California fires: Why are rents spiking in Los Angeles?

The deadly wildfires burning in the Los Angeles area have destroyed thousands of homes, with thousands of people remaining under evacuation orders. 

While so many people wait to hear from their insurance companies, they're also looking for somewhere to live. As a result, there could be a lack of inventory if there isn't already. 

"The reality is this is all unfolding very rapidly and in real time. So it's really too soon to say, too soon to tell what type of long term effect this might have on the housing market," real estate expert Jon Grauman said during an interview on Good Day LA.

Housing inventory

"The immediate demand right now is for short-term housing, while displaced families are just looking to get a roof above their heads, try to regroup, reassess and determine where they go next in terms of where the housing market may go from here."

The housing market has always been at the mercy of the fundamental principle of supply and demand economics. Now that that supply is going away during this natural disaster, this could lead to a more active and competitive housing market. 

"You also have a lot of people naturally as a result of what happened, who are looking and seeking places to live, looking for rentals, you know, long-term rentals at this point. 

Price gouging

Officials are now starting to see price gouging and scams, including with hotels and short-term rentals and medical supplies, said Los Angeles County District Attorney Nathan Hochman.

"There's always going to be some bad actors out there that are looking to take advantage and exploit a situation like this, which I agree is unconscionable. But I want to remind everyone that it is actually illegal to increase the rent or price gouge in the face of an emergency like this," Grauman said. 

California law mandates you cannot increase the price of a commodity, which includes real estate, by more than 10% after an emergency has been declared.

Current or prospective renters who believe they have been victims of rental housing price gouging should also report it to the California Attorney General at oag.ca.gov/report.

Next steps

As some wildfire victims come to terms with the uncertain future ahead, questions arise over where to begin. 

Graum recommends starting with the basics. 

"Start with contacting your insurance carrier and start contacting your lender. You want to file a claim with your insurance carrier and you want to find out what your alley is. That's your additional living expenses. So that's the amount that's allotted per your policy, that is for things like short-term housing. But you have to be careful because it is going to vary from policy to policy and there is going to be a cap on it."

Then, contact your mortgage provider to find out what their forbearance policy is.

"It's probably going to vary again from each lender. It may vary depending on the severity of what was lost. But forbearance is essentially another way of deferring your payment while you're going through this process of rebuilding your home," Graum said. 

"I think we're going to see a lot of circumstances similar to the 2008 mortgage crisis where there are various loan modifications and banks having to work with homeowners to try to find a way to a way to pay for a path forward."

It will take time

The path forward won't be a short or easy one. Even if you have insurance, it will still take time for those claims to be processed.

"You know, it's not like we had one or two homes lost. Obviously, entire communities were lost. Entire neighborhoods were lost. They're going to need to rebuild the infrastructure in those communities. And insurance companies generally aren't set up for mass loss like this, instead of the occasional claim. So it's going to take some while to work through this," Graum said.

A clean slate

At this time, the focus is on cleanup efforts. 

"We just need to sort of clean the slate and see what we have to work with. And I'm sure you guys have heard and read various reports recently as I have, that many of the toxins and for example, asbestos has gotten into the soil. It's gone airborne. It's gotten into the neighboring trees and so forth. So, you know, we're going to need to really wipe the slate clean and have a fresh canvas to start painting on before we can move forward. And then it's going to be a matter of, you know, each homeowner working individually with their insurance carrier to see what that timeline looks like and whether or not people want to stay, to rebuild, whether they need to move on with their lives and perhaps move to, you know, in an adjacent community."

The Source: This story is based off an interview on Good Day LA with real estate expert Jon Grauman on Jan. 14, 2025.

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