Over 15,000 structures have been destroyed in the wake of the Southern California fires that are still uncontained, and with that comes entire neighborhoods reduced to ash and the displacement of families desperately seeking shelter. This surge in demand has led to instant rent hikes due to self-serving price gouging by those who see this tragedy as an opportunity for profit. It’s unfortunate, seeing how the community is already dealing with the unbearable circumstances that have stemmed from these out-of-control fires that were, in many people’s view, preventable – but that’s a whole different topic.
In addition to the families who have lost their homes, property owners and tenants of rentals that are still standing have been ordered to evacuate. At its peak, the number of evacuees reached an estimated 200,000, which adds up to a substantial number of people that were, or are still in need of shelter until the situation stabilizes.
The extreme rise in rental rates has prompted safeguards to be put in place, with California’s attorney general, Rob Bonta, bringing this to the public’s attention in a recent press conference, stating, “We’ve seen businesses and landlords … jack up the price. It’s called price gouging. It is illegal. You cannot do it. It is a crime punishable by up to a year in jail and fines.”
Even with laws set in place to protect the community during this emergency, raising rents beyond what’s reasonable and legal still continues, which displays a total disregard for those who have lost everything to these fires.
Rents Unjustly Skyrocket as Thousands of Displaced Families Seek Shelter
The wildfires in Los Angeles and Ventura Counties have left widespread devastation, and with so many victims seeking out alternative housing in an already tight market, demand and prices have skyrocketed not only for long-term rental units but also for hotels, short-term rentals, and Airbnb properties, forcing families into competition for available spaces.
The extreme numbers of those in need of shelter are reflected in one realtor’s experience, Lauren Ravitz of Berkshire Hathaway, as she explains, “It’s a dire situation here, and it’s devastating for those who have lost everything—they’re all scrambling to find a place to rent.” Ravitz is basing this statement on the fact that she’s been receiving up to 100 texts and emails per day from homeless fire victims searching for a place to live.
Natalie Knott, a supervising attorney at Legal Aid Foundation of Los Angeles realizes this disparity of the situation as well, stating, “Competition, especially for renters at the more affordable end of the market, was already really tight. With a whole bunch of former homeowners now entering that market, it’s going to be even worse.”
This immense competition and unaffordable high pricing has led some residents to look as far as Santa Barbara to secure housing. In areas closer to the fires, like Santa Monica, rental prices have seen increases of up to 33.9% in a matter of days. Along with this, central Pasadena and other regions are raising prices as well, with rises up to 20%, and these percentages are on the lower end; people are seeing price hikes that are even more elevated.
Predatory Price Gouging Devastates Modest Income Earners and the Elderly
Even more concerning is that although a good number of homes destroyed in the fires were high-value properties, many of these owners are not high-income earners or wealthy. Stuart Gabriel, finance professor and director of the UCLA Ziman Center for Real Estate, highlights the disparity between home equity and household income: “While houses in the fire zones were generally quite valuable, some of the residents may be older or of a more modest income. You have to separate the home value from the occupants, and in the case of homes built in the 1950s and 1960s, clearly, owners have wealth in the form of their housing equity – but they may not be otherwise high-income households.”
Following years of increasing property values, many homeowners affected by the fires now find their primary source of wealth, their homes, reduced to ashes. John Kastanas, a 63-year-old administrative worker, had his home burned to the ground in the Altadena fire. His comment sums up the situation for many of these fire victims: “It was our retirement. It was our investment. It was our equity. It was everything.”
Modest income earners or those living off social security are now faced with extra expenses as they are forced to stay in high-priced hotels and rentals instead of their homes. This will cause some to rely on credit cards, racking up even more expenses.
Related Article: Alarming Numbers Reveal Credit Card Ceilings Hit by 37% of Americans
Violations of Anti-Price Gouging Laws
On January 12th, Governor Gavin Newsom signed an executive order putting into effect laws that prohibit price gouging in times of emergency in Los Angeles and Ventura Counties. California law caps price increases for goods and services, including housing and rentals, to 10% during a state of emergency. Although some price gouging is still taking place, this regulation was set to protect vulnerable fire victims from being taken advantage of.
It’s clear that the state needed to intervene. For Instance, a Los Angeles rental property was shown to have two rapid rent increases shortly after the onset of the fires. Originally listed at $5,500 last month, its rent jumped to $7,500 on January 10, marking a 36.4% increase. Just one day later, on January 11, the price surged again, this time doubling to $15,000.
These selfish and predatory actions are being called out by many, including celebrities, as seen in this X post:
Clients of our friend were trying to lease a house while their home was being renovated. The lease was for $18,000 per month. They were to sign the papers the day of the fire. Now the people renting want $30,000.
The vultures are circling and the flames aren’t even out yet.
— James Woods (@RealJamesWoods) January 11, 2025
Another example is a five-bedroom rental in Santa Monica previously listed at $12,500 per month, with the property being relisted at $28,000 – an increase of 124%. Other examples include properties in Mid City and Glendale, where rents were doubled or tripled within days of the fires. Violators of these laws face penalties of up to $10,000 and imprisonment, yet some landlords and realtors are taking the risk anyway because they know the payout is highly lucrative.
Gouging Law May Need to Be Adjusted to Protect New Landlords
The new gouging law places even stricter limitations on property owners planning on listing their homes as rentals for the first time, which may potentially set the maximum allowable rents well below the homeowners’ mortgage payments.
Mott Smith, a real estate development professor at the Sol Price School of Public Policy at the University of Southern California, comments on this, “In a state of emergency, new rentals can’t be priced higher than 160% of the fair market rents established by HUD. So if someone in Santa Monica [ZIP code 90402] decides to put their three-bedroom house up for rent, they couldn’t charge more than $6,736 for it. That likely wouldn’t cover the mortgage for many homes in the area.”
Related Article: California Rental Laws Set to Place More Restrictions on Landlords
Even those who secured mortgages at favorable rates and lower home prices may find the capped rent insufficient to cover their mortgage, not to mention additional expenses such as property taxes and fire insurance. Without an executive action from the governor to exempt this specific restriction from the emergency declaration, these limits could end up stopping new rental properties from entering an already low-inventory market.
Desperate Victims Wiring Money to Scammers for Rentals that Don’t Exist
If illegal rental price hikes were not enough for the residents who have lost everything, these victims have been further exploited by scammers who advertise bogus properties that don’t exist. Displaced fire victims have desperately and quickly searched for another home to rent. However, with thousands of community members doing the same thing, anything up for grabs was immediately taken, and unfortunately, some of the offers were fraudulent. The fact that someone would drain more money from people who are suffering such a great loss is unthinkable.
Price Hikes During this Time of Tragedy Reveal a Moral Failing Within Our Society
Tens of thousands of victims are struggling to simply secure the basics, which includes having a roof over their heads, but instead are faced with illegal price gouging that makes housing unattainable. This scenario highlights a moral failing where profit is put above helping those dealing with a tragedy.
If you’d like to learn more about the California fires, specifically what many feel was the cause of this out-of-control disaster, then dive into the following interview below.
Morris Invest specializes in new construction rental properties. Feel free to contact a team member if you have any inquiries regarding securing an investment property.
