Editor’s note: This Q&A has been edited for length and clarity.
Sarah Wolak: I want to focus on what you’re seeing in terms of rental availability, and what those who have been evacuated or displaced are currently facing. I understand that you have been evacuated too. What’s your status right now?
Xander Snyder: We’re out of town. We live in the La Crescenta area, which is just next to La Cañada, which is next to Altadena. So we were in an evacuation zone, or like one of the yellow zones. Tuesday, we left, we came back and then with the threat of the fires from last night, we decided to leave town again. We’re probably going to go home tomorrow because it seems like things are starting to get contained. But we’re fine, we’re safe.
In terms of the rental market, I think there are maybe two different time periods to think about. There’s the immediate term, and already you do see price gouging happening. It’s not legal, but it’s happening. There have been people reporting certain landlords to the appropriate authorities about this, but I know it’s happening, and I know that some displaced folks who have the capital are the ones who can get those rental units in a slightly longer period.
Intermediate-term, at some point there’s going to be a certain number of people who decide to leave LA, and then we’re going to have to worry about how much supply is left over. And so far, it’s been very hard to estimate how many housing units have been removed from stock in LA, because all the reports have been structures, which can mean a lot of different things. But I have an article that should be published on Friday where I try to take a first stab at the impact of the supply shock on the housing itself. I think it’s probably going to be between 1-1.5% of total housing stock in LA which may have been destroyed by the fires, and of course, they’re not all contained, so that will put upward pressure on rents.
SW: I appreciate that you said that it’s more down to supply and demand, because right now we’re still in the reactionary period, and have been over the last week. Are other people just leaving the area outright? Do you think they’re looking for more short-term or long-term solutions outside of Los Angeles?
XS: I know a lot of folks personally who left, not permanently, but left this week, I think, given the Eaton fire, which is the one that most directly affects me and the people that I know in my neighborhood, is beginning to be contained. And it seems like the most severe Santa Ana winds event may be over, hopefully later today some of those folks are probably going to start returning.
I don’t have a good estimate for how many people are going to leave LA permanently. And the challenge here is a lot of folks from the Palisades have the money to relocate in LA and manage the transition period. Also, Altadena is very mixed, it’s more working class. I wouldn’t say it’s entirely working class because all real estate in LA is really expensive, but some of those folks might find it really challenging to put together the money to even undergo a transition period to remain in LA. That’s why I anticipate that some people will probably end up leaving in the long term, which will impact the degree to which the supply shock affects rents and house prices. But I don’t know of anyone who’s made that decision yet, just because it’s too soon.
SW: Do you think that the destructiveness of the wildfires may spur a lot of relocation? And do you think LA will kind of have to fight to keep people there and to rebuild?
XS: I do think people will leave. I don’t know how many people will leave. In terms of LA having to fight to retain them… it’s hard to tell, again because LA is such a popular destination. Climate is changing, but at least to date, weather has been a huge draw — there are beaches, there are mountains and there are lots of things to do in LA that attract people from all over the country. And that probably won’t change, even if there’s a period where people are priced out.
I am essentially a lifelong resident, and if there’s one thing I can tell you, it’s hard to build in LA. I know that [Governor] Newsom signed an executive order that waived some of the California Coastal Commission restrictions for the Palisades specifically, which is kind of like an extra layer of regulation around development in coastal areas, the idea being trying to speed along development...I will believe it when I see it.
It has been so hard to add stock, and that has been pretty consistent for most of my life. And if you look at data from 2000 to 2020, housing stock in LA has grown by like half a percent to around 3.7% annually, certainly not enough to accommodate growth. So I don’t know if a couple of executive orders will suddenly free all that up, because it’s not just a matter of a top-down directive, it’s all of these individual local municipalities with their specific regulations, and it’s hard to coordinate all that.
And there’s also entrenched interest from people who live there to not have density increase. So I do think that’s going to be a challenge. I think it’s going to be hard for Los Angeles to add enough stock to make up for what’s just happened.
SW: What are some things that you’ve been observing or tracking as you work on the upcoming post about the wildfires for First American?
XS: Certainly rents are increasing, and that’s already happening. There have been several articles of observations on Zillow and Redfin alone. And, my wife, who is in real estate as well, we track listings and we’ve seen things go up more than 10% — just properties that we’re interested in, not to rent ourselves, but we just follow the market, so we’re observing it directly. That’s already happening.
The impact on housing prices is a little bit more challenging. Since the fires are still going on, no one’s looking to buy a new house, necessarily. I mean, there are still deals that will occur, but I think it’s going to take a little bit longer to assess the final impact on house prices. But I do imagine they go up because there will be fewer housing units. And to some extent, it is as simple as supply and demand.
SW: Is there anything else you would add?
XS: Something that’s worth mentioning is all the insurance challenges. I know you mentioned that at the top of the call, but there are now so many upward pressures on insurance premiums in LA and California, and aside from higher replacement costs just from material inflation over the last several years, there have been all the politics of insurance at the state level that’s kind of getting sorted out. But you know this is going to increase insurance premiums, and some insurance companies may decide to cover fewer things, which might make it challenging for people to decide to live here in the long run, which might price some people out. So in thinking about the crisis, I think it’s helpful to think about it in those phases with with different effects in each phase.
