Rent control battle in California heats up, opposing investors pump money

Reyna Aguilar was working as a chef in a restaurant in San Francisco’s Mission neighbourhood when the COVID pandemic struck. The restaurant shut within months, leaving Aguilar worrying about how she would make rent on the studio apartment she had lived in for nearly a decade.

When the government announced it would give rent vouchers, Aguilar, who wears her hair in a loose knot, felt relieved. But her landlord asked for cash instead.

Worried she would lose the home it had taken her a few years to find after she moved to the United States from Mexico to earn money to be able to pay for the education of her five children whom she had left behind, Aquilar contacted Catholic charities for rent vouchers. But the landlord would not accept those either.

Instead, she told Al Jazeera that the landlords’ employees stood in the building hallway, shouting insults and making it hard for her to pass through to her apartment.

At first, she slept with a stick, afraid they would break in and of the rats that scurried around her apartment. When she felt the landlords’ employees looking through the broken keyhole in her apartment door at night, Aguilar stopped sleeping. By November 2021, fear and sleeplessness got to her, and she moved out.

It began a three-year-long journey to find affordable housing in the city. Aguilar started living in her car by the city’s Dolores Park when she couldn’t find another place she could afford to rent. “I didn’t know any laws then, or I would never have left my house, whatever the situation,” Aguilar said.

Later, she learned that once she vacated her apartment, the landlord could charge a new tenant a much higher rent, according to a California law called Costa-Hawkins, which was passed in 1995.  It exempts single family homes, condominiums and post 1995 construction from local rental control laws which would limit the extent and frequency of rent increases. The law also allows landlords to charge higher rent from new tenants when rent-controlled tenants, like Aguilar, vacate the place.

The repeal of this act, to allow more expansive rent control, will come up in the November 5 ballot. Those opposed to it, mainly large developers and landlords, have raised more than $124m in the last year until October 28, California’s Secretary of State figures show, to fight this ballot measure. This is more than twice as much as the funds raised by the campaign to continue having rent-controlled housing.

An Al Jazeera analysis of campaign finance records found that much of the $124m was raised by large corporate real estate companies, such as the Blackstone Group, the Essex Property Trust, Equity Residential and Avalon Bay, which have investments from the California Public Employees Retirement System, the California State Teachers Retirement System and the San Francisco city employees’ retirement fund.

This fund flow from real estate companies allowed increased spending on flyers and advertising, skewing the battle for rent control in an election season where polls show that the cost of housing is the second-most important economic concern for voters after inflation.

Both presidential candidates have announced plans to tackle the housing crisis, including building more homes and making home buying easier. Vice President Kamala Harris has said she will bring laws to fight abusive corporate landlords whom she blames for rent increases.

Given that nearly half of all California residents and some other states are renters and often burdened by the costs, the battle over Costa-Hawkins will suggest whether supporting builders to make more homes or helping tenants stay in rent-controlled housing will be more beneficial to the average US resident.

The ballot measure to bring in rent control comes at “a difficult moment in many cities, with many people experiencing homelessness and housing insecurity”, said Mathew Fowle, a postdoctoral fellow at the University of Pennsylvania’s Housing Initiative.

This is particularly prevalent in California, “which has more renters than any other state,” said Maria Zamudio, the executive director of the Housing Rights Committee, a tenants’ rights organisation. “And this law leaves them at a razor’s edge,” she added.

Those who defend the law believe that prohibiting rent control will encourage developers to build and maintain more homes. A possible repeal would “hamper the construction of affordable housing, exacerbating California’s housing crisis”, say pamphlets opposing the proposition, dubbed Proposition 33.

The ballot measure also came up in 2018 and 2020 and was defeated. Fundraising by landlords this time has outstripped that on previous occasions when $76m and $95m were raised, respectively. On those occasions, too, the California Apartment Association Issues Committee, which is raising funds to oppose the proposition, outraised those supporting rent control by far, thanks to large real estate groups that get funds from California public employees and teachers’ pension funds.

“This is a very conflicted situation for pension funds,” said Eileen Appelbaum, the co-director at the Washington DC-based think tank Center for Economic and Policy Research (CEPR). While retired public school teachers and employees are likely experiencing high rents, their pension funds are invested in real estate companies that fund the campaign against rent control, she said.

Bankrolling the opposition

Of the $124m raised by the lobby against the ballot measure, more than $88m was raised by a committee funded by the California Apartment Association Issues Committee, according to the California Secretary of State’s website. It got $32m from Essex Property Trust and $22.3m from Equity Residential, two of the largest corporate landlords in the state.

