It’s a make-or-break moment for housing in California

We’re making this story accessible to all readers as a public service. At Vox, our mission is to help everyone access essential information that empowers them. Support our journalism by becoming a member today.

As fires continue to rage in and around Los Angeles, burning more than 40,000 acres since last week, destroying more than 12,000 homes and other buildings, and killing at least 25 people, two things are becoming clear: California must rebuild quickly, and it must rebuild differently.

Housing affordability and availability in Los Angeles, and California more broadly, were already at a crisis point even before the fires broke out.

Since January 7, tens of thousands of families have been forced to evacuate and are now rushing to find places to live. Many were stunned to realize there are virtually no rental options available to them, even when they’d be willing to pay large sums of money to stay in the area. 

The region’s rental market was already strained before the fires. An analysis by CoStar Group Inc. found that vacancy rates — meaning the percentage of rental homes sitting empty and available — bottomed out at 2.1 percent in western Los Angeles County — now affected by the Palisades Fire — and 3.8 percent in Pasadena, where the Eaton Fire burns. Los Angeles as a whole had vacancy rates of about 5 percent.

For larger apartments with three or four bedrooms, the rental options are even worse. Almost all new housing developed over the last decade has been studios or one- and two-bedroom apartments, built with singles, childless couples, and adult roommates in mind.

“I think the real wakeup call this is giving is it doesn’t matter how much money you have if you live in a city that has never allowed housing to be built for families,” said Matt Lewis, the communications director for California YIMBY. “The presumption all along has been that fires happen to someone else.”

But the housing impact extends well beyond the immediate needs of evacuees. Facing mounting losses from increasingly severe climate disasters, insurance companies have hiked rates statewide over the last few years and declined to renew coverage for nearly 3 million homeowners in vulnerable regions. (The state updates its regulations to force more insurance companies to cover homes in fire-prone areas, but those changes took effect just before the recent fires broke out.)

As a result of losing their coverage many of the newly uninsured homeowners turned to California’s FAIR plan, a last-resort option that offers limited home coverage for higher costs. FAIR plans are not publicly funded, and if their reserves and reinsurance deplete, then insured homeowners across the state help foot the bill.

“All policyholders, not just FAIR plan policyholders,” could be on the hook for the fires, Dave Jones, the director of the Climate Risk Initiative at UC Berkeley’s Center for Law, Energy, and the Environment, told Vox.

In other words, all Californians could face higher premiums next year, making it even more expensive to live in the already the most unaffordable state.

These wildfires could be the tipping point for California’s already teetering housing ecosystem. As insurance premiums soar, both current residents and prospective homebuyers face impossible choices: absorb the skyrocketing costs, abandon their properties, or leave the state entirely.

Years of warnings about this scenario have proven prescient. The next few months of policy decisions will determine whether the state can stabilize its housing market, or whether the fires will trigger a wave  of foreclosures, homelessness, and exodus unprecedented in California history.

Build Back Better?

While California politicians so far have taken small steps to signal they want to make it easier to rebuild homes quickly, housing advocates say the moment calls for much bolder leadership: not just for restoring homes that burned, but significantly increasing the amount of fire-resistant houses and apartments in less risky areas for people at all income levels. 

On Sunday, California Gov. Gavin Newsom issued an executive order calling to waive permitting requirements under the landmark California Environmental Quality Act (CEQA), which is notorious for holding up housing development. To rebuild properties quickly, Newsom also suspended permitting requirements under the state’s Coastal Act, which ensures the protection of California’s coastal resources including its beaches and environmental wildlife.

But these flashy measures were not meaningful reform. Single-family homes are already exempt from CEQA, and the Coastal Act already exempts reconstruction of homes destroyed by disasters from typical coastal permitting. Legal experts were skeptical it would lead to real change, especially as rebuilt homes would still need to become compliant with zoning and building ordinances that have changed significantly over the years.

On Monday, LA Mayor Karen Bass followed suit with her own executive order calling to expedite rebuilding in Pacific Palisades, though critics note that the city’s already slow permitting is attributed partly to city understaffing, and this order doesn’t say anything about funding more staffers. 

To merely restore what was lost — which will take years even with potentially rushed permitting approvals — won’t be enough to stem the mounting crisis.  

As insurance companies begin to deploy artificial intelligence to assess a region’s climate risk, and as state insurance rules evolve to allow insurers to charge policyholders more for more vulnerable homes, there will be more pressure to rebuild suburban homes that can better withstand fire and other natural disasters; this will undoubtedly be more expensive to both construct and insure than they were before the fires. 

These changes could force a long-overdue transformation in how and where leaders build: away from fire-prone suburban sprawl and toward denser urban neighborhoods that are naturally more fire-resistant. But without major zoning changes to allow this kind of urban development, the crisis could instead accelerate displacement as middle and working-class families — especially those who inherited their homes in communities like Altadena and Pasadena — are forced out of uninsurable areas with nowhere affordable to go.

University of Southern California policy and planning professor Dowell Myers told Vox there’s no good data yet on how longtime residents who inherited their homes have been handling rising insurance premiums. The average annual cost of homeowners insurance in the state has surged to $3,100 — a 62 percent increase compared to the national average — with some California coastal and inland locations facing double-digit percentage increases.

To create housing for people who can’t afford soaring insurance premiums or multimillion-dollar homes, advocates are urging policymakers to make it easier to build housing in denser, relatively fire-safe cities, places that already combine modern building codes, rapid emergency response times, mandatory sprinkler systems, and updated infrastructure to minimize risk. 

Communities must build back differently — faster and with more density than they’ve traditionally allowed.

A bill introduced back in 2020 by a California state representative would have exempted infill housing from CEQA, but it died in the legislature. Lawmakers could reintroduce and pass that quickly, and advocates have been urging Newsom to support such a step.

“The real challenge is that we’re very late to try to do this, and so it won’t actually solve the problem for people who need housing today,” said Lewis of California YIMBY. “This crisis will absolutely spill over into other states, as people who aren’t willing to rebuild or can’t afford to rebuild will find they have nowhere left to stay.” 

The mounting barriers to homeownership

While the fires are devastating to homeowners, the crisis has made the situation even more stressful for renters.

The ripple effects of California’s insurance crisis extend far beyond current homeowners, threatening to worsen an already severe housing affordability crisis. For renters, who make up more than half of Los Angeles County residents, the impact could be devastating. 

The insurance crisis creates what National Low Income Housing Coalition disaster recovery manager Noah Patton describes as a “three-pronged impact” on housing affordability. Rising insurance costs push more potential buyers into the rental market, increasing demand. Meanwhile, landlords pass these costs onto renters via rent increases, and developers struggle to finance new affordable housing projects in disaster-prone areas that “desperately need it.”

The stakes are particularly high in California, where nearly 186,000 people already live on the streets or in shelters — an 8 percent increase since 2022. Homeless people already have greater exposure to the climate crisis and wildfire smoke in particular when they cannot take shelter inside. For the many households spending over half their income on housing, even small rent increases can trigger a cascade toward eviction and homelessness. 

While residents displaced by the fires may be allowed to live temporarily on their properties in recreational vehicles, tiny homes, and other modular structures, this stopgap solution does nothing to help the many Californians still struggling to become homeowners or pay their rent in the first place.

“While many millennials were able to take advantage of record-low mortgage rates during the pandemic, young people are still facing a housing affordability crisis that doesn’t show many signs of improvement on the for-sale side,” said Daryl Fairweather, chief economist at Redfin. “What’s more, these devastating wildfires are in Los Angeles, which already has the least affordable housing market in the country, with the median home price exceeding $900,000.”