California Bill Would Keep the AIDS Healthcare Foundation Out of the State's Housing Battles

Is it constitutional?

Just as a California rent control ballot initiative gains steam, a bill in the state legislature would effectively prohibit the initiative's chief financial backer from participating in housing politics. It's anyone's guess whether the legislation is constitutional.

Working its way through the California Assembly right now is A.B. 1938, a bill that would prevent a very narrowly defined set of health care organizations from spending money they receive from contracts with state and federal health agencies or from federal discount drug programs on influencing housing-related ballot initiatives. The legislation also blocks them from spending the money on certain types of environmental lawsuits often used to hold up housing projects.

The type of organization affected by the bill is defined so narrowly that it applies to only one outfit: the polarizing AIDS Healthcare Foundation (AHF).

"There have been documented cases where public money was used in an attempt to affect public policy unrelated to the health arena, and instead used to affect the production of new housing in California," reads a summary of the bill released by its sponsor, Evan Low (D–Campbell), which calls out AHF by name. "A.B. 1938 ensures that public resources are spent wisely and for the purposes for which they are intended."

An Assembly Committee on Health analysis of the bill is explicit about it solely targeting AHF.

By day, the Los Angeles–based AHF contracts with the state's Department of Health Care Services (DHCS) and the federal Centers for Medicare and Medicaid to provide health care plans to HIV-positive patients.

It also runs a network of pharmacies that make much of their money by participating in the federal 340B Drug Pricing program. That program requires drug companies to sell certain drugs at discount rates to hospitals and other nonprofits, such as AHF, which then bill private and public health insurance plans for the full price of the drug.

In addition to these functions, the group and its controversial founder Michael Weinstein have devoted some its $1.4 billion-a-year budget to pushing an eclectic set of political causes, including condom mandates for porn stars and capping the costs of prescription drugs.

More recently, AHF has made itself a major player in California housing politics, combining NIMBY (not in my backyard) opposition to new development with strident support for rent control. The group spent some $22 million advocating for 2018's Proposition 10, a failed ballot initiative that would have repealed the state's restrictions on local rent control measures. It's trying again this year with the similar Rent Affordability Act, which will be on the November ballot. AHF has contributed $4.7 million to the Yes campaign so far.

The group is also known to file lawsuits to prevent the development of new housing. And it has been a full-throated opponent of various bills by state Sen. Scott Wiener (D–San Francisco) to legalize the development of mid-rise apartment buildings near transit stops and job centers. Last year it sparked controversy with mailers comparing one of Wiener's bills to the urban renewal policies of the mid-20th century. The mailer featured a quote from civil rights era activist James Baldwin calling urban renewal "Negro removal."

Needless to say, this activism has made AHF a lot of enemies in the contentious world of California housing politics. Hence A.B. 1938. Wiener is listed as a principal co-author on the legislation, which also has the support of the California Apartment Association, a landlord trade group.

"This is perhaps one of the most undemocratic bills that a Democrat could carry. This bill is trying to silence an organization that is trying to speak on behalf of renters and the disenfranchised," says Ged Kenslea, communications director for AHF. "This is a total David and Goliath situation that legislators are carrying water for Wall Street landlords that are eager as all hell to evict tenants."

Kenslea also says A.B. 1938 is unconstitutional. "This legislation would not pass the constitutional test when it comes to infringing on First Amendment rights," he says.

Eugene Volokh, a law professor at UCLA who also blogs at The Volokh Conspiracy (hosted here at Reason.com), isn't so sure on that last point.

A.B. 1938 "does raise First Amendment concerns, but it's not clear how they are to be resolved," he tells Reason, saying the Supreme Court has yet to definitively rule on this issue.

"The argument in favor of constitutionality is this is government money and the government can attach strings to it," says Volokh, saying that courts have generally upheld the ability of the government to restrict or condition how the recipients of government subsidies spend those dollars. They have said, for example, that when the government provides subsidies to doctors to educate patients about contraception, it can restrict them from discussing abortion.

In the context of A.B. 1938, a court could treat the money the organization receives from DHCS as a subsidy that must be used on health care, in which case it would be within the state legislature's power to say it can't be spent on housing ballot initiatives.

On the other hand, Volokh says, a court could also reason that this money isn't so much a subsidy as compensation paid to AHF for providing health care. In that case, the government couldn't regulate how that money is spent.

"It's one thing when the government gives people a subsidy but it's another thing when it pays for services rendered," Volokh explains. He adds that a law restricting AHF's speech on housing issues only could prompt a court to strike it down for viewpoint discrimination.

Volokh thinks the bill is most vulnerable to a constitutional challenge when it tries to restrict how AHF uses dollars it receives from federal programs. California couldn't claim to be the entity providing the subsidy, and therefore it would have no authority to attach strings to that money. The legislation does, however, instruct the DHCS director to get all necessary federal approvals when implementing the bill.

A.B. 1938 passed out of the Assembly's Committee on Health Care in mid-May and has been referred to the Appropriations Committee. It faces a June deadline for passing out of the Assembly. Kenslea says that even if the bill passed, it wouldn't go into effect until 2021, meaning it would have no effect on the current rent control ballot initiative.

There is pretty much zero overlap between any of AHF's positions on housing and those of free marketers. The group has opposed lifting existing restrictions on development, advocated imposing new ones, and has spent millions of dollars pushing rent control.

That said, A.B. 1938's efforts to prohibit the group from participating in the political process seems dirty, especially given the possible unconstitutionality of the bill.

The folks who favor upzoning and oppose rent control have a compelling case to make. They should focus on selling their vision to the public, not squelching the speech of their opponents.