The Blackstone Group, the country’s largest private equity real estate company, gave $1m. It gave another $1.88m through Air Communities, a company it recently acquired. Avalon Bay, another large corporate real estate company, gave $20.135m. Carmel Partners, another private equity real estate company gave $1.48m.

Three other committees together raised $36m to oppose the ballot measure. Large real estate companies also funded some of these.

All of these companies have investments from Calpers, the California Public Employees Retirement System, a review of the Calpers 2023 portfolio showed. They also have investments from CalSTRS, the California State Teachers Retirement System. While the San Francisco Employees Retirement System does not publish its investment portfolio online, press releases said it had recently invested in Blackstone and Carmel Partners.

Spokespeople for Calpers and CalSTRS told Al Jazeera they had nothing to say on the issue. The other organisations did not respond to Al Jazeera’s request for comment.

In essence, the private equity funds used the pension funds of California public employees, public school teachers, San Francisco municipal employees and state public employees to bankroll the opposition to rent control.

This funding allowed the campaign against the ballot measure to put out flyers against Proposition 33 across the state as well as advertisements claiming that a repeal of Costa-Hawkins would lead to cities setting rent boards that would “dictate what you can charge to rent out your own home”.

Dean Preston, a city supervisor in San Francisco and former tenant rights lawyer, told Al Jazeera that while the campaign against rent control “talks of small landlords, there is a range of landlords. We have seen corporate landlords being much more aggressive in evicting tenants.”

The ballot measure has come at a time when Unlawful Detainers, notices asking tenants to vacate homes within days, doubled, Preston said. More than 2,800 such notices were sent in the fiscal year 2023, up from 1,428 the previous year, according to city data, after a statewide moratorium on evicting residents for non payment of rent during the pandemic period ended. These were expected to rise further in 2024.

“We had set off an alarm to say that the health pandemic should not become a housing crisis,” Preston said in an interview at his San Francisco City Hall office. The city began a large rental assistance programme. “But we did see a wave of evictions.”

Susie Shannon, the policy director for Housing is A Human Right, the group that has sponsored the ballot measure to repeal Costa-Hawkins, told Al Jazeera the group sponsored it again because “wages have been stagnant for a while and rents have been going up. People are struggling. Some are couch surfing and others are homeless.”

Her campaign to support Proposition 33 raised a little more than $50m, funded largely by the Los Angeles-based AIDS Healthcare Foundation (AHF). The Foundation works in healthcare worldwide, including selling low-cost drugs, which are sourced through government discounts and sold at its pharmacies. It has also expanded into housing, buying single-room occupancy hotels to rent out to the unhoused. However, the Los Angeles Times has reported that these homes often have faulty plumbing, heating and electricity.

The battle over rent control has led to large landlords and real estate companies backing and funding a proposition requiring AHF to spend its revenues from discounted drug sales on patient care rather than funding rent-control measures. The California Apartment Association Issues Committee gave more than $40m to support this proposition to curb the AHF.

One night, when Aguilar was sleeping in the backseat of her car near Dolores Park, she was awakened by policemen shining flashlights into her face. They searched her car and checked her papers. They left after finding her to be above board and unable to make rent.

After nearly a year of living in her car, Aguilar’s car was towed for illegal parking and she began living on a street by the park. She stayed up all night to keep an eye on her belongings and made sure to stay out of fights and more police trouble. “I was so scared,” she said, recalling those months.

Three months later, in January 2023, she found a shared room in South Francisco’s Daly City. It cost her twice as much as her old apartment had.

Aguilar regretted leaving her apartment in San Francisco City, thinking she should have suffered for a roof over her head.

“Some landlords have made it a business practice of evictions to raise rents,” Preston said about the Costa-Hawkins provision allowing landlords to charge higher rents from new tenants. Aguilar later believed this had led to her being forced out of her house.

The California Apartment Association, which opposes Proposition 33, says in its pamphlets that not allowing rents to rise when a new tenant comes “would dramatically reduce the flexibility to adjust rents between tenancies. Imagine never being able to bring your rents to market rates.”

But tenant activists believe allowing landlords to charge higher rents from new tenants encourages them to push out older ones, such as Aguilar.

“If people are evicted, all they have left is sidewalks and underpasses,” said Carol Fife, a city supervisor in Oakland. Fife had received an Unlawful Detainer notice, threatening to evict her within days for not paying one month’s rent. While she was able to fight against the notice and stay on, not all tenants are able to do so.

Alexander Ferrer, a researcher with Debt Collective, an organisation that created the Tenant Power Toolkit to help tenants fight eviction cases in court, found that such notices were being issued with less than two months rent due, threatening to force many residents out of their homes.

Living under a battery light

It has also meant that tenants cling to rent-controlled homes when they have them, as Aguilar wishes she had.

