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In California Rent Control Battle, Controversies Swirl Around Funders on Both Sides

Corporate backers of a group opposed to Proposition 21 don’t match the protective image it portrays. And a nonprofit that has contributed to supporters has been accused of financial improprieties.

(Photo illustration by Elizabeth Brown. Photo from Getty Images.)

Corporate landlords are spending millions to fight a California ballot initiative that would expand and strengthen rent control, claiming that they’re trying to protect renters. 

If approved by voters next week, Proposition 21 could expand rent control to more than 100,000 homes currently excluded from rent control laws, according to estimates from local governments. It would loosen the restrictions imposed by the 1995 Costa-Hawkins Rental Housing Act. This would allow local jurisdictions to enact rent control ordinances on all apartments built at least 15 years ago, vacant apartments, and single-family homes and condominiums if the landlord is a corporation or owns at least three properties. 

“Prop 21 will make the crisis worse by reducing the amount of available housing on the market as people pull their units off the market if subjected to draconian regulations,” said Steven Maviglio, spokesperson for Californians for Responsible Housing. “It hands over housing policy to radical groups to put things on the ballot.”

The website for Californians for Responsible Housing states that Proposition 21 is “opposed by a broad, diverse coalition of seniors, veterans, labor, homeowners, affordable housing advocates, and businesses.”

Its corporate backers, however, don’t line up with the image the group tries to portray. Real estate trusts Essex Property Trust, Equity Residential, and AvalonBay Communities have contributed more than $34 million to Californians for Responsible Housing, according to state records. The three groups’ real estate portfolios have a combined net worth of about $28 billion as of June 30, according to filings with the Securities and Exchange Commission. 

Democratic Governor Gavin Newsom, building and construction unions, the California Police Chiefs Association, and the state NAACP are among those who oppose the measure. Californians to Protect Affordable Housing, another committee opposed to Proposition 21, paid $620,000 to a consulting firm run by the state NAACP president Alice Huffman, according to state records. The group’s major funding is from the California Business Roundtable, the California Association of REALTORS®, and the Apartment Association of Orange County. 

Huffman did not respond to requests for comment about the payment. (Maviglio has accused the financial backer of Yes on 21 of similar financial improprieties.) 

Even though Newsom opposes the measure, the state Democratic Party endorsed it, along with the ACLU of California, tenants and labor unions, Black Lives Matter-Los Angeles, as well as U.S. Congress members Karen Bass, Barbara Lee, Maxine Waters, and Bernie Sanders. Its supporters say rent control, which limits the amount a landlord can raise rent each year, helps low- and middle-income renters stay in their homes. 

“If we win with 21 this year, I think it will be a lightning rod,” said René Christian Moya, campaign director for the California group Yes on 21. “This is why you’re seeing the strident opposition of the landlord and real estate lobby.”

The primary financial sponsor of Yes on 21—the AIDS Healthcare Foundation—has contributed more than $35 million to the group, according to state records. The foundation, a billion-dollar nonprofit and emerging landlord of low-income housing, has been at the center of several controversies.

Foundation president Michael Weinstein opposed mandatory PrEP education for people who test negative for HIV and are determined to be at high risk of infection, dismissing the medication as a “party drug.” PrEP, if taken daily, can help prevent the transmission of HIV. The foundation has also been accused of financial improprieties. In an email to The Appeal, the foundation claimed these allegations are politically motivated. 

In March, tenants at The Madison, a single occupancy hotel owned by the foundation, filed a class action lawsuit, claiming there were bed bug and roach infestations, and that each floor had one toilet and shower for all residents to share, the Los Angeles Times reported. 

One former tenant sued the foundation, claiming she became homeless after she was illegally evicted. “In order to make the project financially viable and build self-sufficiency, we exercise tough love on paying the rent,” Weinstein said, according to the Times. 

“There do remain some issues at the Madison. But blame falls on both our and the City of Los Angeles’ shoulders,” AIDS Healthcare Foundation spokesperson Ged Kenslea told The Appeal in an email. 

To live at The Madison, tenants must demonstrate at least $600 per month in income and “must also not be convicted sex offenders,” according to Kenslea

“It’s not a high bar to live at the Madison between either the rent or communal behavior, but some tenants cannot manage,” wrote Kenslea. “(NOTE: We do offer payment plans for those who fall behind on their rents).”

Proposition 21’s opponents say expanded rent control will worsen California’s housing crisis, but the absence of those protections has certainly not prevented it. Almost one million affordable and available rentals are needed for extremely low-income residents, according to 2018 data compiled by the National Low Income Housing Coalition. As of 2019, about 151,000 unhoused people lived in California, a 16 percent increase from the previous year. 

And many of those who find housing can barely afford their homes. Seventy-seven percent of extremely low-income renters in California, defined as earning less than about $25,000 for a family of four, spent more than half their income on rent, according to 2018 data.  

“People have been working more and more, but our wages have stayed stagnant,” said Luis Fernando Anguiano Quiroz, a volunteer coordinator with the Alliance of Californians for Community Empowerment Action’s Prop 21/Measure C Campaign. “However, rents have continued to rise.”

Last year, Newsom signed a bill to limit annual rent increases to 5 percent plus inflation or 10 percent, whichever is lower. Several properties are exempt from the cap, including housing that received a certificate of occupancy within the previous 15 years. But even for the homes covered, it still permits an increase that outpaces many people’s wages. Nationally, real average hourly wages increased 3.3 percent from September 2019 to September 2020, according to the U.S. Bureau of Labor Statistics

“In the past year, California has passed a historic version of statewide rent control—the nation’s strongest rent caps and renter protections in the nation—as well as short-term eviction relief,” said Newsom. “But Proposition 21, like Proposition 10 before it, runs the all-too-real risk of discouraging availability of affordable housing in our state.”

