How the Los Angeles Wildfires Affected an Already Struggling Housing Market

Los Angeles is not known for being cheap. According to Smart Asset, the Los Angeles housing market ranks 3rd in cost, only behind two other Californian cities. Housing is not only rare but also hard to obtain. Only 46% of households own their home in Los Angeles. On top of that, a staggering 46.8% of households are cost-burdened by housing. Another 23.9% of households are severely cost-burdened, meaning they spend over 50% of their income on housing. These numbers outpace the rest of the country by large margins, indicating an extremely unhealthy market for those looking to buy homes.

So, what causes these high prices? Lack of development and multifamily housing. A study conducted by the Othering & Belonging Institute found that 78% of all property zoned for residential use is designated for single-family housing. For a county with over 9.6 million residents, this number is alarming. Even if developers wanted to build, strict zoning laws and regulations would prevent them. Los Angeles residents are practically forced to rent or purchase a home. This is what ultimately drives up rent prices and contributes to Los Angeles having one of the worst homeless populations in the country.

Now, the problem is set to worsen. The recent Palisades fire burned over 23,000 acres of land, and CNN reported that over 12,000 structures were lost as well. The already limited supply of housing has just gotten smaller, as displaced residents will look to other neighborhoods to avoid homelessness. This creates a bidding war for already expensive housing, ensuring that the lower class will be the first to feel the effects.

Rebuilding a community is difficult under any circumstances, especially after such a devastating event. To make matters worse, insurance companies are raising prices or, in some cases, leaving the state altogether. According to the LA Times, State Farm has raised premiums by over 22%. This doesn’t even include the price spikes that occurred in 2024, which left many homeowners uninsured. These increased rates make development projects even more expensive than they already were, making most of them financially unfeasible. These price hikes mean companies will have to use more expensive building materials to avoid higher rates. If not, they will have to bear the burden of the higher insurance costs. Additionally, rising labor and lumber costs are important to consider, as recent tariffs imposed by President Trump indicate that high prices are likely here to stay.

So, what needs to change for Los Angeles to rebound? Regulation and government intervention. Unless the city of Los Angeles is willing to ease building regulations to help alleviate costs or collaborate with insurance companies, the problem will only worsen. Homelessness will rise, and an exodus of people leaving the city will occur. The city of Los Angeles will persevere, there is no question about that. The city has been through worse and emerged stronger. The real question is: will the working class survive along with it?

If you are looking to donate and help rebuild, visit the Red Cross for more resources.