As Californians head towards the ballot boxes this November 2024, apartment owners are rightfully concerned about the potential impacts on their investment properties and management strategies with regard to Proposition 33 and Proposition 34.
In short, Proposition 33 aims to expand rent control measures in California, while Proposition 34 aims to weaken the source of these rent control measures, which is the AIDS Healthcare Foundation’s ability to financially back them. Below, are the four potential scenarios which could unfold.
Possible Scenarios:
- Scenario 1: Prop 33 Passes, Prop 34 Does Not Pass -Probably the worst-case scenario for CA landlords. If Proposition 33 passes, rent control will be expanded in California likely leading to increased regulatory constraints on rent increases for many apartment owners, including the possible implementation of Vacancy Control. And with Proposition 34 defeated, the AIDS Healthcare Foundation will continue to have funding available to support future rent control initiatives down the line.
- Scenario 2: Prop 33 Does Not Pass, Prop 34 Passes – Best Case Scenario for CA landlords. In this case, Prop 33’s defeat would mean that existing rent control measures remain status quo, without expansion. And with Proposition 34 passed, the AIDS Healthcare Foundation would be forced to allocate 98% of its revenue directly towards patient care, potentially diminishing its ability to support rent control initiatives such as Prop 33 in the future.
- Scenario 3: Both Prop 33 and Prop 34 Pass: A good look for the future, but the damage would already be done. As mentioned above, with Proposition 33 passed, it would introduce expanded rent control measures, however it may likely be the last as the AIDS Healthcare Foundation’s mandated re-allocation of funding in accordance with Prop 34 would hinder their ability to support further rent control initiatives.
- Scenario 4: Neither Prop 33, Nor Prop 34 Pass: In the event that neither proposition passes, the current rent control measures will remain in place without expansion and apartment owners will continue to operate under existing rent control laws. The AIDS Healthcare Foundation will retain its funding and resources, allowing it to pursue rent control initiatives in the future.
Conclusion:
The outcomes of Propositions 33 and 34 hold significant implications for apartment owners in California. Each potential scenario above presents unique challenges underscoring the importance of understanding these propositions and their potential impacts on the housing market and property operations. Apartment owners should stay informed and prepared to adapt their strategies in response to the ballot results in November.
