The LA Wildfires are driving up rental housing prices, raising concerns about inflation

The devastating wildfires that have ravaged the Los Angeles area in recent weeks have also threatened an already strong housing market, causing rising rents that have fueled concerns about inflation.

Authorities said more than 12,000 structures were destroyed by the Los Angeles wildfires, which affected Pacific Palisades and Altadena, as well as the Malibu area. At least 27 people have died as a result of the wildfire, which continues to be dangerous as firefighters work to contain the flames, which are being driven by Santa Ana winds.

With the fires destroying dozens of homes in those areas and many people in the region still being told to evacuate due to the volatile nature of the wildfires, local residents looking for rental housing are seeing prices rise dramatically compared to the market down the road. fires broke out.

“The wildfires have had a profound and far-reaching impact on the Los Angeles housing market,” David Berg, founder of Smith & Berg Property Group, Compass, told FOX Business. “Neighborhoods have been destroyed, landlords have been evicted and there has been a lot of pressure to find housing. Families who have lost their homes want to be rented out as soon as possible. They are in great need in the surrounding communities.”

CALIFORNIA WILDFIRES: IMPORTANT PHONE NUMBERS FOR LOS ANGELES RESIDENTS AND HOW TO HELP

Daryl Fairweather, chief economist at Redfin, echoed similar sentiments, telling FOX Business that not only would those looking for rental housing see higher rents, but “soon-to-be renters could get unexpected rent increases.” Fairweather added that some residents are looking to rent as far away as Santa Barbara because of the high demand near the fire areas.

Joel Berner, chief economist at Realtor.com, told FOX Business in an interview that from January 4 to January 11, there were many zip codes near the fire sites that saw a significant jump in rental prices following the fires. The 90403 zip code, which he described as being in Santa Monica southwest of the Palisades Fire, saw rents rise 33.9%. Another Santa Monica zip code, 90404, saw rents increase by 23%, while Pasadena’s 91125 zip code also saw a 20% rent increase during that time.

Berner noted that the data is still “noisy” as some parts of LA saw rents drop week-over-week, and that with a full week of post-fire data it may be easier to see the full effect of the rental market. impact.

CALIFORNIA WILDFIRES: INSURED LOSSES UP TO $30B, GET WELLS FARGO ANALYSIS

A view of damaged buildings and homes caused by the Palisades Wildfires in the Pacific Palisades area of ​​Los Angeles on January 11, 2025. (Axelle Photos/Bauer-Griffin/GC/Getty Images)

California law limits prices after a declared emergency to 10% of the pre-emergency price, and Attorney General Rob Bonta emphasized in a recent press conference that the anti-price gouging law applies to homes and rentals.

Zillow, a real estate marketplace that integrates rental listings, told FOX Business that it is “taking action to help address price increases in rental listings in affected areas from our platform” by “activating our internal systems to flag potential violations.” immediately and to remove the list with price increases that exceed the emergency limit.”

“If renters see potential violations, we encourage them to report the listing to Zillow and California authorities. We believe it is important for real estate agents to follow local housing laws, including consumer protections from price gouging during and after a natural disaster, and we provide resources to help them understand their obligations.” theirs,” continued the Zillow spokesperson’s statement.

WHAT ARE THE FASTEST INSURANCE COMPANIES IN CALIFORNIA?

Homes were destroyed along the Pacific Ocean after the Palisades fire in Malibu on Wednesday, Jan. 15, 2025. (Eric Thayer/Bloomberg via Getty Images/Getty Images)

Stuart Gabriel, a finance professor and director of the UCLA Ziman Center for Real Estate, told FOX Business in an interview that while homes in the fire zone were generally more valuable, some of the residents may be older or earn less. very wealthy neighbors, as some of the houses were built in the sixties or seventies. That may pose challenges as they seek to rebuild.

“You have to divide the value of the houses by the occupants, and in the case of houses built in the 1950s and 1960s, obviously, the owners have wealth in terms of the equity of their houses – but they may not be high-income families. , they may be low-income families and in many cases they may be older families,” he explained.

“Therefore, it is not at all clear whether these households have the capacity or the financial strength to pay off the loans they need and participate in a rebuilding process that will be difficult and complex and take time and energy,” it added.

Chimneys stand amid debris after the Palisades Fire in Pacific Palisades, California, on January 8, 2025. (AGUSTIN PAULLIER/AFP via Getty Images / Getty Images)

Gabriel noted that federal and local authorities are looking to accelerate the reconstruction of similar buildings in areas affected by the fire, but added that there may be changes in terms of density of buildings, use of non-combustible materials, different landscaping. and other infrastructure changes to address fire risk.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

“The rebuilding of these neighborhoods will happen. It won’t happen – these neighborhoods are very important, very valued. But it will take time for resources to be replaced and repositioned and these communities to return to a new state of equality,” said Gabriel.