Housing Providers Pay Twice

For years, California apartment owners have been told that increased regulation, capped rents, and reduced operational flexibility are necessary sacrifices in the fight against homelessness. The private rental housing industry has been asked—repeatedly—to absorb risk, limit income growth, and shoulder greater responsibility in the name of solving a statewide crisis.

Now, federal investigators are signaling what many housing providers have long suspected: significant portions of public funds intended to address homelessness may not have been used as promised. And while public systems failed to deliver results—or allegedly allowed funds to be misused—apartment owners were still expected to comply, subsidize, and stay silent.

A Federal Reckoning Brings Long-Standing Concerns Into Focus

In 2025, Acting U.S. Attorney Bill Essayli announced the formation of a federal task force focused on fraud, waste, and corruption tied to homelessness funding in California. Criminal cases have since followed, involving allegations that money earmarked for homeless housing programs was diverted through real estate transactions, false financial representations, and personal expenditures.

For apartment owners, this development is not political—it is practical. If funds intended to reduce homelessness were siphoned off or mismanaged, then the rationale behind increasingly aggressive regulation of private housing begins to unravel.

Who Pays When Homelessness Dollars Don’t Deliver?

Apartment owners fund the system and absorb its consequences, experiencing homelessness policy not as theory, but as a daily operational reality.

Rent caps limit revenue growth regardless of rising insurance premiums, utilities, labor costs, and capital repair expenses. Just-cause eviction rules restrict owners’ ability to address chronic nonpayment or property disruption. Expanded termination requirements expose owners to legal risk for technical missteps—often regardless of intent.

Each rule is justified as a protection against displacement and homelessness. At the same time, apartment owners are taxpayers. They fund homelessness programs through income taxes, property taxes, sales taxes, and local assessments—while also providing the overwhelming majority of naturally occurring affordable housing in the state.

The result is a one-way accountability structure:

Owners must document every notice, deadline, and disclosure

Owners face penalties for administrative errors

Owners are publicly blamed for affordability failures

Meanwhile, public homelessness systems have operated with limited transparency, inconsistent outcome tracking, and—according to federal prosecutors—potential criminal misuse of funds.

Unfunded Mandates And Enforcement Asymmetry

Perhaps the most overlooked burden on housing providers is the growing list of unfunded mandates imposed in the name of homelessness prevention.

Owners are required to extend tenancies, absorb unpaid rent, delay enforcement, upgrade properties, and manage increasingly complex compliance regimes—often without corresponding public support or reimbursement. These mandates shift social policy costs onto private balance sheets.

At the same time, enforcement is asymmetric. A missed notice date or paperwork error can expose an owner to fines, litigation, or rent forfeiture. By contrast, public agencies overseeing homelessness spending have faced comparatively little scrutiny—until now.

Federal scrutiny now exposes the imbalance owners have endured for years—private housing regulated to exhaustion, while homelessness spending is misused, abused, and effectively unregulated.

Regulated Like The Problem, Treated As The Backstop

Apartment owners are increasingly cast as both the cause of—and the cure for—California’s housing crisis, despite having no authority over policy design or public spending. When homelessness rises, the industry is blamed. When rents respond to market pressures, the industry is capped. When government programs fail, private housing is still subjected to more regulation.

This framing ignores a fundamental reality: rental housing is a private industry, governed by capital markets, operating costs, and supply and demand—not a charitable enterprise or an extension of the social services system. Housing providers deploy private capital, assume private risk, and operate within the constraints of capitalism, not public subsidy.

The emergence of federal fraud investigations forces a long-overdue question: why has a private, market-driven industry been burdened with escalating restrictions while public homelessness systems operated with far less accountability?

Government Overreach, Not a Housing Failure

From the outset, government should not have inserted itself this deeply into the operations of private rental housing. Apartment owners are not public agencies, social service providers, or fiscal administrators of homelessness programs. Yet policy after policy has treated them as such—regulating their businesses as if private housing were an extension of the state. This intrusion has only become more troubling as evidence mounts of how homelessness funds have actually been spent.

Money earmarked for homelessness has been alleged to bankroll luxury homes in Beverly Hills, personal credit card bills, vacations, and other private expenses—while practical housing solutions remain unfunded. The result is a system where public dollars are consumed, accountability is absent, and homelessness continues unabated.

Against that backdrop, the decision to further regulate private apartment owners is not merely misguided—it is misplaced. Private housing providers did not approve these expenditures. They did not design these programs. They did not benefit from them. Yet they are routinely subjected to rent caps, operational constraints, enforcement penalties, and public criticism—ostensibly to solve a crisis managed elsewhere.

This is not a call for government to manage private rental housing more effectively. It is an argument for government restraint. Private apartment operations are not an extension of the public sector, and they should not be treated as such—particularly when public homelessness programs have consumed extraordinary resources with so little measurable progress.

The question policymakers should be confronting is not whether additional controls on housing providers can be justified. It is far more fundamental: Why is government intervening in private rental operations at all, while its own homelessness programs absorb billions of dollars and continue to fall short of their stated goals?

Written by Mercedes Shaffer, Real Estate Broker

Mercedes Shaffer is a multifamily broker with REAL, serving LA and Orange County. For questions about buying, selling or 1031 exchanges, contact her team at 714.330.9999, InvestingInTheOC@gmail.com, or you can visit their website at InvestingInTheOC.com BRE 02114448