A top real estate executive warned that California is facing an unprecedented “triple threat” with rising house prices, interest rates and insurance rates as it embarks on a critical rebuilding phase after the Los Angeles fires.
Over the past few years, California has been hit with a growing insurance crisis as major carriers pulled out of the state, discouraged by restrictive policies that prevented the firms from setting rates based on weather risks.
That crisis is only expected to worsen after the devastating fires that ripped through Los Angeles County, causing estimated insured losses of at least $28 billion, according to Verisk, a global data analytics company.
“So many of our economic troubles, so much of this generational malaise tracks back to home prices increasing at an unprecedented rate, especially during the pandemic, and then interest rates going up, and now insurance going up,” Redfin chief executive Glenn Kelman told Fortune.
“It’s a bit of a triple threat that we’ve never seen before,” he added.
He worries that the fires will push more insurance firms to flee California, especially as the state’s politicians and government agencies are blamed for the out-of-control flames.
“Sometimes I just wish it weren’t so political,” the real estate boss said. “I hear about the fire department being blamed, or California being blamed, and just think, ‘How dare you? Have you actually talked to anyone who is going through what those folks are going through? How dare you feel that way?’”
The insurance crisis in California will likely get worse before it gets better — but the damage from the fires is shoving the state into a key rebuilding phase that could eradicate its “NIMBY” ways, according to Kelman.
“California was the place that just perfected NIMBY-ism,” Kelman told Fortune, referring to the state’s “not-in-my-backyard” crowd that vehemently opposed new projects in their neighborhoods.
Strong neighborhood opposition — along with strict regulations, land-use policies, extensive environmental reviews and a lack of land — have pushed major housing developers to flee the blue state, he said.
Wood Partners, one of the country’s largest real estate developers, last year said it would no longer be pursuing projects in California. The company has said it would not provide a reason for the withdrawal.
But the tides will have to change after the uncontrollable blazes caused an estimated $150 billion in damages across Los Angeles County.
California Gov. Gavin Newsom and LA Mayor Karen Bass have pledged to cut the red tape around rebuilding.
Newsom, for example, suspended permitting requirements under the California Coastal Act — which implements strict protective measures for projects on coastal land — and the California Environmental Quality Act in order to speed-up building efforts.
“I think they’ve been looking for an opportunity to do so, and the fire gives them that,” Kelman said.
“I have been a longtime YIMBY so of course, I support all of this,” he added, calling himself a “yes-in-my-backyard” type.
He said he expects President Trump to help California during this construction boom.
“We’ve elected a president who used to be a real estate developer,” Kelman said. “He could become the real estate developer in chief.”
It is unclear exactly how many homes have been lost in the LA fires, though about 48,000 acres of land across the county were burned in the Palisades, Eaton and Hughes fires.
“You have to have a hole in your head as a builder not to come back to California at this point,” Kelman said. “You’ve got a very friendly government…and suddenly there’s whole neighborhoods that need to be rebuilt.”
He warned that some of California’s neighborhoods will likely lose their charm through this rebuilding effort, though.
“I think they’re going to be built for more density. It’s exactly what the society needs, but it’s never going to look the way that it did before the fires came through,” he said.
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