A measure seemingly targeting the AIDS Healthcare Foundation, which has put forth three rent control ballot measures, is on its way to narrowly passing.

By Mark Kreidler, Capital & Main

This story is produced by the award-winning journalism nonprofit Capital & Main and co-published here with permission.

Three times, nonprofit CEO and political activist Michael Weinstein has spearheaded state initiatives to give municipalities more ability to curb runaway rent costs. Three times he has failed.

Weinstein says he won’t stop trying. But his ability to do that is now in serious jeopardy.

California voters produced a double whammy for Weinstein. His group’s latest effort to repeal state law and allow more local rent control, Proposition 33, failed badly. It was pronounced a loser not long after polls closed on Election Day, and trails by almost 3 million votes with more than 98% of the vote counted.

But it’s the fate of another measure that may hurt worse. Proposition 34, written specifically to prevent Weinstein’s deep-pocketed AIDS Healthcare Foundation from using its revenue to fund future such housing initiatives, is going to narrowly pass. With more than 98% of the vote counted, the measure leads 50.8% to 49.2%.

In both cases, Weinstein’s foundation was principally opposed by the California Apartment Association, a powerful landlord lobby with huge corporate backing and money to burn. The association spent almost $90 millionto make sure the rent control measure failed, with other realtor and business groups kicking in another $40 million. The apartment association also spent $44 million on the effort to place strict guardrails on how the AIDS Healthcare Foundation can use the money it makes from federal prescription drug discounts.

“The results of Propositions 33 and 34 prove only one thing: If billionaires spend more than $170 million lying and confusing voters, they are virtually guaranteed to win,” Weinstein said in a statement conceding the fates of both measures. But, he added, “The battle for justice for renters marches on.”

Weinstein’s ability to continue that fight will be severely compromised if Prop. 34 becomes law. Essentially, the measure, which was carefully shrouded in medical language, requires California health care providers to spend at least 98% of what they make through federal drug discounts on “direct patient care.” But that’s only if they meet certain other qualifications: spending at least $100 million on expenses other than direct care; owning and operating apartment buildings; and receiving 500 severe health and safety violations over the last decade.

Examined in detail, those qualifications apply to exactly one entity: the AIDS Healthcare Foundation.

It was an open secret even before the campaign began in earnest. As reported by Politico, the California Apartment Association explained Prop. 33 and Prop. 34 to its members last fall as “dual campaigns” by the CAA “to defeat Weinstein’s current rent control measure and prevent him from misusing taxpayer dollars to fund rent control campaigns in the future.” (The AIDS Healthcare Foundation, or AHF, is not violating any current law on how it spends its money.)

Asked by Capital & Main whether he will mount a legal challenge to Prop. 34, Weinstein replied, “We will consider whether the law applies to AHF first before making any decision.”

Weinstein’s foundation became a multibillion-dollar nonprofit largely on money made from the federal drug program, which allows health care providers to buy certain drugs at a discount and sell them at a profit, theoretically using that money to improve their services. As he ventured deeper into California’s political and housing scene, using some of the foundation’s money to buy low-cost apartments and some to fund rent-control measures, the often-combative Weinstein drew the ire of landlord groups like the California Apartment Association.

The landlords want to keep on the books a law known as Costa-Hawkins, which essentially prevents strict rent control measures at the local level. Weinstein, who considers housing costs to be inseparable from poverty and homelessness, has repeatedly taken direct aim at that law.

“But the vast majority of economists say these types of laws actually make the housing crisis worse,” countered Nathan Click, a spokesperson for both the campaign against 33 and the one in favor of 34. “It’s supply and demand. If you take away all the incentives for supply [by restricting rents], you’re not going to fix the demand side.”

Click insisted that Prop. 34 wasn’t strictly designed to get Weinstein out of the initiative business, but the measure was condemned as exactly that by a slew of major newspapers in the state, including the Los Angeles Times, San Francisco Chronicle, San Diego Union-Tribune and Sacramento Bee.

When voters examined their ballots, though, they saw only the language of the initiative itself. It read like a medical issue. Instead, it will have the practical effect of shoving Weinstein to the political sideline, at least for a while.

Assuming the law withstands any potential legal challenge, the landlord association — again, propped up significantly by billion-dollar corporations, not mom-and-pop operations — will have had its way on two fronts. What won’t have changed? California’s housing crisis, and the spiraling, out-of-control rents that accompany it.

A 2019 state law, which limits annual rent increases to 5%, has been criticized by housing activists as laughably inadequate, in part because it also allows for a yearly inflation increase of up to another 5%. The idea of Prop. 33 was that, by repealing Costa-Hawkins, cities and municipalities dealing with potential 10% a year rent hikes could exert more direct control.

That won’t happen this time around. It also won’t be the last time the battle is fought. Michael Weinstein is hardly the only person working for more rent control in the state — but he is often the loudest. Through a specifically designed, single-purpose, massively funded state initiative, his opponents may well place Weinstein on mute.

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