What is in the Future for the LA Real Estate Market after the Fires?
One thing I know for sure this week is that the real estate agents in the Los Angeles fire-affected areas are working overtime. Not only did many of them lose their own homes, but they also lost listings, their clients and friends lost homes, and some lost their branch offices. So many have no home or office but are working to find long-term housing for those displaced.
The quiet heroes behind the scenes are working at donation centers; restaurants are serving free meals, people are donating money, and resources are everywhere. And we can’t forget the firefighters who have tirelessly worked for over a week, with many coming from other states and countries to help. I would be remiss if I didn’t mention the front-line news reporters who have worked every day in dangerous conditions to keep us updated. It is an army of selfless helpers.
Yesterday, another large fire, the Hughes Fire, popped up north of LA. Thankfully, the winds are not as strong, but everyone is taking it very seriously. It has already grown to over 10,000 acres and has only 24% containment. Water-dropping planes and helicopters are on it.
What we have lost.
San Francisco was destroyed by an earthquake, and Chicago by fire. Many cities have suffered similar fates throughout the centuries and have risen from the ashes in a new version of themselves. Los Angeles is made up of a dynamic, creative, and diverse population. They will figure out how to best support these communities. While people are focused on what has been lost right now, history will look back and see what the city accomplished to move forward.
If you have not seen the aerial footage of the devastation, I encourage you to look at it so that you can grasp the magnitude of what happened. The Palisades and Eaton fires destroyed 12,000 homes and structures, burned 40,000 acres, and killed 28 people. Let those numbers sink in for a minute. For perspective, 40,000 acres is about 62 miles in diameter, and St. Louis is 62 square miles in diameter.
Even if the state and federal governments step up to make rebuilding these communities easier, it will still take at least five years or more for them to resemble their former selves…if they ever do. The losses are profound, and we cannot minimize what those affected are going through, especially the children who lost not only their homes but many also lost their schools. Nothing about their lives will be the same.
While some are angry about what was or wasn’t handled well and what could have been done differently, it doesn't change the outcome. All we can do is learn from this and ensure it never happens again. It is impossible to predict what a disaster like this will do in the short and long term since it is uncharted territory.
Agents stepping up:
I was pleased to hear that 50 top producers and brokers from different companies have banded together to contact LA Mayor Bass and California Governor Newsom with their suggestions for speeding up rebuilding. The letter emphasizes the unique perspective of real estate agents on the challenges ahead and their commitment to rebuilding Los Angeles.
Here are the things the agents proposed:
Increase the state's FAIR Plan maximum coverage for residential properties to $6 million from $3 million, including liability insurance.
Exempt property owners who lost their homes from the city's "mansion tax" and provide similar exemptions for buyers and developers of affected land for five years.
Allow special exemptions from restrictive building policies to help homeowners rebuild the same home that previously existed.
Expedite the permitting process, reduce fees, and suspend debris hauling route limits.
Pause property taxes for any property affected by the fires until it's rebuilt or immediately re-assessed at land value.
While the first two are certainly targeted at the higher-end property owners, the last three benefit everyone affected.
Mayor Karen Bass has taken several significant steps to expedite rebuilding in the aftermath of the fires. Here are some key measures she has agreed to:
Debris Removal Plan: The city will immediately set up a debris-removal plan to clear the properties of toxic materials, which is necessary before any rebuilding can occur.
Expedited Permitting: All city departments will review building plans concurrently and aim to complete them within 30 days of submission. This includes the Los Angeles Department of Water and Power, which often faces criticism for the time it takes to issue permits.
Temporary Housing: Rebuilding residents can set up recreational vehicles, tiny homes, or other temporary residences on their land for up to three years.
Temporary Certificates of Occupancy: The city will expedite approvals for 1,400 housing units currently in the pipeline across the city, allowing them to open to residents faster.
Physical Permitting Center: To help accomplish the 30-day goal, a physical permitting center will be set up near the Palisades, staffed with representatives from all applicable departments seven days a week.
Coordination with State and Federal Agencies: The city will coordinate with the California Office of Emergency Services and other agencies to streamline debris removal and rebuilding efforts.
Mayor Bass has also appointed Steve Soboroff, a longtime L.A. businessman and civic leader, to head the rebuilding efforts. Soboroff will recommend a comprehensive city strategy for rebuilding and expediting the process. He is a guy that knows how to get things done. And there is a lot to get done.
