L.A.’s fires will make the city’s housing crisis even worse

There’s a perception that the houses that burned in L.A.’s fires were mansions. But in the city of Altadena, where the Eaton Fire devastated neighborhoods, many of the people who lost homes weren’t rich. On one block that burned down, several of the small 1930s houses were rentals. Other homes that were destroyed had been in the same families for decades—purchased when a house might have cost $50,000 rather than the million-plus it’s worth today. Two new affordable housing complexes currently under construction were also damaged in the fire.

Now, as thousands of people in the area scramble to find new housing, securing an affordable place to live will be a challenge. And the sudden surge in new demand could also help push prices up in an area that was already struggling with a massive housing shortage.

After disasters, it’s not unusual for rents (and house prices) to rise. When the town of Paradise, California burned down, around 20,000 people moved to the nearby city of Chico, and rents jumped 10% to 20%, even with post-disaster rent caps in place. In a study that looked at more than a decade of data after hurricanes on the East Coast, “we saw that more frequent and higher-intensity hurricanes resulted in less affordable rent,” says Kelsea Best, an assistant professor at The Ohio State University and author of the study. “This was especially true in counties that already had a higher percentage of renters and a higher percentage of people of color.”

Rental housing is typically rebuilt more slowly than single-family homes, Best says. And there’s less federal aid available for renters.

For homeowners who want to rebuild, the process also takes time. One homeowner in Pacific Palisades, a professor at UCLA, told The New York Times that his insurance company expected it to take two or three years for him to rebuild. In the meantime, his family planned to look for a rental in West L.A.—something that he acknowledged could contribute to displacing other tenants in a tight rental market.

For homeowners who are underinsured, rebuilding may not be possible. After the destructive Marshall Fire in Colorado—which was also fueled by drought and very strong winds—some property owners had no choice but to sell their land. One teacher sold her property for $375,000, less than the purchase price. A developer bought the land and built a new house that later sold for $1.45 million. The same development company bought other properties in the neighborhood, pushing up prices more broadly.

Insurance companies reeling from the cost of the L.A. fires will also raise rates. “That affects housing affordability,” says Rob Olshansky, one of the authors of a report on rebuilding after wildfires. “And it’s also making it hard for people to get mortgages—people get ready to close on their purchase and the insurers back out.”

It’s possible for disasters to have the opposite effects on housing prices: in theory, if enough people decided it was too risky to live in an area, prices would go down. But there’s little evidence of that happening after other events. For the last four years, Paradise was the fastest-growing city in California, even though the community’s fundamental fire risk still exists. If some people decide to leave Altadena or Pacific Palisades, it’s likely that others will immediately replace them.

Before the fire, Altadena was gentrifying. The town is diverse, with a large Black community that moved to the area in the middle of the last century, when some majority-Black L.A. neighborhoods were cut in half by freeways. It was affordable at the time, though prices have been rising.

In the broader region, Los Angeles has been struggling to fill its housing shortage; the city says that it needs to build more than 450,000 housing units by 2029, but the number of new construction permits has been dropping. Even as the state has passed multiple laws to try to speed up construction, the cost of building and a labor shortage are still problems. A new zoning plan is unlikely to fill the housing gap.

“There were needs prior to this tragedy—the need for housing in general, but specifically affordable housing, across the population spectrum,” says Welton Jorda, chief real estate development officer at EAH, a nonprofit that builds affordable housing. The nonprofit has a building under construction in Altadena, called Agave, that was supposed to open later in the year and house 58 people experiencing homelessness. But the fire damaged the partially-built building, and it isn’t clear yet how much can be salvaged.

In a different neighborhood, an affordable 71-unit senior housing complex from another developer was also under construction and supposed to open this fall, but it was also damaged in the fire.

It’s too soon to know what will happen to the housing market, or whether the city will decide to make changes in the wake of the disaster, such as replacing some single-family homes with apartment buildings to add more housing. But what’s clear is that rebuilding will take time—and the disaster could put a strain on housing budgets that were already stretched. Already, prices are starting to spike on some rentals.