Valente Casas was out one December night last year when he heard that there had been a fire in the home below his in Oakland. The electrical fire in the double-storied house led to the power and gas going out in both storeys, never to return.

Casas works as a cleaner for businesses, but many of the offices he used to clean have shut down as employees work from home, cutting his income and hurting his ability to rent a new home. So, Casas has stayed in his unit, devising an elaborate system to live without power or gas. He has one battery-powered light he charges at work, buys small amounts of groceries every day since the fridge does not work, cooks on a camping stove, accumulates gas cans to light his stove, and watches shows on his mobile phone for as long as the battery holds out.

Then he sits on his bed in the dark until he can fall asleep.

At these times, “I think about what a stressful life this is,” Casas told Al Jazeera. He has lived in the apartment for 15 years. “But if I leave and look for a new place, my rent will go up at least 100 percent.”

Christian Dominguez, who lived in the apartment that caught fire, slept in his car for nearly three months after the fire. With the light of his mobile phone, he walks through the burned unit his family moved into the day he was born, two and half decades ago. The house had a beautiful fireplace, his father had fixed new flooring and cabinets, and Dominguez received his own bedroom. The fire gutted it all.

Dominguez and his father Narciso, who sells hot dogs at the Oakland Coliseum, have rented another place while this one stays ruined, even as Dominguez continues to spend time there. The landlord offered them no help other than to encourage them to move out, Dominguez and Valente said. They believe if they do, the landlord can fix the place and get a new tenant at a higher rent, making the repair worth the money. They have not had any interaction with city inspectors either.

Not far from Dominguez’s and Casas’s home, Marco Cajas’s apartment block also had a fire one January evening. The power did not come back for a month and a half, during which time Cajas showered at a relative’s place and shared meals with them. While power has now returned to his unit, it still is not back in some of the others, which get electricity through a generator parked in the compound. It spews smoke that has made the children sick.

Cajas and other residents have sued their landlord but stayed in the building because they know an affordable new place would be hard to find.

Aguilar, meanwhile, has begun volunteering for tenants’ rights groups, including the South East Tenants Association and Housing Rights Committee, to support tenants such as herself. She visits low-income tenants in San Francisco and helps organise them into unions. She photographs their broken windows, doorbells, faucets with no running water, and elevators that do not work. She sends them to building managers, asking for them to be fixed.

She is also part of a volunteer army that tenants’ rights organisations hope will help reach voters to counter the other sides’ extensive funding in the fight to repeal Costa-Hawkins.

Aguilar thinks it is possible that many people with decision-making power do not know about the Costa-Hawkins rule and how it hurts people. “I wish the authorities knew about Costa-Hawkins,” she said. “It would reduce families having to live on the street. Police treat them so badly, like criminals.”

Fiduciary responsibility

CEPR’s Appelbaum, who has written a book called Private Equity At Work, said there is not much pension funds can say to influence the investments of the private equity funds in which they are invested.

“Pension funds are told they have a fiduciary responsibility to maximise returns for retirees. Doing anything else would hurt that,” she said.

However, in 2018, state law was amended to expand the meaning of fiduciary duty of Calpers, the state’s largest public pension fund, allowing it to “take into account harmful external factors when determining the overall return of an investment”. In other words, pension funds had to keep in mind harmful factors and not just returns.

Jordan Ash, the housing director at the Private Equity Stakeholder Project, said an earlier analysis by the group had found that aside from California’s public employees and teachers’ pension funds, several city utilities’ pension funds – including the Los Angeles Department of Power and Water Employees Pension Fund and San Diego and Santa Barbara county employees retirement systems – have also invested in Blackstone funds that contributed to opposing the repeal of rent control in previous years.

Since then, several cities across the state, including Pasadena, have voted to expand rent control.

Shanti Singh, the legislative director for Tenants Together, a statewide tenants’ rights group, said more cities would look to expand rent control because she believes having volunteers such as Aguilar in communities helps reach out to voters, even without as much money as the opposition.

Aguilar lived in her shared room in Daly City for more than a year, commuting to organise tenants in city apartments and working as a cleaner in a city gym. She struggled to find a place in the city she could afford and still be able to send money to her children, whom she had not seen since she left home 18 years ago. They were children when she left, she said. Now, they have their own children.

“I came here to support my children in their careers,” Aguilar, who almost only speaks Spanish, said. The thought of them had kept her going through her hardest times. “That is what it is to love as a mother.”

Earlier this year, Aguilar had an accident that restricted how much she could work and made the long commute into the city harder. Recently, she moved back to the city but pays more in rent than she earns every month, leaving her in a growing pool of debt as well as the constant worry of being evicted again.