Wildfires’ Impact on California Housing

With two destructive and deadly fires still burning in the state, the local real estate industry faces major changes.
California Statewide Fire Map

California is in the midst of two tragic wildfires, with the destructive Camp and Woolsey fires causing devastating damage in the northern and southern parts of the state, including the loss of more than 40 lives.  

The Camp Fire has destroyed more than 125,000 acres of Northern California and was less than 50 percent contained as of Wednesday morning. Meanwhile, the Woolsey Fire has scorched more than 96,000 acres and was only about 40 percent contained.

The California Department of Forestry and Fire Protection reported 6,522 residences and 260 commercial structures had been destroyed by the fires already with tens of thousands more at risk. CoreLogic issued a report earlier in the week estimating that the total reconstruction cost value of the 48,390 homes in danger was approximately $18 billion.

“We are witnessing a tragedy of immense proportions, both in losses of life and property,” Mike Nemeth, California Apartment Association’s (CAA) communications director, told Multi-Housing News. “It’s vital that families get back on their feet as quickly as possible, and rebuilding housing—including multifamily—is a huge part of that recovery.”

Michael Tachovsky, a Realtor with Berkshire Hathaway Realty’s Laguna Beach office and an expert in real estate damage economics for Landmark Research Group, said that even though wildfires are something of a regular thing in the state, the difference with these current blazes is they are in more densely populated areas with higher real estate values.

“With most natural disasters, you have homeowners who are displaced while they are repairing their homes, but with wildfires what’s interesting is the rate of rebuilding compared to other natural disasters is significantly lower,” Tachovsky told MHN. “There was a study that showed that three years after a wildfire, the rate of which homeowners rebuilt was something like 30 percent.”

The amount of time it takes for insurance to come through also plays a significant role in a shift in the multifamily space in the area. “They need somewhere to go and the multifamily space is a logical step,” Tachovsky said.

Christopher Dicus, a certified senior fire ecologist and professor at California Polytechnic State University, said the fires this week will have a real impact on the real estate industry—not only in the areas directly impacted by the fires, but throughout the state for many years to come.

“Unfortunately, housing will be extremely difficult to attain in the affected areas for years to come, which will likely permanently drive out many who do not have the means to rebuild or are able to find affordable rental properties, which will be incredibly scarce,” Dicus told MHN. “Even for residences that survived the fire, property values will likely be lowered in the short term due to the scarred landscape significantly reducing the quality of life there.”  

For example, the Camp Fire that largely destroyed the town of Paradise in Northern California may never be the town it once was due to it housing such a large number of retirees, who may never return due to financial and emotional constraints.  The Southern California fires, however, generally affected a younger, more-affluent populace who have more means to rebuild.  

“If the 2017 fires in Santa Rosa are any indicator of future trends, house prices in areas affected by the Camp Fire will likely drop in the short term due a scarred landscape impairing views and quality of life, even for those residences that escaped destruction,” Dicus said. “However, rents in the area will likely sky rocket due to the immediate increased demand for workforce housing, which was largely decimated.”

A Need for Government Assistance

The CAA believes it is incumbent upon local and state governments to streamline rebuilding efforts as much as possible, such as removing hurdles in the permitting process or issuing state legislation to help.

For example, in the aftermath of the wine country fires last year, Assemblyman Jim Wood authored AB 2267 to help rebuild Sonoma County. 

“One immediate impact for housing providers whose properties remain intact is the state’s ban on price gouging, which was activated by the declarations of emergency by acting Governor Newsom in both Southern and Northern California,” Nemeth said. “We have alerted our members that the price-gouging law is in effect and have discouraged members from rent increases of any kind during this crisis.”

More than Structures

While the loss of property and housing structures are obvious effects of the fires, Tachovsky noted that property owners go through an emotional state after a wildfire affects their region that can be just as destructive. That can keep people from rebuilding right away as well.

“It’s really important to come together as a community after and talk to your local government officials because they can actually have a big influence on people rebuilding,” he said. 

Wildfires map via CAL FIRE