Los Angeles wildfires spark rental bidding wars—prices soar to $30,000!

The Palisades and Eaton fires have left a trail of destruction across Los Angeles, reshaping the housing market and intensifying the rental crisis. According to a Redfin analysis, 14% of homes within the fire perimeters—totaling 6,354 properties—were either destroyed or damaged. This catastrophic loss highlights the vulnerability of California‘s housing infrastructure to natural disasters and underscores the growing challenges facing both renters and homeowners in fire-prone regions.

How Have the Palisades and Eaton Fires Affected Los Angeles Housing?

The fires have dealt a severe blow to Los Angeles County, a region already grappling with a housing shortage. Of the homes affected, 86% (5,449 properties) were completely destroyed, while 14% (905 properties) sustained damage. Despite the localized impact within fire perimeters, the overall damage equates to 0.17% of Los Angeles County’s housing stock.

The fires’ impact is further magnified by the nature of the properties destroyed. Single-family homes accounted for 89% (5,636 units) of the total, underscoring the significant loss of family housing. Multi-family units comprised 11% (707 units), while mobile homes represented less than 1%. The Eaton fire was responsible for 56% of the destruction, with the Palisades fire accounting for 44%.

Why Is the Rental Market Facing Unprecedented Pressure?

The destruction has triggered a housing ripple effect, sending displaced residents scrambling for rentals in an already constrained market. Redfin Premier Agent Gregory Eubanks described the intense competition:

“Rentals are seeing bidding wars like never before. One property listed for $16,000 a month was bid up to $30,000, with the winners committing to a two-year lease.”

The surge in demand for temporary housing has led to skyrocketing rents. Online rental searches for Los Angeles homes have surged by 186% since early January, with Redfin reporting a 93% year-over-year increase in rental pageviews for the week ending January 14.

Adding to the challenges, displaced families are turning to creative solutions. Airbnb properties are being converted into long-term rentals, and second-home owners are offering vacant properties to meet the demand. However, for many renters, securing housing remains a daunting task.

How Are Wildfires Reshaping the Real Estate Market?

Beyond the immediate rental crisis, the wildfires are disrupting the broader real estate market. Homebuying activity has slowed, with many buyers pulling out of deals due to the uncertainty surrounding the fires. Sellers, too, are reevaluating their options.

Redfin Premier Agent Alin Glogovicean highlighted the difficulties:

“I have a $1.7 million home in escrow that fell through because the buyers were concerned about the fires. On the other hand, homeowners are opting to rent out their properties to displaced families rather than selling.”

Adding to these challenges is the issue of insurance. Many insurers are reluctant to issue policies for homes near the affected areas. As Glogovicean noted, “The California Fair Plan is often the only option for homeowners, but it’s more expensive and offers limited coverage.”

What Are the Long-Term Implications for Housing in Los Angeles?

The fires have amplified long-standing concerns about the sustainability of housing in disaster-prone areas. Redfin Chief Economist Daryl Fairweather emphasized that the wildfires could mark a tipping point for many residents reconsidering their risk tolerance.

“While fire-prone areas nationwide have seen more people moving in than out, California’s high-risk zones saw a net loss of residents in 2023—a trend likely to accelerate following these fires,” Fairweather stated.

Los Angeles County already faces significant challenges, with over 565,000 residential properties considered high-risk for fires, according to data from First Street Foundation. The rebuilding process is expected to take two to three years, prolonging the strain on the housing market.

What Can Be Done to Address the Housing Crisis?

Rebuilding efforts will require coordinated action from policymakers, developers, and insurers. Los Angeles issues roughly 6,000 single-family home permits annually, a figure dwarfed by the 6,354 homes destroyed by the fires. Accelerating the permitting process and incentivizing fire-resistant construction could help address the housing deficit.

In the short term, expanded rental assistance and insurance reforms could alleviate some of the burden on displaced residents. Redfin agents have also offered free services to help affected families find temporary housing, highlighting the importance of community support during this challenging time.