The wildfires in LA have fueled a spike in apartment rental prices, sparking concerns about price increases

The devastating forest fires that have hit the Los Angeles area in recent weeks have further constrained an already tight housing market, driving up rents that have fueled concerns about price increases.

Authorities said more than 12,000 structures were destroyed Los Angeles wildfires in the area, which affected Pacific Palisades and Altadena, as well as the Malibu area. At least 27 people have died in the wildfires, which continue to pose a threat as firefighters work to contain the blazes fueled by Santa Ana winds.

With the fires destroying a significant number of homes in these areas and many people in the region still subject to evacuation orders due to the dynamic nature of the wildfires, area residents looking for rental options are seeing dramatic price increases compared to the pre-fire market.

“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. “Entire neighborhoods have been destroyed, displacing homeowners and putting tremendous pressure on an already limited housing inventory. Families who have lost their homes are urgently looking to rent, which is fueling demand in nearby communities.”

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Daryl Fairweather, Redfin’s chief economist, echoed a similar sentiment, telling FOX Business that it won’t be just those who are currently looking apartment rental see higher rents, but “people whose leases are about to expire could get a rent increase they didn’t expect.” Fairweather added that some residents are looking to rent as far away as Santa Barbara because of the high demand closer to the fire zones.

Joel Berner, senior economist at Realtor.com, told FOX Business in an interview that from Jan. 4 to Jan. 11, there were several zip codes near the fire area that saw significant spikes in post-fire rental prices. The 90403 zip code, which he explained is in Santa Monica southwest of the Palisades Fire, saw rents rise 33.9%. Another Santa Monica zip code, 90404, saw rents rise 23%, while central Pasadena’s 91125 zip code also saw rent growth of 20% over the period.

Berner noted that the data is still “noisy” because rents in other parts of LA have been falling week-over-week, and that after a full week of post-fire data, it may be easier to see the full impact of the rental market. influence.

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California law limits price increases after a state of emergency to 10% of the pre-state price, and Attorney General Rob Bonta emphasized at a recent press conference that the rule against price gouging applies to housing and rentals.

Zillow, a real estate marketplace that includes ads for renttold FOX Business that it is “taking action to help address price gouging in rental listings in affected areas that appear on our platform” by “activating our internal systems to flag potential violations and remove price gouging listings that exceed the state of emergency threshold .”

“If landlords see a potential violation, we encourage them to report the report to Zillow and the California authorities. We believe it is critical for housing providers to follow local housing laws, including protecting consumers from price gouging during and after a natural disaster, and we provide resources to help them to understand their responsibilities,” the Zillow spokesperson’s statement continued.

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Stuart Gabriel, professor of finance and director of the UCLA Ziman Center for Real Estate, said in an interview with FOX Business that homes in fire zones are generally very valuable, but some of them may be older or have lower incomes than their more affluent neighbors, because some of the housing buildings date back six or seven decades. This could present challenges as they look to rebuild.

“You have to separate the value of the home from the tenant, and in the case of homes built in the 1950s and 1960s, it’s clear that the owners have wealth in the form of their home equity – but they may not otherwise be high-income households. In fact, they may be low-income households. and can be in many cases older households,” he explained.

“So it’s not at all clear whether these households have the means or even the financial capacity to take out the loans they need and engage in a rebuilding process that will be difficult and complex and will take some time and enormous energy,” he said. added.

Gabriel noted that state and local governments want to expedite the rebuilding of similar structures on fire-affected parcels, but added that there will likely be changes in building density, use of fire-resistant materials, different landscaping and other infrastructural changes. solve the risk of fire.

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“There’s going to be a rebuilding of these neighborhoods. It can’t help but happen — these neighborhoods are overvalued, they’re overvalued. But it’s going to take time to replace the amenities and move them and bring these communities back to a new balance,” Gabriel said. .