January 12, 2025 Bianca Barragán, Jonathan Rose and Molly Armbrister
“Rebuilding won’t be easy.”
Cityview CEO Sean Burton knows there’s a long road ahead for the Los Angeles area to rebuild from historic fires still burning across five counties. The degree of difficulty and expense, however, depends on how long the flames rage.
The fires have already caused an estimated $150B in damage, a number that has been rising daily since the fires began last week. The rebuilding effort will multiply problems with housing affordability, construction costs and insurance that have plagued the area for years.
“What we’re seeing is utter devastation — I’ve never seen anything like this. There is no Pacific Palisades anymore. The area looks like something out of Dresden in World War II,” said Burton, whose company owns 30 multifamily properties in LA.
Fires that began early last week, driven by gale-force winds and a bone-dry atmosphere, tore through towns on both sides of Los Angeles fast. The four largest fires totaled nearly 40,000 acres as of midday Sunday. So far, 24 people have died, and an estimated 12,000 structures have burned. The largest fire, named Palisades, was 11% contained on Sunday after burning through the ritzy Pacific Palisades neighborhood.
Southern California has been in the throes of a housing crisis for years, with a shortage of housing units and rents that are unattainable for many. Construction costs there and across the U.S. are high and projected to rise when President-elect Donald Trump implements promised tariffs after taking office in a few days. Insurance companies began fleeing from California years ago.
All of these challenges are certain to worsen in the coming months and years as Los Angeles and its surrounding communities put themselves back together.
California Gov. Gavin Newsom on Sunday announced an executive order suspending review processes under the California Environmental Quality Act to ease rebuilding, while further calls for even more reform persist.
The extent to which the fires will increase multifamily rents depends on how many housing units are ultimately lost, a number that won’t be known for some time, University of Southern California’s Lusk Center for Real Estate Director Richard Green said.
Altadena and Pacific Palisades, the hardest-hit localities, are predominantly single-family neighborhoods. Nine percent of Altadena housing units are multifamily and 18% of Pacific Palisades units are multifamily, according to USC’s Neighborhood Data For Social Change project, which uses data from the American Communities Survey.
Green said 35,000 units lost would decrease the vacancy rate by about 1% and that every 1% decline in vacancy leads to a roughly $200 to $300 per month increase in rent for the average unit.
“The number of units lost is really an important number to know if you want to know how much rents are going to go up, but we know that rents are going to go up, right?” Green said.
Green has spoken to a few multifamily landlords already who have instructed their property managers not to set new rents any higher than they were last week.
California has an anti-price-gouging law that prohibits rent increases beyond 10% of pre-emergency levels for existing tenants and new leases. Those protections extend to areas “wherever displacement increases demand for housing,” The California Apartment Association notes, but they are also temporary.
The most recent census data for the rental market found 76,000 units for rent in Los Angeles County. If 5,000 or 10,000 single-family homes and apartments are destroyed, all those people looking for housing are certainly enough to move the market, Redfin Chief Economist Daryl Fairweather said.
Many of the homes destroyed were pricey abodes owned by wealthy residents who have more resources and options for their emergency lodging. While they are unlikely to take up residence in market-rate apartments, their displacement will still have an effect on the local market.
An estimated 12,000 structures have been damaged or destroyed in the fires.
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“My hope is that this tragedy serves as a catalyst for real and meaningful change — a moment to pull together and finally address both the immediate need to rebuild and the long-term housing shortage,” Cityview’s Burton said. “We need to find ways to streamline the process and build housing at scale, or we’ll never catch up.”
