The fires that have ravaged Southern California for over seven days now will have to “turbocharge” change at the government level in order to rebuild the homes destroyed by the flames, according to Los Angeles-based real estate adviser Carl Muhlstein.
In an interview with commercial real estate news website Costar, Muhlstein, chairman of Muhlstein CRE and a former longtime JLL executive, called for changes in California’s famously strict building regulations to be fast-tracked to make sure those who have lost their homes to the fires don’t find themselves in a housing shortage.
Newsweek contacted Governor Gavin Newsom‘s office for comment by email on Wednesday morning.
Why It Matters
Hundreds of thousands of Californians have been forced to flee their homes as flames approached over the past week. Upon their return, many found only ashes where their properties once stood. According to the latest estimates, more than 10,000 homes have been destroyed by the fires still burning through Southern California, and thousands more are currently considered under threat.
Because of the massive scope of the damages caused by the blazes, the recovery and rebuilding process will likely be challenging. The risk is that the supply shortage that has been affecting the Golden State for years now will get even worse, exacerbating the ongoing housing affordability crisis for Californians trying to get back on their feet after losing everything.
What To Know
There aren’t enough houses for sale in California for everyone who wants to buy, and those that are on the market are often unaffordable to the average consumer.
While the entire nation has suffered from a lack of inventory since the financial crisis of 2007-2008, California’s complex zoning restrictions and lengthy permit approval processes are often blamed by experts as the main cause behind the state’s chronic shortage of homes.
Lawmakers in the Golden State have passed more than 100 laws affecting planning, zoning, permitting processes, and building since 2017, as reported by Washington-based nonprofit Brookings, to alleviate the housing shortage in Southern California. Even so, reforms have failed to make a dent in the state’s production problems.
The state needs millions of homes to fix its housing crisis—but it’s simply not building fast enough to do so.
A 2024 report by the California Housing Partnership found that, despite more than doubling production of new affordable homes in the previous five years, the Golden State was only funding 12 percent of what it needed to meet its building goals. California was hoping to build 119,287 new homes in the year 2024, but it funded construction of only 14,592.
The annual goals set by the state should help California reach its goal to build 2.5 million homes by 2030.
Muhlstein is among the many real estate experts who are calling for California to make changes to its regulations to speed up the rebuilding process.
“The planning and building departments are just going to be overrun,” Muhlstein told Costar News, as displaced residents try to lease off apartment units near their destroyed homes.
“Landlords expect multiple applicants per unit if it is close to the destruction [areas],” Muhlstein said. “Single-family homes are already flying off the shelves in Manhattan Beach in pending sales at record prices. A friend of mine that has a condo project that he bought as a rental leased three units the very first night. They didn’t even ask the price, they said we’ll take it.”
With limited availability for vacant homes and rental units, experts like Muhlstein expect an uptick in price gouging in the areas affected by the fires.
In a statement to Newsweek, Muhlstein said: “[The] LA fires coincide with densification of single family lots. ADUs, duplexes, & fourplexes add housing, are easier to defend with fire life safety upgrades, and proper spacing.
“The City should suspend ULA Mansion taxes for rebuilding, selling teardowns, and a 15-year moratorium for new Multifamily projects. The City and County lost political capital. They’re going to have earn their votes next year.”
What People Are Saying
Sean Burton, CEO of Los Angeles-based multifamily developer Cityview, told Costar News: “We have to use this as a catalyst for change. Not just the business and real estate community, but a much broader swath of Angelenos need to demand change from our elected officials at all levels in how we do our zoning, planning and entitlement so we can build more housing.”
LaTerra CEO Charles Tourtellotte told CNBC: “Ground-up new construction has been constrained for some time as it is, and now with costs relating to insurance and interest rates so high, for sure it’s going to add to the difficulty to rebuild, or build anything new. The constrained housing market will only get worse with less housing and more demand, and the cost to live will just go up, it just has to.”
What’s Next
Governor Newsom has already said he will suspend two landmark environmental laws—the California Environmental Quality Act and the California Coastal Act—to allow rebuilding in areas affected by the wildfires.
“When the fires are extinguished, victims who have lost their homes and businesses must be able to rebuild quickly and without roadblocks,” the governor said Monday.
“The executive order I signed today will help cut permitting delays, an important first step in allowing our communities to recover faster and stronger. I’ve also ordered our state agencies to identify additional ways to streamline the rebuilding and recovery process.”
The California Realtors Association praised the governor’s decision, calling for Newsom and the legislature to “expand the applicability of the streamlining measures contained in the measure to other housing construction in Los Angeles and surrounding counties.”
In a statement released on the association’s website, C.A.R. President Heather Ozur, a Palm Springs REALTOR, said: “The Los Angeles area already has very limited housing availability, and the fires have displaced many people who will need housing. It will be essential to get new housing built, which streamlining measures will allow.”
But rebuilding in wildfire-prone areas exactly as it was is likely to add pressure to the insurance crisis in the state, where insurers have cut coverage in the past few years over the growing risk of catastrophic events which could cause a barrage of damage claims.
Read more: https://www.newsweek.com/california-developers-want-turbocharge-building-after-la-fires-2015077
