Allen Matkinsreal estate law firm with deep ties to development and litigation in Southern California, representing homeowners, developers, contractors and permittees involved in rebuilding efforts following the Palisades and Eaton fires.
“Rebuilding has been slower than anyone thought,” said Alan Hearty, who heads the firm’s litigation division in Century City. “It’s not because of one failure. The insurance, the regulations and the construction are no match for a disaster of this nature.”
The fire, which broke out in many parts of Los Angeles, forced evacuations and destroyed thousands of homes. Hearty recalled watching the first plumes of smoke from the Palisades fire from her office window.
Almost a year later, the pace of reconstruction has slowed more than expected. Hearty estimates that only about a dozen homes in the Palisades have been rebuilt so far. Although hundreds of permits are still being processed, he said it could take years before the communities are restored.
Rebuild status
Daryl Fairweather, chief economist at Redfinstates that investors currently buy about 40% of blighted properties in the Los Angeles area.
“I think these investors probably intend to develop homes, but it may be a slow process,” he said. “There is this coordination problem when you go back where, if you wait a long time to rebuild, you may be able to resell at a higher price, because once the relief materials are rebuilt, the area is more revitalized and people will be more interested in going back.”
“The first year is always the hardest,” said Selma Hepp, senior economist Cotality. “And given what we’ve learned about urban fires and the intensity of these fires — and the desire to put power lines, water systems and sewers underground — that takes a long time and is very expensive.”
Insurance remains one of the biggest obstacles, according to the Ministry of Angels, as 40% of policyholders have experienced major non-payment issues, such as large increases in premiums and declines in coverage.
Some homeowners had no coverage at all, while others were underinsured for today’s rebuilding costs. Hepp said that during the renovation, some residents have experienced delays in applications, received quotes that were significantly different from their neighbors or had disputes over installation.
“In some cases, people whose homes are still standing are actually worse off,” Hearty said, pointing to arguments over smoke damage and pollution. “There is disagreement as to whether that damage is covered.”
As a result, several class-action lawsuits have been filed against the company over pollution claims, Hearty said. On the other hand, many homeowners cannot start rebuilding because the insurance payments have not yet arrived.
Contractors face their own challenges. Although demand for rebuilding is high, many contractors are reluctant to start projects without assurance that homeowners can pay. The result, Hearty said, is a growing gap between wealthy borrowers who can rebuild and those who can’t compete.
The slow recovery following the wildfires has reshaped communities and displaced many residents. The Palisades was home to many young families before the fire, but Hearty said many moved permanently rather than wait out years of uncertainty.
“They don’t want to reunite their families,” he said. “That community will never be the same again. It will be completely new.”
Located in California
Despite the insurance issues, trauma and heartache associated with wildfires, many Californians are resistant to moving out of state and want to prevent it. This has led them to try to find suitable places to live in nearby communities while they are waiting for insurance quotes and the construction of their houses.
Xander Snyder, First AmericanA senior real estate economist, said the crisis had an impact on the area’s rental market.
“Rent growth picked up quickly after the fire, but it didn’t continue across the country,” Snyder said. The biggest increase in rents, he said, has occurred in areas close to the fires, where homeless residents are vying for limited housing. In the Palisades ZIP code, rents increased nearly 9% in the months following the fires before returning to near pre-fire levels.
Reports of price increases early in the crisis were short-lived, Snyder said, after local authorities estimated rents would increase by 10% in areas affected by the fire.
“That effectively eliminated the most dangerous cases,” he said.
Many residents who left their homes moved to nearby communities rather than leaving Southern California entirely. Snyder pointed to rising rents in areas like Burbank and the San Gabriel Valley, where rents are up nearly 10% from last year. Others moved to coastal or Westside neighborhoods, including Santa Monica, Brentwood, Manhattan Beach and Beverly Hills.
Since the communities of Palisades and Altadena are very different in terms of wealth, Fairweather says this has an impact on people staying in their communities.
“People in the Palisades can afford to wait, they live in a short-term rental nearby and just pay the extra cost … but the people in Altadena, it’s a working-class neighborhood,” she said. “They’re probably under a lot of financial pressure to just sell, instead of waiting until it’s gone. … When you have less money, you have more pressure to take whatever you can get from an investor.”
Barriers to development
Despite state and local efforts to address reconstruction — including Gov. Gavin Newsom’s suspension of certain environmental and coastal permit requirements — progress has been limited. Hearty and Snyder each cited specific areas of overlap and regulatory layers as continuing obstacles.
“There has been very little development in the Palisades so far,” Snyder said. “Although some laws have been repealed, there is a lot of red tape.”
Sean Roberts is the CEO of Villa housesconstruction company that specializes in fast, factory-built homes – including utility homes, single-family homes and multi-family homes. He said some residents do not want to be the first to return home.
“Not much has been rebuilt. There have been a few things that have been completed,” Roberts said. “Now that we’re past one year, and for a lot of people who were getting insurance, living expenses, etc., those payments are starting to expire, and that’s going to drive a lot of people to make a decision here in the coming months.”
Roberts says Villa Homes is actively buying lots to put the homes it has in stock up for sale and is working with residents in the Altadena area to rebuild their homes.
“We designed our products to make Altadena think more about what the beauty of the community was like before the fire. We want to rebuild the community to kind of what it was, which is, at least in Altadena, a normal, normal separation.”
Last year, the community of Altadena adopted the slogan “Altadena is not for sale” to prevent gentrification and development. That movement, Fairweather says, is still alive.
“[Redfin] heard from the agent in Altadena that many people are pursuing the sale to investors, and they are pressuring the community not to sell because of how much it can change communities. But the social pressure cannot compete with the financial pressure the residents are facing,” he said.
Meanwhile, in the Palisades, Fairweather says affluent residents are rebuilding despite ongoing fire hazards and are likely to enlist the help of private firefighters during the next disaster.
“The need for housing does not end when disasters strike, people still need a place to live,” he said.
