L.A. rents were declining, but the flames might turn everything around.
The devastation may result in increasing rent costs around the city, where over half of the population rents, while thousands of homes in Los Angeles seek safety from the fury of flames.
Even while some of the homes in the areas affected by the fires are worth millions of dollars, the possible increase in rent in Los Angeles could also affect less affluent neighborhoods, making an already costly city even more expensive.
“Doubling of growth or tripling of rent growth is absolutely possible,” Selma Hepp, chief economist at CoreLogic, told MarketWatch, citing the scarcity of homes in Los Angeles. “As displaced homeowners seek shelter, word-of-mouth may spread the availability of some rentals, which is not captured by real-estate models, so the increase in rent prices could be even higher,” she noted.
She also mentioned that some landlords would try to take advantage of the situation. According to Hepp, price gouging might occur, particularly for highly sought-after rentals.
“California is the most underhoused state in the nation,” said Jay Lybik, director of multifamily analytics at real-estate data company CoStar (CSGP), talking about the state’s ongoing housing crisis, in an interview with MarketWatch. He claimed that as people rush to locate housing, the flames will “cause a major shock to the housing market” throughout Southern California.
At least 10,000 structures have been burned, at least 10 people have been killed, at least 180,000 people have had to evacuate, and the damage from the Los Angeles fires is projected to be at least $135 billion.
Many homeowners were forced to locate short- or long-term rentals while their properties were being restored or rebuilt after Hurricane Harvey in 2017 caused thousands of individuals to be displaced in Texas. According to CoreLogic, that resulted in a 4% increase in rentals in Houston, and those increases persisted for at least a year.
However, according to Lybik of CoStar, Houston had enough available apartments to handle the spike in demand, so the post-Harvey rent increase wasn’t as significant as it could have been. “That helped hold back from rents going crazy,” Lybik stated.
In Los Angeles, things are different. According to Lybik, “we should see rents rising anywhere from two to three times the level we saw in Houston,” since L.A. is more housing-starved than Houston.
To put it another way, rentals in Los Angeles may increase by 8% to 12%.
According to Lybik, demand for rentals in the Los Angeles area may remain high for a longer period of time than it did following Harvey because fire damage usually takes longer to repair and rebuild than flood damage.
According to Lybik, Houston’s vacancy rate—the percentage of rental units that are empty or unoccupied—was 11.4% at the end of the previous year. It was about 8% nationwide. However, Los Angeles has one of the lowest vacancy rates in the country at 5.1%, second only to New York and Orange County, which is adjacent to Los Angeles County.
Scott Goshorn, a real estate agent in Los Angeles, frequently assists customers in purchasing and selling luxury homes, but in the wake of the fires, he has been receiving queries from past clients regarding potential rental properties. According to him, he was searching for homes in areas like Santa Monica and Brentwood, where monthly rentals may reach $25,000. “They’re going to go so quick,” he continued, despite the cost.
He claimed that the fires were rapidly destroying residences, eateries, and commercial establishments. “It’s straight-up apocalyptic,” Goshorn declared.
Zumper, a website that lists rental properties, reports that the median rent in the Pacific Palisades neighborhood of Los Angeles this month was $10,000. This statistic encompassed rentals in any kind of property and with any number of bedrooms. According to the firm, that is 417% greater than the national average.
According to a report released by the city in September 2024, 54% of people living in Los Angeles County are renters. Additionally, almost 60% of that group was cost-burdened, which means that rent accounts for more than 30% of their household income.
One of the most costly rental markets in the United States is the Los Angeles metro area. According to Zumper, the median rent in Los Angeles as of January 9 was almost $3,000. Compared to the national average, that is 52% higher.
Tenants in Los Angeles were beginning to feel some respite from rent hikes brought on by the pandemic when the anticipated spike in rents in the wake of the fires occurred. According to Zillow (ZG), median rents in the Los Angeles market have decreased somewhat since January 2024, and Zumper’s website showed a 21% decrease in January rentals compared to the same month the previous year.
According to an investigation by the nonprofit journalism organization CalMatters, the number of homeless persons in California increased to an estimated 186,000 in 2024, who were either living on the streets or in shelters.
