The wildfires have created an entirely new housing crisis in Los Angeles

The wildfires have created a much bigger housing crisis in L.A. as people out of their homes now have to look for somewhere to stay. Yeah, that's right. David Lazarus is here in studio to talk about these issues. Laz, you've been all over this. People need a lot of help right now. So, what are the experts saying? Boy, things are changing really, really fast. Earlier today, I spoke with a housing expert at USC named Marco Giacoletti, and we talked about a number of things. First of all, are rents going up? Yes, he says they are. But when I said, what, as much as 20 percent, he said, no, that might be too aggressive. So that might be a smidge of good news, even though he did acknowledge that short term, yes, there's probably be some price gouging on the part of landlords. I asked him about the prospect of a rent freeze in L.A. County, as some consumer advocates are calling for. He said that could be counterproductive because it could limit our supply if landlords stop bringing properties to the marketplace. And that could just exacerbate the problem. But the most interesting element of my conversation with Mr. Giacoletti was when he talked about the possibility of, as we start rebuilding, starting to relax some of the zoning laws, especially in a more working class neighborhood like Altadena, so that rather than putting up single family residences, especially on parcels where people might not have the wherewithal to rebuild at all, we allow developers to start putting up duplexes and apartments, in other words, increasing density, but also increasing more housing. But would that work? Here's what Giacoletti said. I think it would be highly controversial. So it's hard to say whether this is going to happen or not. Exactly right. It would be controversial. And make no mistake, higher density housing would change the character of many neighborhoods. That's just simply a fact. Nevertheless, most large cities in Europe and Asia have discovered that if you don't go for higher density within your urban areas, you end up just with people with massive commutes from far, far away. And that's not ideal either. So as with the rest of the world, at some point, L.A. is going to have to perhaps consider these steps that these neighborhoods, these very homey neighborhoods that we've enjoyed for decades now, might not be in step with the times. And that, in fact, and I don't want to call it a silver lining to the fires because that's not such a thing, but the opportunity that might come from the rebuilding might be if we're open to changes in our zoning laws, making some neighborhoods, well, at least more amenable to more families coming in, more residents coming in and thus keeping more people closer to their jobs. There was a housing crisis before the fires, not enough housing in greater L.A. for people. Yeah. With this situation, what do you, I mean, what do you say to folks who, you know, say in Altadena, a working class community where people work their lifetime just to be able to afford a single family home in such a beautiful place close to the city? Right. And it's heartbreaking because these are people who might have invested all of their funds into their home thinking this is going to be my biggest investment and I'm all in and now here you are. And in Altadena, if there's a number of people who are uninsured, they're just off the playing field at this point, but even people who were insured might not have the wherewithal for rebuilding because it's going to be very tough. The overages will be profound, but most importantly, it's going to take a long time. Some estimates say it could be five years or more before many of these residents get built. There's going to be some more well-to-do families from, say, Malibu or Pacific Palisades that have the financial resources to ride this thing out. It's going to be other working class families from the Altadena area that do not have that cushion and are going to have to make some very difficult decisions, especially when it comes to things like getting kids back into schools and things like that. How do you stay put? And I want to give you a word of warning as well. Some insurers might be sending out appraisers and adjusters to the properties that were insured, looking around and then telling the homeowner, we're ready to settle right now, all cash. Oftentimes that's going to be very attractive, especially if you don't have the funds to try to get you over the hump until we get into the rebuilding. But make no mistake, many of those all cash settlement offers will be low ball offers. If you get such an offer, I'm not saying walk away from it, get a second opinion first. And if you get some developer who also wants to come in, they're being called predatory buyers. Also don't rush into something like that. Get a second opinion. It reminds me in Gone with the Wind when we had the carpet baggers showing up for reconstruction. We're going to see the same thing here. Right. It just feels grossly opportunistic, whether we're talking about the developers or rezoning an area that people wanted to live in because it wasn't a high density area. I was speaking with one housing analyst earlier and I put the question to him. I said, quite simply, is this capitalism pure and simple or is it heartless greed? The answer? Yes. Yeah, to both. So if you are a homeowner who just lost everything, house incinerated and your insurer comes around and offers you this all cash offer, you know it's low ball. You're saying get a second opinion. You're saying get a second opinion from another insurer or real estate agent or somebody who knows the marketplace, knows the values that are out there, also knows how values are going to change over time. Right now, obviously, as we've talked about, the value of the structure, if your house is burned down, is zero. The value of the underlying land can still be profound. And as I heard from the L.A. County tax assessor yesterday, they've looked at all the fire hit regions and looked at the values of the properties there. It turns out that the underlying land makes up roughly two thirds of the value. And you're still going to have to pay taxes on that going forward, although you can work out some forbearance or deferment. So you're not paying all that right now. But for many working class families, it's going to be very, very tough to get from here to there. And that's the problem. That's why they are so vulnerable. So if you are and I know we got to get a break, but if you are going to turn down that all cash offer, are you just telling your insurance company, hey, listen, we need more. Don't reject it out of hand, but do look around a little bit. Don't jump right at it. Also, remember, your insurance policy almost certainly allows you to get some payment up front right now. And that's not going to be an all cash settlement finalizing everything. That's a part of a longer term deal. Ask your insurance company about that. Tell them, ask them, how much can I get up front now before we settle down the road?