PROPOSITION 33

Can 1 person really alter the real estate, investment real estate, and real estate rental markets? If Proposition 33 passes then the answer is a resounding “yes”. Seems like all it takes is a warchest of cash and a rallying slogan (“Justice for Renters”) and an evil enemy (property owners).

Proposition 33 is the 3rd attempt by “renter’s advocates” (Michael Weinstein, the president of AIDS Healthcare Foundation) to repeal the Costa-Hawkins Rental Housing Act. Costa-Hawkins was enacted by the California Legislature in 1995. Without getting into the regulations on evictions, this Act exempts new construction, single family homes and condominiums from rent control ordinances. It also allows property owners/landlords to reset the rental rate to market rates when they become vacant.

Proposition 33 would repeal this law. Repealing Costa-Hawkins would create a loss of property rights for single family homeowners. It would also lower quality of life for renters because of over control of unelected rent control boards.

AB 1482 and statewide rent control

AB 1482, The California Tenant Protection Act of 2019, is California’s statewide eviction and rent control law that was introduced by Assemblymember Chiu and signed into law by Governor Newsom and took effect January 1, 2020.

A few highlights of AB 1482 include:

  • Creates rent control by generally limiting the amount of annual rent increases for eligible properties to no more than 5% + local CPI, or 10%, whichever is lower.

  • Certain properties are exempt from the law, including most single-family homes and condominiums.

  • Allows the property owner to ask a market rent when the unit is vacated.

Who and what is the AIDs Healthcare Foundation (AHF)?

This will be the third attempt by AHF to repeal Costa-Hawkins. In 2018 and 2020 AHF sponsored two similar Propositions that were defeated.

According to the CA Secretary of State website, in 2018, AHF contributed $24,571,889 of the $26,165,040 raised for Proposition 10 (Expands local government’s authority to enact rent control on residential property). In 2020, AHF contributed all of the $40,184,953 raised for failed Proposition 21, which had the exact same title. As of September 9, the latest state campaign finance data show supporters of Proposition 33 have raised $29.4 million. The bulk of the funding – $28.7 of that – is from AHF.

AHF’s ethics need to be called into question. An LA Times found potential conflicts-of-interest and disclosure failures involving AHF. As recently as April, voicemail recordings from a signature-gathering firm verified that the AHF was paying $5 total for two signatures (one on a letter Governor Newsome requesting he support Prop 33, the other for the ballot measure). If their efforts are legit, why pay people for their signatures?

Why is AHF so adamant about passing rent control? Why is their CEO Michael Weinstein making it his personal mission to change California law and how millions of people in the state own, make available for rent, and rent property? He has completely strayed from AHF’s mission and this is his own, personal agenda. Nowhere in their mission does it mention housing or specifically housing in California as a reason for their existence.

What would Proposition 33 really solve?

Does a rent control measure like that proposed in Prop 33 solve the underlying issues of housing affordability? It has been estimated that California needs 3.5 million new homes by 2025 to ease its housing crisis, and since Prop 33 does nothing to encourage building new housing, the logical answer is “no”.

Enacting Prop 33 would create unelected rent boards that have no accountability, that would have the power to set strict rent increases.

By making it harder for property owners to cover the costs of maintenance, will it likely worsen California’s housing shortage and increase rents in the long run? Of course.

Economics 101

What is the first lesson learned in any economics class? Winner winner chicken dinner if you answered supply and demand. Prop 33 ignores this basic economic principle.

Might there be unintended consequences, such as reduced rental housing supply, if Prop 33 passes?

Would an economist look at Prop 33 and argue that rental housing supply will go up or down as a result of this Proposition?

Can an argument be made that the housing supply will increase with less rental income for property owners?

If the rental housing supply goes down, will rental rates go down or up?

Is stricter rent control likely to increase or decrease rental property conversion or construction?

Might homeowners be forced to remove rental properties from the market, shrinking the supply of available housing?

This doesn’t even address our tenant friendly California laws that already pushes people to invest in other states.

Is Prop 33 a vote for Capitalism or Socialism?

Though you already know, it’s worth repeating. Capitalist societies are where the free market (and, therefore, supply and demand) determines production and pricing with little government intervention. In socialist economies, governments control production, distribution, and prices. Do we want our government, or the free market, to control what we do with our homes?

The rallying cry – “Justice for Renters!!!”

What about justice for property owners? The people who take the risk of homeownership, who abide by California’s tenant friendly laws, who maintain the property, who put their savings into a downpayment on a home? The same people who are subject to inflation, increased insurance costs, property taxes and utility costs. During Covid, renters in certain circumstances did not have to pay rent and were protected from eviction. Yet, the homeowner was NOT given that privilege when it came to the mortgage payments owed to their lender. How did it become the property owner’s responsibility to cover rent for the tenant? How did property owners get compensated for lost rent? (They didn’t) The state mandated no evictions though did not mandate no foreclosures or repayment by the state of lost rent.

Official Voter Information Guide

The legislative analyst who reviewed the Proposition had this to say.

1. “Rent is high in California because the state does not have enough housing for everyone who wants to live here. People who want to live here must compete with other renters for housing, which increases rents.”

  • This does not say greedy landlords are the reason for high rents.

2. “Fewer homes would be available to rent. One reason for this is that some landlords would sell their properties to new owners who would live there instead of renting it out.”

3. “The value of rental housing would decline because potential landlords would not want to pay as much for these properties.”

Argument in favor of Proposition 33 in the Official Voter Information Guide

1. “Billionaire corporate landlords are calling the shots and causing skyrocketing rents.”

  • Meaning billionaires charge above market rents, charging more than the market will bear so they can have higher profits?

  • Why would someone pay above market rents? If above market rents were being charged, wouldn’t that create vacant units? There is no complaint of vacant units overwhelming the market and driving prices down.

  • According to ChatGPT, 60% to 70% of rental single-family homes in California were owned by individual investors or small-scale landlords. So, this Proposition is clearly targeting the mom and pop investors.

  • According to ChatGPT, there are approximately 1.5 million single-family homes that are rental properties in California. Therefore, Prop 33 would harm over 1 million individual or small scale investors. What would happen to market rents if only 20% of these properties were taken off the market?

2. “The housing crisis is complex. There isn’t one magic bullet to solve it.” Prop 33 is the place to start?

3. In this argument in favor, they write “We need to build more affordable housing and preserve the units we have.” Prop 33 does not address this need.

4. The argument in favor says “The California Constitution guarantees a reasonable rate of return” to mom and pop landlords. Reasonable defined by who?

5. “Rent control has been an “American tradition” since 1919.” Like baseball, hotdogs, apple pie and Chevrolet? What does this even mean?

  • Simple research shows that rent control started in New York, during World War 1.

  • The next notable event was in 1942, during World War 2.

  • California is one of over 30 states that have enacted laws to severely limit local rent control.

The rebuttal to the argument in favor of Prop 33 shares 7 articles about AIDS Healthcare Foundation, including:

  • AHF being a slumlord – In September, 2024, AIDS Healthcare Foundation settles with tenants over conditions in Skid Row apartment building

  • AHF throwing low income tenants out on the street

  • AHF wasting taxpayer dollars on lawsuits blocking new housing

  • California terminating its multimillion dollar contracts with AHF citing improper negotiation tactics

  • Audits by LA County found AHF overcharged taxpayers by millions of dollars

 

Please make your voice heard on November 5th.