Editorial: California voters should reject rent control and ‘Revenge of the Landlords’

California voters will be asked this fall to expand rent control with a statewide ballot measure similar to ones they wisely rejected in 2018 and 2020.

Supply-and-demand economic principles today are the same as they were six years ago. “Rent is high in California 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 hold down rents, the state needs to add supply by incentivizing more construction. But rent control discourages investment in new housing, constraining supply and driving up overall housing costs.

Which is why voters should reject Proposition 33 on the Nov. 5 statewide ballot. At the same time, voters should also reject Proposition 34, a measure that can best be described as “Revenge of the Landlords.”

Bankrolled 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 measure and the last two, each rejected by about 60% of voters.

Proposition 34 is an abusive use of the state’s initiative system to silence a political opponent. It would set a horrible precedent if it passes and survives legal challenges.

No on Proposition 33

The state already has rent control. Until 2030, California law limits increases to no more than 5% plus inflation (up to a total of 10%) in a year.

In addition, local rent control laws cover about one-quarter of Californians. In the Bay Area, that 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 multi-unit apartment buildings constructed before Feb. 1, 1995. And they must allow landlords of those older buildings to reset rents to market rates for new tenants.

Proposition 33 would free local governments to set rent rules without restrictions. Cities could expand price controls to all types of units, including those built after 1995, and limit how much landlords could increase rents for new tenants.

“Neither of these changes would increase the supply of housing and, in fact, likely would discourage new construction,” the legislative analyst wrote in 2016, when that year’s similar ballot initiative was being contemplated.

Proposition 33 is so broad that key Democratic housing advocates, including state Sen. Toni Atkins, the party’s former leader in the Senate, and Assemblymember Buffy Wicks, D-Oakland, oppose it. They fear the measure grants autonomy to cities that they could use to undermine recent state mandates for more housing.

Indeed, some city leaders opposed to housing mandates are looking to Proposition 33 as an escape hatch. If it passes, they could set rent limits so strict that no developer would want to consider construction.

It would be an extreme example of the underlying principle: Expanding rent control would only exacerbate the state’s housing crisis.

No on Proposition 34

The two prior rent control measures were funded with $64 million from Weinstein’s foundation, which also bankrolled unsuccessful 2016 statewide propositions to require that adult film performers use condoms and to limit how much the state could pay for prescription drugs.

With Proposition 34, the apartment owners’ association seeks to cut off Weinstein’s political money supply. It’s questionable whether the targeting of the foundation is constitutional. The state Supreme Court in July refused to block Proposition 34 from the ballot, but could consider the measure’s legality if it passes.

Proposition 34 targets the foundation’s reselling of medications, the primary source of its $2.5 billion in annual income.

Under a federal program, pharmacies serving underprivileged populations can buy drugs directly from manufacturers at substantial discounts but seek reimbursement from insurers for the full wholesale price. The program is designed to help nonprofits stretch their money further 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 in the past 20 years, according to one analysis.

The foundation has 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 under threat of eviction, roach and bedbug infestations and high rates of code enforcement and public health complaints.

Proposition 34 would apply only to health care providers that meet two conditions: They have spent over $100 million in any 10-year period on anything other than direct patient care, and they have operated multifamily housing reported to have at least 500 high-severity health-and-safety violations.

For a provider meeting those two criteria, the ballot measure would revoke its health care license and tax-exempt status if it failed to spend 98% of its revenues from the federal discount prescription drug program on direct patient care.

The AIDS Healthcare Foundation’s expenditures from the drug-discount program are troubling. But the solution is to fix the federal law or pass a state law to curtail abuse. Similarly, there are laws to address squalid housing conditions. If they aren’t adequate, they should be fixed.

But combining the two issues and using the California initiative system against one person is not the answer. It would set a troubling precedent for ballot paybacks targeting groups that dare to seek serious policy changes affecting special interests.

Voters should not head down that slippery slope of retribution. Nor should they expand rent control. They should reject Propositions 33 and 34.