The sheer scale of the fire’s devastation in Los Angeles County is still coming into focus, but it’s already clear that the task of rebuilding ahead will be Herculean.
As the disaster continues, the current focus remains on controlling the flames and protecting lives and property from additional damage.
However, state and local officials have begun to set the stage for rebuilding, announcing the return of building regulations in hopes of speeding the recovery.
At least 12,300 structures have been destroyed by the fires, according to Cal Fire, but it’s unclear how many of those structures were homes.
Areas with the most destruction include Pacific Palisades, which was destroyed in the Palisades Fire, and Altadena, where the Eaton Fire caused devastation.
Loss estimates are likely to continue to rise, with damage assessments still ongoing. But in their latest estimate on Tuesday, analysts with investment bank Keefe Bruyette & Woods forecast insured property losses of up to $40 billion, roughly double their estimate from a day earlier.
That would make the recent fires by far the largest fire insurance industry loss event in history, surpassing the $11.5 billion in insured losses in the 2018 Camp Fire.
How much will it cost to rebuild a destroyed house?
For individual homeowners, rebuilding costs will vary greatly depending on the size and nature of the new home.
In Pacific Palisades, homes were listed for a median price of $4.7 million last month, but most of that value was on the land itself, before any improvements. The December median list price in Altadena was about $1.3 million.
Land values in Los Angeles make up an extremely high portion of home values, among the highest in the country.
Across Pacific Palisades and Altadena, land values make up about 78% of total property values, according to an analysis by the American Enterprise Institute.
Using market values as a guide, a rudimentary analysis by the Realtor.com economic research team suggests that the typical cost to rebuild a home could reach $947,000 in Pacific Palisades and $262,000 in Altadena.
Stay up-to-date with NYP’s coverage of the devastating wildfires in the LA area
This rough estimate assumes a 20% improvement value share in both areas, after deducting a 2% profit margin for builders.
However, there are many unknowns, including whether construction costs will skyrocket due to overwhelming demand as reconstruction begins.
Also, these early estimates do not include the cost of debris cleanup and site remediation, or the road and utility repairs that will be needed to make the affected areas habitable again.
It is also unclear how many residents will choose to stay and rebuild after the trauma of losing everything.
Looking for a fresh start, or fearing a repeat of the disaster, some may choose to sell as-is and move elsewhere. A flood of such listings can drive prices down significantly if they are not filled with an equal pool of willing buyers.
“The area may experience long-term price devaluations and increases in insurance premiums as climate risks are taken into account. But in the short term, we expect housing to become more expensive due to supply and demand fundamentals,” says Realtor.com Senior Economist Joel Berner.
“Look for spots to rent, especially in areas near but not directly in the path of the fires, like Santa Monica,” he adds. “Los Angeles already has a low vacancy rate, so more people asking for less rent will drive up rents.”
What will the insurance pay for?
Homeowners with insurance should be able to expect relief, as smoke and fire damage is covered by standard California homeowners and renters insurance, according to the Insurance Information Institute.
“Insurance coverage varies with different policy limits, and we’ve seen insurance companies cancel policies recently, so it’s important to know the specifics of your policy,” says Berner.
A house that burns down due to fire will generally be covered up to the sum assured minus depreciation under the dwelling cover, belongings will be covered under the personal property cover and the cost of temporary relocation may be covered under the loss of use cover, it adds he.
Several major insurance companies, including State Farm, recently canceled their policies in affected areas, citing volatile climate risks.
But the FAIR plan operated by the state of California serves as an insurer of last resort, providing limited coverage for high-risk properties.
The FAIR plan covers up to $3 million in damages for home policyholders and reimburses the cost of renting a property that is similar to the damaged dwelling.
For larger ultra-luxury properties destroyed by fires, this may not cover the entire cost of rebuilding.
For example, real estate investor Robert Rivani told the Wall Street Journal that he spent $27 million to buy and renovate a home in Malibu’s luxury Carbon Beach, but expected to receive only $3 million in insurance claims from the FAIR plan.
No other insurer would cover the property for its full replacement value, Rivani said.
Will regulatory returns help the rebuilding process?
On Sunday, California Gov. Gavin Newsom waived environmental permit and review requirements in areas affected by the fires to speed up the rebuilding process.
Also, Los Angeles Mayor Karen Bass issued an executive order speeding up the local building permit process in affected areas by up to a decade.
“This unprecedented natural disaster requires an unprecedented response that will accelerate the rebuilding of homes, businesses and communities,” Bass said in a statement. “This order is the first step in removing bureaucracy and red tape to organize around urgency, common sense and compassion.”
The mayor’s steps include establishing special permit centers in burn-affected areas, mandating expedited permit reviews of 30 days or less, and waiving demolition permit requirements for any structure significantly damaged by the fires. .
“It will be important for leaders in California to ensure that regulatory bureaucrats do not get in the way of the massive rebuilding process that will occur once the fires are over,” says Berner. “Increased building regulations will allow faster and more cost-effective rebuilding, getting more people back into their homes sooner at fairer prices.”
#cost #rebuild #Los #Angeles #fires
Image Source : nypost.com