Wall Street Is Spending Tens of Millions Against Rent Control 

Large corporate property owners are the biggest financiers in the campaign against Proposition 10.

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Invitation Homes and Blackstone have contributed $1.8 million to the main campaign committee opposing Prop. 10, which calls themselves, "Californians for Responsible Housing," and another $5 million to a second committee also Prop. 10 (in all, there seven campaign committees opposing Prop. 10). In response to questions about how Prop. 10 would impact their business, Invitation Homes officials emailed the Express stating that "rent control dampens new housing starts and investment in existing housing," and that "we agree with the experts that Prop 10 is the wrong answer for California's continuing housing shortage." Invitation Homes added that it has invested $2 billion in renovations to the homes it has purchased.

Avalon Bay is another corporate giant that's funding the campaign against Prop. 10. Among its vast holdings are 10,325 apartments in Northern California and 13,330 in Southern California. Some of the company's properties are located in rent control jurisdictions, including "The Avalon" on Addison Street. Built in 2011, The Avalon wouldn't be covered by rent control if Proposition 10 and Measure Q are approved until 2031. But Avalon Bay owns numerous older properties in other cities that have recently considered enacting rent control, and one city, Mountain View, where voters did approve a new ordinance.

"In 2016 in Mountain View, California, the voters passed a referendum that limits rent increases on existing tenants (but not on new move-ins) in communities built before 1995," the company's executives wrote in their most recent annual report. "We have three communities with a total of 946 apartment homes that are subject to the new law."

Avalon Bay has contributed just over $3 million to the main No on 10 committee. When asked how the repeal of Costa-Hawkins and possible new rent control laws might affect their profits, the company referred the Express to Steven Maviglio, a political consultant running the No on 10 campaign.

"You're asking a question that's impossible to answer because Prop. 10 allows rent control (and expansion of rent control) as a blank check to special interest groups in these communities to put whatever form of rent controls on the ballot that they want," Maviglio wrote in an email. "No one knows how many nor what type of controls would be in place, nor the provisions in them, so it's impossible to do the cost analysis you requested."

Other large corporate landlords, like The Irvine Company in Southern California, have also been pumping millions into the California Republican Party, which, in turn, is also campaigning against Prop. 10. The Irvine Company has donated at least $2.7 million to the California GOP this year.

"Frankly I don't understand the amount of money that has been spent by these corporations given that massive windfall profits have been already provided to property owners over the last number of years," said Igor Tregub, a member of Berkeley's rent board who is supporting Prop. 10.

Tregub, who is also running for the Berkeley City Council District 1 seat, explained that companies like Avalon Bay, Equity Residential, and Invitation Homes have been able to make incredible profits in California's real estate because of Costa-Hawkins' ban on vacancy control. "There is a lot of big money at stake it seems, and that's probably the reason so much money has been spent against Prop 10," he said. Vacancy control allows cities to limit landlords' ability to raise rents on vacant units.

To understand the sums of money at stake in the rent control debate, Tregub referred to a 2010 study conducted by the Berkeley Rent Board that found dramatic increases in rental prices throughout the city, even on units covered by the rent control ordinance, following the enactment of Costa-Hawkins' vacancy decontrol provision in 1999. In essence, the sheer number of tenants moving out of rental units in Berkeley each year allowed landlords to periodically bring rents on hundreds of apartments up to the market rate. According to the rent board, there have been an extra $100 million in annual rent increases in the city thanks to Costa-Hawkins' ban on vacancy control.

At the same time, because landlords could charge more in rent, their buildings were now worth much more. This resulted in increased taxes collected by the city on rental property businesses and on transfer taxes when buildings are sold.

Ultimately, Costa Hawkins has been a boon to the real estate industry, including some of the biggest Wall Street-backed companies. Last year, Equity Residential collected $2.7 billion in rents on its properties throughout the United States and earned a profit of $847 million, according to filings with the U.S. Securities and Exchange Commission. Avalon Bay collected $2.1 billion in rents and reported $876 million in profit. And Invitation Homes and several other companies it merged with, which currently own dozens of single-family homes in Oakland and other East Bay cities, collected $156 million in rents.

From Laverde's standpoint, the reason corporate landlords are spending so much to defeat Prop. 10 is obvious. The tens of millions in campaign funds they raised so far amount to a fraction of their yearly profits. "Their expectations are outlandish," Laverde said. "No other industry can say we're supposed to make 10 percent on our investment."


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