Government officials have promised to cut through the horrific permitting process here. However, they will not let people toss up any style or size of house. There will be environmental concerns. I suspect particularly around making them more fire-resistant and environmentally sustainable. Some of the ecological restrictions will have to be relaxed. CA prides itself on this stuff, but now is no time for pride. Let people do what they need to do to clear their land and start rebuilding.
I have been listening to a lot of agents and industry leaders for their opinions, and here is some of the feedback I am getting:
Many homeowners affected were grossly underinsured or recently lost their insurance, meaning they cannot replicate their previous homes unless they are wealthy. The fire insurance issue is an evolving nightmare. While there is a moratorium on cancellations or non-renewals in affected and adjacent communities, there will be a fight. I suspect those of us in unaffected areas will pay a heavy price. The cost of insuring a home rebuilt in a fire-ravaged area may be prohibitive for many.
Landlords are already starting with the price gouging. A CA anti-price gouging law says raising rents more than 10% pre-emergency levels is a crime. Zillow pulled off hundreds of rental listings that violated this law. Many have doubled rents. Shameful. Violators face fines of up to $10,000 and up to a year in jail. They must be reported and prosecuted. The desperation of renters may prevent that.
Some agents are saying that as many as 50% or more of those who lost their property may end up not rebuilding and just selling their lot to a private owner or builder. This makes sense.
Those displaced from the Palisades fire may end up in adjacent markets, such as Brentwood, Santa Monica, Westwood, Beverly Hills, etc., and will likely experience higher sales prices.
The Eaton fire victims might end up in the adjacent San Fernando or San Gabriel Valleys.
These victims may want to maintain some normalcy with familiar surroundings by living adjacent to their former communities.
Or they may leave the state or head to the adjacent Orange, Ventura, Riverside, Santa Barbara Counties, or the desert.
Can you imagine if your home is one that survived in the middle of all of the destruction? Or even in a nearby neighborhood? The construction noise and chaos will likely be enough to push some into selling. Survivor’s guilt is a very real thing.
Some alternative solutions:
According to the US Census Bureau, in 2023, there were 32,000 unoccupied vacation homes in LA County. If the owners are willing to lease them long-term, they will provide a vital lifeline for those seeking rentals. There were also 5,800 vacation homes listed vacant in Ventura County. According to a recent Inman article, there are over 4,000 Airbnb listings in the area. But are those owners willing to make them available, and will the city allow them to become long-term rentals? Most city regulations only allow for 120-day rentals.
We are seeing temporary housing companies step up to offer their rentals for long-term assistance. Since those properties will be unavailable, the relocation process may be affected as transferees come in. Transferees may end up in hotels, which is not always optimal.
Please donate if you can. Any amount helps. Here’s what I know…people are resilient, and we will work together to ensure they get what they need to rebuild their lives. Here are some places to donate to support those affected by the LA fires:
American Red Cross: The American Red Cross engages in wildfire relief efforts, providing shelter, meals, and emergency supplies. You can donate through the website Wildfire Relief Information | American Red Cross or by calling 1-800-RED-CROSS.
California Community Foundation: Focuses on long-term recovery efforts. Home - California Community Foundation
Direct Relief: Supplies medical resources to healthcare agencies in affected areas. Direct Relief | Official Charity Site
Los Angeles Regional Food Bank: Helps provide food to the affected. Fires Update from the LA Regional Food Bank
Pasadena Humane: Assists animals affected by the fires. Pasadena Humane | Compassionate Care for Animals Since 1903
The Central World Kitchen: Jose Andres’ organization provides meals to fire victims, evacuees, firefighters, and volunteers. www.cwk.org
California Association of Realtors (CAR) has set up a disaster relief fund for real estate professionals, including office staff. I know of at least eight real estate professionals who have lost their homes, but I am sure there are many more. C.A.R. Disaster Relief
There are many other great organizations available to help. Please make sure they are vetted. Here are some articles that list some of the above and others. How to help L.A. wildfire victims: A list of vetted relief organizations or Where to give: Top-rated charities active in the Los Angeles wildfire relief effort – NBC 7 San Diego
Destruction from the Palisades fire.