Large owners of rental housing in California have committed millions of dollars in opposition to a ballot initiative that would make it easier for localities to launch and expand rent control laws.

Polls on the measure suggest that Proposition 10, which would repeal a law restricting localities' power to control rents, has so far failed to capture the public's imagination. Even so, large multifamily and single-family rental landlords, along with other real estate companies and trade organizations, appear to be leaving little to chance.

As of Oct. 23, affiliates of Blackstone Group LP had contributed $5.0 million to committees opposing the measure, while Essex Property Trust Inc. and affiliated entities contributed $4.5 million, Equity Residential contributed $3.7 million and AvalonBay Communities Inc. contributed $3.1 million, according to Ballotpedia.org, a nonpartisan election-tracking website.

The property owners are among the top contributors to opposition efforts, behind a political action committee associated with the California Association of Realtors, which has contributed $8 million, Ballotpedia said. In all, opponents of the proposition contributed $64.3 million, while supporters contributed $25.0 million — 95% of which came from the AIDS Healthcare Foundation.

Local tastes vary

The proposition would roll back the Costa-Hawkins Rental Housing Act, a 1995 law limiting local governments' ability to restrict rents. In the law's absence, localities could move to enact new rent controls or to strengthen rent-control laws that already exist, such as by broadening them to include single-family rental properties, which many currently exclude.

Fewer than two dozen cities in California currently have rent-control laws, with most predating the passage of Costa-Hawkins. Many of the existing laws are concentrated, though, in apartment markets where real estate investment trusts and other large landlords own property, such as the Los Angeles and San Francisco Bay areas.

Proponents of the Costa-Hawkins repeal argue that housing is a local issue best handled by local governments.

"The question is, who's in a better position to respond to the crisis that hundreds of thousands of renters are experiencing, where they're one rent increase away from being evicted from their apartments and landing on the street," Zev Yaroslavsky, a former Los Angeles County Board of Supervisors member who is now a senior fellow at the University of California, Los Angeles' Luskin School of Public Affairs, said in an interview.

In a report, Alisa Belinkoff Katz, a Luskin School fellow, argued that the Los Angeles rental market has warped in recent years, with the percentage of household income that renters spend on their housing rising while the number of affordable units covered by the city's rent-control law has fallen. About 50% of middle-income renters in the city were "rent-burdened" — spending more than 30% of household income on rent — in 2011, compared to 10% in 1970, the school found.

AvalonBay and Camden Property Trust, which contributed $432,000 to the anti-Proposition 10 campaign, declined to comment, citing so-called quiet periods before the release of their third-quarter earnings. Equity Residential did not respond to a request for comment. Essex referred an inquiry to the No on Prop 10 campaign. A spokesman for the campaign, Steven Maviglio, said in an interview that the repeal of Costa-Hawkins would allow "any special interest group in any community to enact any kind of rent control they wanted."

Maviglio cited a review of the measure by the nonpartisan state Legislative Analyst's Office, which concluded that it would likely cause the value of rental housing to decline and would likely reduce state and local revenues from property taxes.

As an alternative, he said, the No on Prop 10 campaign had embraced suggestions from the University of California, Berkeley's Terner Center for Housing Innovation: a statewide cap on rent increases and an incentive program for the creation and retention of below-market-rate rental units.

A spokesperson for Invitation Homes Inc., a single-family rental REIT in which Blackstone owns an approximately 42% stake, said in a statement that rent control would be counter-productive to affordability because it would dampen construction of new housing. The landlord is one of the largest payers of state and local taxes in California and has invested more than $2 billion in upgrading its properties, "many of which were sitting vacant or blighted when we purchased them," the spokesperson said.

Polls inconclusive

The most recently released poll on Proposition 10, conducted by the University of Southern California and the Los Angeles Times from Sept. 17 to Oct. 14, found that 41% of likely voters supported the measure, while 38% were opposed and 21% were undecided.

Proposition 10 fared better in that poll than in another poll, from SurveyUSA, which found 35% in support of the proposition, 46% opposed and 18% undecided. Still, USC's Robert Shrum, a longtime Democratic strategist, told the Times that the measure appeared to be in "deep trouble," because of relatively low support and its opponents' fund-raising advantage.

Maviglio called the CEO of the AIDS Healthcare Foundation "a serial ballot measure offender," and justified the No on Prop 10 campaign's fund-raising, arguing, "We're outspending him because we have to. The concept of rent control, in the abstract, is favored by most voters, so we need to spend a lot of money educating people on what the difference between that and Prop 10 is."

UCLA's Yaroslavsky said large real estate owners appear to be trying to kill the idea of Costa-Hawkins repeal by a decisive margin, so that legislators will not reintroduce it if Proposition 10 fails.

"They have enough money to tailor their campaign, to saturate their message," he said, noting that during a recent Dodgers playoff game, he saw multiple ads against the measure and none in favor. Still, he said the polls may be too close for comfort for rent control opponents, especially given the high numbers of undecided voters.

"This is a very volatile election; we don't know who's going to vote," Yaroslavsky said. "We don't know who's turning out in bigger numbers."