Economists have also questioned the benefit of rent control laws. They argue that the laws can discourage development, which would further squeeze the supply of housing available and lead to a spike in prices. But economics professor J.W. Mason pushes back on this narrative. 

Until recently, most economists opposed raising the minimum wage, invoking similar arguments, said Mason, who teaches at John Jay College of the City University of New York. A higher wage, they theorized, would mean employers hire fewer people, leading to higher unemployment. But last year, several economists published research on the effects of a higher minimum wage and found that it led to economic benefits for low-income workers, not lower employment. A similar shift may occur on the issue of rent control, said Mason.

“Economists don’t always recognize that actually allowing people to remain in their homes is a very valuable social good and something that most people and most elected officials think is something worth pursuing,” he said.  

Proposition 21’s opponents also seem to dismiss the potential benefits of allowing people to remain in their homes. 

“The rent control statistics show people just don’t move out,” said Maviglio. “You have movie stars living in $800 apartments in New York City that should be on the market for six times that.”

The California legislature limited rent control in 1995, at a time when tenant protections were being gutted around the country. That year, state lawmakers passed the Costa-Hawkins Rental Housing Act, which prohibits the application of rent control to single-family homes and newly built housing completed on or after Feb. 1, 1995. It also blocks rent control laws from dictating what landlords can charge new renters.

In 2018, Proposition 10, which would have repealed Costa-Hawkins, failed to pass. Like Proposition 21, the AIDS Healthcare Foundation championed the proposal and the real estate industry funded a campaign to defeat it (including hiring the state NAACP president’s consulting firm).

In their battle to defeat Proposition 21, the Apartment Association of Greater Los Angeles, the California Association of Realtors, and corporate landlord Mosser Companies Inc. have collectively donated more than $1 million to the anti-Proposition 21 group Californians to Protect Affordable Housing, according to state records. 

The California Business Roundtable has contributed more than $7 million to the group. In October alone, the California Business Roundtable received more than $20 million from the real estate industry and corporate landlords, according to state records. This month, the group also received $125,000 from the New Majority PAC, which “seeks to inform its membership and contribute resources to Republican and other philosophically aligned candidates and issues that share its mission,” according to the New Majority website. Under “Political Priorities,” the website lists: “Maintaining the GOP’s control in the State Legislature and locally … Fight Local and Statewide Ballot Measures.”

Opposition to Proposition 21 is indicative of a larger assault on renters’ rights, orchestrated by the politically influential and well-funded real estate lobby, said Moya, of Yes on 21. In September, Californians to Protect Affordable Housing contributed $1.2 million to the California Republican Party. 

More than 25 percent of state legislators are also landlords, as of 2019, according to an investigation by CalMatters, which found only one renter in the legislature. 

“There’s obviously a problem of representation,” said Jackie Fielder, a renter and candidate for California’s 11th District in the state Senate. She supports Proposition 21.  

“I’m fighting for a comprehensive housing plan that starts with the premise that we need more involvement from the public sector if we want to make sure that housing is affordable,” she said. “Because otherwise the real estate lobby is going to dictate who is housed first. And seeing that they are motivated by profit alone, they will make sure that people who are already housed who have six-figure incomes and more, are housed first.”

Fielder, who is endorsed by the Democratic Socialists of America-San Francisco, said she refuses to accept donations from the real estate lobby. Last week she tweeted that the messaging from opponents to Proposition 21 and other local housing rights proposals is “just big corporations using mom and pop small businesses and renters as shields. They know they can’t win by being transparent.”

The California Apartment Association, the sponsor of the anti-Proposition 21 group Californians for Responsible Housing, has opposed other protections for tenants, such as Assembly Bill 1436, which was intended to keep people in their homes for the duration of the COVID-19 pandemic. The California Apartment Association mischaracterized it as a “free rent” bill.

AB 1436 would have prevented landlords from evicting tenants who have been financially affected by COVID-19 for failure to pay rent during the pandemic. In place of AB 1436, the apartment association advocated for AB 3088. In August, Newsom signed the bill into law. Housing justice activists, who had supported the original bill, condemned AB 3088.

AB 3088 prohibits evictions for nonpayment due to a COVID-19 related hardship if certain criteria are met. For nonpayment of rent due between March 1 and Aug. 31, 2020, a tenant must sign a declaration of hardship under penalty of perjury. For rent due between Sept. 1, 2020 and Jan. 31, 2021, a tenant must return the declaration and pay 25 percent of the missed rent payments for that period by Jan. 31, 2021. 

Last summer, the Apartment Association of Greater Los Angeles sued the city of Los Angeles seeking an end to its temporary moratorium on evictions and rent freeze for those affected by the pandemic. Mosser, which has donated more than $200,000 to defeating Proposition 21, is notorious among some of its tenants, who have accused the company of exploiting a loophole in Oakland’s rent control law to raise rents and push out low-income tenants.

“The real estate industry is extremely powerful,” said Moya. “It can bring to bear tens of millions of dollars on any given year to get its way, and they will do whatever it takes to stop this.”

Housing justice activists may be outspent, said Moya, but they’re not deterred. 

“The more that they stop us from getting these protections, that’s only going to inspire and galvanize even greater demand to decomodify housing and make housing a human right,” he said.