Californians Decisively Reject Rent Control Measure

A sign is posted in front of an apartment building with available rentals in San Francisco on June 9, 2023. Justin Sullivan/Getty Images

California voters have rebuffed Proposition 33, which would have given cities and counties authority to control residential rents, according to unofficial election results. At the same time, Golden State voters approved Proposition 34, a measure that critics call “revenge politics” aimed at one of the rent control proposal’s key backers.

Proposition 33—known as the Justice for Renters Act—sought to prohibit the state from limiting the kinds of rent control laws enacted by cities and counties.

It also would have eliminated an existing law known as the Costa-Hawkins Rental Housing Act, which prohibits rent control on single family dwellings, condos, and new housing (generally that was built after Feb. 1, 1995). The Costa-Hawkins act also prohibits “vacancy control,” a means of denying or limiting an owner’s ability to increase rent for new tenants. 

Prop. 33 is failing by nearly 3 million votes, with slightly more than 60 percent of voters opposed, according to preliminary results from California’s secretary of state as of Nov. 15.

Michael Weinstein, president of the AIDS Healthcare Foundation—which championed the measure—expressed disappointment with the results.

“Housing is and will remain a human rights issue,” he said in a statement emailed to The Epoch Times. “The result of our loss is that billionaire corporate landlords will pile up more billions while renters will have to choose between paying their rent and buying food or ending up on the sidewalk.”

The nonprofit leader and political activist said the proposal was defeated because of heavy spending from opponents. More than $125 million was spent by those critical of Prop. 33 compared to about $50 million raised in support, according to data from the California secretary of state.

“The conventional political wisdom is that whoever spends the most on propositions wins,” Weinstein said. “That [money], financed with exorbitant rents extracted from tenants, was spent lying and bullying [the] AIDS Healthcare Foundation and its supporters.”

Rent control measures are traditionally challenged by landlords and supported by tenants, and different rules apply throughout California.

Approximately 25 percent of California’s rental units are subject to some form of rent control—including in the cities of Los Angeles, San Francisco, and San Jose—according to the nonpartisan Legislative Analyst’s Office.

Additionally, state law limits rent increases to no more than 5 percent plus the percentage change in the cost of living, up to 10 percent annually.

Had the measure passed, analysts said likely effects would include lower rents for some individuals in rent-controlled areas and higher rents for those living in properties not affected by rent control.

Some rental markets could be negatively affected, however, with fewer homes available because some landlords would sell, putting downward pressure on home values with fewer investors interested, according to the state’s voter guide summary.

Declining home values would also lead to reduction in property tax revenues of “at least tens of millions of dollars annually” which could affect budgets of cities, counties, schools, and special districts, analysts wrote.

Similar proposals were floated to voters in 2018 and again in 2020, with strong margins ultimately opposed to both attempts.

Critics argued the newest rent control proposition was “deeply flawed and deceptively anti-housing” because it would discourage development and investment.

“Prop. 33 is misleading,” a group of opponents, including Ken Rosen, an economics professor emeritus at the University of California–Berkeley, stated in the voter’s guide. “[It] will make it harder to become a homeowner or find a place to rent, driving up costs for renters and home buyers.”

Proposition 34

At the same time voters rejected Prop 33, they approved—by less than 2 percentage points—a measure that critics said singles out the AIDS Healthcare Foundation.

Proponents spent more than $43 million to promote Prop. 34, compared to approximately $16 million spent by critics.

“The results of Propositions 33 and 34 prove only one thing: If billionaires spend more than $170 million lying and confusing voters, they are virtually guaranteed to win,” Weinstein said in a separate statement emailed to The Epoch Times.

Proposition 34 targets organizations that meet certain conditions: They must participate in the federal drug prescription discount program; have contracts with the state’s Medi-Cal or Medicare programs; and have spent at least $100 million on non-patient matters over a 10-year period.

Further, the organizations must have at least 500 housing violations.

Organizations such as the AIDS Healthcare Foundation—which calls itself “the world’s largest HIV/AIDS healthcare organization”—often generate revenues by charging health care payers—including the state—more than the price paid for prescription drugs obtained through the discount program. The foundation used some of the resulting revenue to invest in real estate, including hotels and housing units in disadvantaged communities.

The law will mandate providers that meet the conditions must spend at least 98 percent of revenues derived from discount drug programs on patient care.

If affected organizations fail to comply or act in a manner that is “unprofessional, dishonest, or harmful to public health or safety,” penalties could include the loss of licenses and loss of nonprofit tax-exempt status. Additionally, executives would be blocked from leading other clinics, health plans, or pharmacies.

Prop. 34 also authorizes the state and all state agencies to negotiate lower drug prices for Medi-Cal.

Supporters argued that allowing such dealmaking will help cut the cost of prescription drug prices and could potentially save taxpayers billions of dollars.

Critics, meanwhile, called Prop. 34 a “revenge initiative” against the AIDS Healthcare Foundation.