This fall, California voters will be asked to expand rent control with a statewide ballot measure similar to those they wisely rejected in 2018 and 2020.
The economic principles of supply and demand are the same today as they were six years ago. “Rents in California are high because the state does not have enough housing for everyone who wants to live here,” notes the state’s nonpartisan legislative analyst.
To address California’s housing crisis and keep rents low, the state must increase supply through construction incentives. But rent controls discourage investment in new housing, limit supply, and drive up overall costs.
That is why voters should reject Proposition 33 in the November 5 national ballot. At the same time, voters should also reject Proposition 34, a measure that can best be described as “revenge of the big landowners.”
Funded by the California Apartment Association, Proposition 34 directly targets Michael Weinstein and his multibillion-dollar AIDS Healthcare Foundation. Weinstein was the primary funder of this year’s rent control measures and the last two, each of which was rejected by about 60 percent of voters.
Proposition 34 is an abuse of the state’s right of initiative to silence a political opponent. It would set a terrible precedent if it passes and survives legal challenges.
No to Proposition 33
The state already has rent control. Through 2030, California law limits rent increases to no more than 5% plus inflation (up to a total of 10%) per year.
In addition, about a quarter of Californians are subject to local rent control laws. In the 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 Act, local governments can only limit rents for multifamily buildings built before February 1, 1995. And they must allow landlords of those older buildings to adjust rents to market levels for new tenants.
Proposition 33 would give local governments the freedom to set rent rules without restrictions. Cities could extend price controls to all housing types, including those built after 1995, and limit how much landlords can raise rent for new tenants.
“None of these changes would increase the housing supply and would probably even hinder new construction,” the law expert wrote in 2016, when a similar referendum was being considered that year.
Proposition 33 is so sweeping that key Democratic housing advocates, including former Senate party leader Toni Atkins and Rep. Buffy Wicks (D-Oakland), oppose it, fearing the measure gives cities autonomy that they could use to undermine recent state mandates for more housing.
In fact, some city politicians who oppose housing mandates see Proposition 33 as a way out. If passed, they could set rent caps so strict that no developer would even consider building.
This would be an extreme example of the underlying principle: expanding rent control would only exacerbate the state’s housing crisis.
No to Proposition 34
The two previous rent control measures were funded with $64 million from Weinstein’s foundation. The foundation also funded unsuccessful 2016 statewide proposals to require performers in pornographic films to use condoms and to limit government coverage for prescription drugs.
With Proposition 34, the homeowners association wants to cut off Weinstein’s source of political money. It is questionable whether the targeting of the foundation is constitutional. The state Supreme Court declined to exclude Proposition 34 from the ballot in July, but could review the legality of the measure if it passes.
Proposition 34 targets the resale of the foundation’s drugs, the foundation’s primary source of revenue of $2.5 billion a year.
A federal program allows pharmacies serving underprivileged populations to buy drugs directly from manufacturers at significant discounts but to be reimbursed by insurers at full wholesale price. The program is designed to help nonprofits allocate more money to provide health care services.
But according to one analysis, the AIDS Healthcare Foundation has spent more than $100 million on ballot measures, candidate campaigns and political committees over the past 20 years.
The foundation has also purchased apartment complexes, including more than a dozen in Los Angeles, according to a Los Angeles Times investigation. The newspaper found deplorable conditions in the foundation’s buildings, residents facing eviction, cockroach and bed bug infestations, and high rates of building code violations and public health complaints.
Proposition 34 would apply only to health care providers that meet two conditions: They spent more than $100 million on something other than direct patient care in any 10-year period, and they operated multifamily properties that had at least 500 serious health and safety violations.
The vote would strip a provider that meets both of these criteria of its healthcare license and tax exemption if it fails to spend 98 percent of its revenue from the federal prescription drug rebate program on direct patient care.
The AIDS Healthcare Foundation’s spending on the drug rebate program is concerning. However, the solution is to correct the federal law or pass a state law to curb abuse. Likewise, there are laws that address the deplorable housing conditions. If these are not enough, they should be corrected.
But combining the two issues and using California’s initiative system against one person is not the answer. It would set a disturbing precedent for voter fraud that targets groups that dare to demand serious policy changes that affect special interests.
Voters should not enter this vicious cycle of retaliation. Nor should they expand rent control. They should reject Propositions 33 and 34.
—Editorial staff, Bay Area News Group
