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Prop. 21 Failed But The Rent Control Battle Will Continue

After an expensive fight, a state ballot measure that would have made it possible for more properties across the state to fall under California's rent control regulations has been defeated. 

“Yet again, California voters clearly understood the negative impacts Prop. 21 would have had on the availability of affordable housing in our state by clearly rejecting this radical ballot measure,” said Tom Bannon, CEO of the California Apartment Association and one of the leaders of the No on 21 campaign, in a statement. 

But for some in the commercial real estate industry, it is unclear whether this battle is going to make a regular appearance on future ballots.

Downtown Los Angeles

“That was one election,” said Jovana Fajardo, Sacramento director with the Alliance of Californians for Community Empowerment, one of the roughly 300 organizations and groups that voiced support for the proposition. “But it’s not the end of the fight, for sure.”

Proposition 21 would have allowed localities to expand state rent control protections by extending them to housing types that were not previously eligible, including apartments built within the last 15 years. 

“Given the headwinds we faced against some very deep-pocketed and deceitful opponents, we are disappointed, although not completely surprised, that Prop. 21 fell short at the ballot box,” said René Christian Moya, campaign director of Yes on 21 and director of Housing Is A Human Right, in a statement. 

Moya said it was the money, and the advertising it bought, that most affected the race in his opinion. When it comes to passing propositions,“he who has money wins,” Moya told Bisnow

Organizers and advocates who wanted to see the proposition pass said that the fight for housing justice and renter protections isn’t over just because Prop. 21 failed. That is exactly what worries John Loper, an associate professor of real estate at the University of California's Price School of Public Policy.

Prop. 21 was similar to 2018’s Prop.10, which was a broad repeal of the Costa-Hawkins Rental Housing Act, the law that dictates rent control in California today. The difference was that Prop. 21 offered some restrictions on local control over rents that its predecessor did not, a concession that some supporters thought might make it more favorable to voters. Spending on Prop. 21 surpassed spending on Prop. 10, which cost both sides a total of $103.7M, according to numbers from California's Secretary of State.

By the end of the election, the costly Prop. 21 campaign drew nearly $135M in contributions: $94.6M against the measure, much of it from some of the biggest REITs in the country, and $40.4M almost entirely from the AIDS Healthcare Foundation in support of it, according to totals from the Secretary of State’s website. 

Some of the same names that donated to defeat 2018’s Prop. 10 spent big on Prop. 21 this year. AvalonBay kicked in $10.2M, Equity Residential contributed $12.9M, and Essex Property Trust donated $16.9M to the opposition campaign. Requests for comment from all three directed to the No on 21 campaign were not immediately returned.

The proposition needed a simple majority to win, and as of Sunday morning, nearly 60% of votes counted had been cast against the measure. 

That two fairly similar propositions have come up in the last two years that would have made sweeping changes to the state’s rent control regulations could be indicative of a future appearance of a similar ballot measure, Loper said. Loper said he has already seen some hesitancy from investors who are similarly worried.  

It was a concern voiced by investors and developers after Prop. 10 failed, and that time it ended up ringing true.

“Every time this gets brought up, there’s a lot of money that the multifamily investment world has to invest to educate the population about the effects of it,” Loper said. “At some point, you wonder, 'Why not just build in Texas, where everyone’s moving anyway?'”