LA wildfires drive surge in rental housing prices, prompting price gouging concerns
2025-01-19
Category: economic

The&#xA0;devastating wildfires&#xA0;that have hit the Los Angeles area in recent weeks have further constrained an already tight housing market, spurring a rise in rental prices that has sparked concerns about price gouging. Authorities have said more than 12,000 structures have been destroyed by the&#xA0;Los Angeles area wildfires, which have impacted Pacific Palisades and Altadena, as well as in the Malibu area. At least 27 people have been killed in the wildfires, which continue to pose a threat as firefighters work to contain the blazes that were driven by Santa Ana winds. With the fires destroying a significant number of homes in those areas and many people in the region still subject to evacuation orders due to the dynamic nature of the wildfires, area residents searching for rental housing options are seeing prices climb dramatically compared to the market before the fires broke out. &quot;The wildfires have had a profound and far-reaching impact on the housing market in Los Angeles,&quot; David Berg, founding partner of Smith &amp; Berg Property Group, Compass, told FOX Business. &quot;Entire neighborhoods have been devastated, displacing homeowners and putting immense pressure on the already limited housing inventory. Families who lost their homes are urgently seeking rentals, driving demand in nearby communities.&quot; CALIFORNIA WILDFIRES: ESSENTIAL PHONE NUMBERS FOR LOS ANGELES-AREA RESIDENTS AND HOW YOU CAN HELP THEM  Daryl Fairweather, chief economist of Redfin, expressed a similar sentiment, telling FOX Business that not only will those currently seeking&#xA0;rental housing see higher rents, but &quot;people whose leases are up soon might get a rent increase that they weren&apos;t anticipating.&quot; Fairweather added that some residents are looking for rentals as far away as Santa Barbara due to the high demand closer to the fire zones. Joel Berner, senior economist at Realtor.com, told FOX Business in an interview that from January 4 to January 11, there were several zip codes near the fire areas that saw notable jumps in rental prices following the fires. The 90403 zip code, which he explained is in Santa Monica southwest of the Palisades Fire, saw rents rise by 33.9%. Another Santa Monica zip code, 90404, saw rents rise by 23%, while central Pasadena&apos;s 91125 zip code also saw a 20% rise in rent in that period. Berner noted that the data is still &quot;noisy&quot; as other portions of LA saw rent falling week-over-week, and that once there is 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 COULD TOP $30B, WELLS FARGO ANALYSIS FINDS  California law caps price hikes in the wake of a declared emergency to 10% of the pre-emergency price, and Attorney General Rob Bonta emphasized at a recent press conference that the anti-price gouging rule applies to housing and rentals. Zillow, a real estate marketplace that includes&#xA0;rental listings, told FOX Business that it&apos;s &quot;taking action to help address price gouging on rental listing in the affected areas that appear on our platform&quot; by &quot;activating our internal systems to flag potential violations and removing listings with price increases that exceed the state of emergency threshold.&quot; &quot;If renters see a potential violation, we encourage them to report the listing to Zillow and California authorities. We believe it is essential for housing providers to follow local housing rules, including consumer protections against price gouging during and following a natural disaster, and we are providing resources to help them understand their responsibilities,&quot; the Zillow spokesperson&apos;s statement continued. WHICH INSURANCE COMPANIES HAVE THE MOST EXPOSURE IN CALIFORNIA?  Stuart Gabriel, a finance professor and director of the UCLA Ziman Center for Real Estate, told FOX Business in an interview that while houses in the fire zones were generally quite valuable, some of the residents may be older or of a more modest income than their more affluent neighbors, as some of the housing dates back six or seven decades. That could pose challenges as they look to rebuild. &quot;You have to separate the home value from the occupants, and in the case of homes built in the 1950s and 1960s, clearly, owners have wealth in the form of their housing equity &#x2013; but they may not be otherwise high income households. In fact, they may be quite modest income households and they may be in many cases older households,&quot; he explained.&#xA0; &quot;So it&apos;s not at all clear that these households have the wherewithal or even the financial capacity to pull down the loans they need and to engage in a rebuilding process that&apos;s going to be difficult and complex and take some time and take enormous energy,&quot; he added.  Gabriel noted that state and local authorities are looking to fast-track the rebuilding of similar structures on fire-impacted lots, but added that there will likely be changes in terms of the density of buildings, the use of fire-resistant materials, different landscaping and other infrastructural changes to&#xA0;address fire risk. GET FOX BUSINESS ON THE GO BY CLICKING HERE &quot;The rebuilding of these neighborhoods will occur. It can&apos;t not occur &#x2013; these neighborhoods are too treasured, they&apos;re too valued. But it will take time for amenities to be replaced and repositioned and for these communities to come back to a new equilibrium,&quot; Gabriel said.