“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.
“We're expecting a lot of these folks who are being displaced — not everyone but a lot of folks – to be looking at higher-end apartments than our base would be staying in, but it kind of rolls downhill as those apartments become harder to find,” said Cynthia Strathmann, the executive director of tenant advocacy group Strategic Actions for a Just Economy.
The group is based in South LA, which is not directly touched by the fires, but Strathmann said they are anticipating that their members and the population they serve may soon see “downstream effects” of the increased demand on the city’s already tight multifamily market.
“There's more vacancy at the top end of the rental market in LA than there is at the bottom end because there's really an affordability crisis,” Strathmann said. “As those fill up, you're going to see pressure coming down the ladder, and I think one thing we're really concerned about is that landlords will become incentivized to push out lower-income tenants, even more so than they are now, to make way for people who are able to spend more money.”
Strathmann is also concerned that areas that aren’t burning, like South LA, could become even more attractive to buyers seeking yields now that they seem safer from the threat of wildfire.
“Are you going to start to see more gentrification and displacement pressures on neighborhoods that were previously less desirable because they weren't in the hills, that are now more desirable because they aren’t in the hills?” Strathmann said.
After the cleanup comes the rebuilding phase, the scale of which again will vary based on how long the fires burn.
Construction material costs leveled off in 2024 after shooting up in the preceding years. Costs are expected to increase after Trump takes office later this month, however.
Trump has proposed a 60% tariff across the board on imports from China. Building necessities like steel, aluminium and stone are produced in large quantities in China.
“New or increased tariffs have the potential to raise prices for a wide range of construction inputs, including items produced domestically that compete with imports,” Ken Simonson, chief economist at the Associated General Contractors of America, told Supply Chain Dive in November.
Rebuilding efforts from other natural disasters, namely hurricanes that decimated parts of Florida and North Carolina last summer, will exacerbate demand for materials sourcing both internationally and domestically, driving up costs.
Then there are the looming international sporting events Los Angeles is scheduled to host in the coming years. The city is expected to host eight matches for the FIFA World Cup in 2026 and the Olympic and Paralympic Games two years later.
“We’re going to face a double whammy. Rebuilding after these fires will take time — it often takes years just to start the process,” said Mike Mitchell, Associated Builders and Contractors Southern California chapter president. “And in the next four years, we also have the 2028 Olympics in Los Angeles.”
Even before the fires, LA was already six years behind in refitting venues for the various sports they’ll be hosting. Now, it will be dealing with an even greater labor shortage.
“Our members have told us there will be a huge demand for skilled labor leading up to the Olympics. Between rebuilding from the fires and preparing for the Games, we’re going to be very, very busy,” said Mike Mitchell.
Labor could also be impacted by Trump’s presidency. Mass deportations promised by the president-elect would have a stark impact on the country’s construction labor force. If or how he’ll truly carry out such an operation remains to be seen.
These fires, while historic in their destruction, are just the latest in a long string of wildfires that have gotten more intense in recent years, which started off an exodus among insurers. State Farm and Allstate, which together claimed 15% of the U.S. market share among property and casualty insurers in 2023, canceled tens of thousands of policies in California that year, citing wildfires.
“The wildfires are yet another unfortunate example of the increasing frequency and intensity of natural disasters exacerbating the already critical insurance crisis,” said Danielle Lombardo, chair of the real estate, hospitality and leisure division at WTW.
Regulators have taken steps to staunch the bleeding and protect coverage, but they tend to focus on homeowners, Lombardo said.
“You don’t have lawmakers looking at commercial real estate,” she said.
That leaves commercial property owners dealing with reduced cash flow as a result of higher deductibles from reduced competition in the insurance market. Ultimately, a lack of affordable coverage could lead to delayed transactions and projects.
“In the real estate sector, every dollar increase in insurance costs has a compounding effect, reducing profitability and potentially halting development,” she said.
The fires are far from extinguished, but many are calling for regulatory reform to aid with rebuilding efforts. California’s largest cities are known to have lengthy planning processes that can hold up developments, and streamlining would move replacement projects along faster and bring them to market sooner.
“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.”
Martin Muoto, CEO and founder of SoLa Impact, is among those hoping for regulatory intervention to ease the rebuilding process. Newsom’s order will help speed state-level environmental clearances, but other regulations remain.
Muoto, who lost his own home in the fires, fears long-term consequences if the process isn’t streamlined.
He recommends any home built in the last 10 years be allowed to be rebuilt with over-the-counter approval. Building codes haven’t changed much in the last decade, and these newer homes will have gone through a permitting process relatively recently.
“They have to do this,” he told Bisnow in an interview Thursday. If it takes 18 months to go through Coastal [Act] and the permitting process, that will decimate the communities.”
He’s committed to speeding up his own pipeline.
SoLa is the largest private builder of affordable housing in Los Angeles. It owns 2,000 units in the city and has 3,000 more units in various stages of development. Building private is faster, more efficient, more streamlined and usually cheaper.
“The eyes of the world are on Los Angeles,” he said, adding that he’s getting calls from all over the world asking what is happening because the images look like a war zone.
“How we respond is a demonstration of American resilience,” he said. “I’m just hoping we can demonstrate pragmatism and intelligence in how we respond.”
Bisnow Managing Editor Catie Dixon contributed to this report.
Contact Molly Armbrister at molly.armbrister@bisnow.com