Wildfire Displacement Reshapes Los Angeles Real Estate

January 22, 2025

The City of Los Angeles has reported that throughout the course of the fires nearly 200,000 residents were evacuated, with estimates of nearly 80,000 still under evacuation orders as of January 20^th. The two largest fires, the Palisades and Eaton fires, have been concentrated in largely residential neighborhoods sending displaced residents frantically seeking interim housing. As a result, many hotels and short-term rentals like Airbnb and VRBO have seen occupancy spikes in the double digits.

Soaring Rent Prices: A Housing Crisis Accelerated by Wildfires

While many evacuees have or will be allowed to return home, officials continue to survey the full extent of the damage. As of Sunday, January 19^th, the California Department of Forestry and Fire Protection has confirmed over 14,000 structures have been damaged or destroyed, creating unprecedented pressure on the rental market as many residents seek new permanent housing. The sudden spike in demand, combined with a reduced housing inventory, has triggered substantial rent increases across many Los Angeles neighbors. While the full effect of the rental market impact has yet to be seen, Realtor.com reported that during the week of January 4^th to 11^th, neighborhoods near the fires saw rents rise between 20 and 35 percent. However, under California Penal Code 396, businesses are forbidden from raising prices on essential goods and services, including hotel rooms, rental housing, and emergency supplies, by more than 10 percent during an emergency. Price-gouging protections remain in effect for 30 days following an emergency declaration and up to 180 days for contractor-related services. It is unclear at this time whether state or local governments will amend or extend these protections.

Rebuilding Challenges and Calls for Regulatory Reform

Furthermore, in the wake of this historic destruction, many in the Southern California real estate industry are calling for changes to California’s notoriously strict building regulations to expedite the rebuilding process. Prior to the fires, many cited these regulations as major reason for the city’s housing shortage. Coupled with skyrocketing insurance costs and high interest rates, many are calling complete rebuilding unfeasible. As a result, developers are calling for changes including densification of single-family lots and the suspension of the ULA Mansion taxes for purposes of rebuilding, selling teardowns, and a 15-year moratorium for new multi-family projects. To date, Governor Newsom has signed an executive order to cut permitting delays by suspending the California Environmental Quality Act and the California Coastal Act.

Long-Term Impact on Los Angeles Housing and Rental Market

As Los Angeles grapples with the aftermath of devastating wildfires and long rebuilding process, the rental market faces a complex and challenging landscape. Landlords find themselves in a delicate position, struggling to balance the surging demand and potential for increased profits with the ethical considerations of assisting displaced residents. Meanwhile, renters encounter a highly competitive market with dwindling options and soaring prices, making the search for affordable housing increasingly difficult. The impact of the wildfires extends far beyond the immediate destruction of property, sending shockwaves through the entire rental ecosystem of Los Angeles.