L.A. Fire Impact

by Jim the Realtor | Jan 10, 2025 | Jim's Take on the Market | 4 comments

Jackie said I should do a post on the fires, but I don’t have any personal knowledge of what’s happening or have anything to add to what we are seeing on television.

But I’ll add a couple of thoughts.

The Cost of Insurance Will Increase Dramatically – If You Can Get It. The unwillingness of major insurers to underwrite policies in California has caused more dependence upon the California Fair Plan, which has $200 billion in reserves and $300 billion in exposure:

Another concern is what the fires could mean for the California FAIR Plan, the state’s last-resort insurance plan for those who lose or can’t find traditional coverage.

Over the past half-decade, the number of homeowners on the plan — a state-mandated insurance pool with buy-in from private insurers — has more than doubled to around 350,000. That’s pushed the FAIR Plan toward the brink of insolvency.

Many who lost homes in the L.A. infernos were likely on the plan. According to an analysis of FAIR Plan data, there are more than 26,000 FAIR Plan properties in ZIP codes impacted by the fires across Los Angeles County.

If insurers cannot cover those liabilities, it’s possible they could pass on those costs to all of their home and business customers in the form of higher premiums.

“We are one event away from a large assessment — there’s no other way to say it,” California FAIR Plan President Victoria Roach told lawmakers last year. “We don’t have a lot of money on hand, and we have a lot of exposure out there.”

The insurance industry will probably have major changes in store besides premium hikes. The deductible amounts could go much higher, and forget about getting the guaranteed-replacement policies.

One great alternative is private firefighters. They are on the job in L.A., and we’ve seen them in Rancho Santa Fe during the last fire here. Instead of insuring to rebuild your home, how about preventing it from burning down instead? For many, that would be worth the extra cost.

Open Space Is A Major Liability. Cities like Carlsbad are proud of having major portions of their cities dedicated as open space. I’m sure the gnat-catchers are benefiting, but what about the people? Everyone complains about the high cost of housing. Can’t we live with a smaller patch of open space and build more homes? It would reduce the city’s liability from fires and provide more housing opportunities!

Above is Denk Mountain, also known as Dead Mountain. It’s just scrub brush and a few trails for hikers and mountain bikers. There are probably a few thousand people every year who enjoy those benefits, but the vast majority of the 110,000 people who live in Carlsbad have never heard of it and would be radically affected if another fire comes blowing over it like it did in 1997.

Or how about Calaveras? Look at the homes surrounding this open space just waiting to get burned up some day. Try to get fire insurance for one of these canyon-front homes today!

Another benefit? Make the home builder put all the power lines underground while they are at it, which would make everyone happy!

We’ll carve out some trails too, don’t worry. But is the beauty of these areas that great? Not really – not when a nickname is Dead Mountain. Let’s pave paradise – for our own good!

Some have said they have never seen anything like these fires. But it’s happened before: