal program, pharmacies serving underprivileged populations can buy drugs directly from manufacturers at deep discounts, but they can ask insurers to reimburse them at wholesale prices. The program is designed to help nonprofits stretch their budgets to provide more health care services.
But the AIDS Healthcare Foundation has spent more than $100 million on ballot measures, candidate campaigns and political committees over the past 20 years, according to one analysis.
The foundation also bought apartment complexes, including more than a dozen in Los Angeles, according to a Los Angeles Times investigation. The newspaper found squalid conditions in the foundation’s buildings, residents facing eviction, cockroach and bedbug infestations and high rates of code and public health complaints.
Proposition 34 would apply only to health care providers that meet two conditions: They spent more than $100 million over a 10-year period on something other than direct patient care, and they operated multifamily dwellings reported to have at least 500 serious health and safety violations.
For a provider meeting both criteria, the ballot measure would revoke its health care license and tax-exempt status if it failed to spend 98 percent of its revenue from the federal discounted prescription drug program on direct patient care.
The AIDS Healthcare Foundation’s spending on the drug price reduction program is worrisome. But the solution is to change federal law or pass state law to reduce abuse. Similarly, there are laws to address substandard housing. If they are not adequate, they should be changed.
But combining the two problems and using California’s initiative system against a single person is not the solution. It would set a troubling precedent for electoral retaliation against groups that dare to call for serious policy changes that affect special interests.
Voters should not go down the slippery slope of revenge. They should not expand rent controls. They should reject Propositions 33 and 34.
