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The Real Deal Los Angeles

Woolsey Fire devastation sends Malibu rental market into overdrive

Displaced Malibu residents are in the market for rentals and property owners are scrambling to meet demand
By Dennis Lynch | January 08, 2019 09:00AM

Christi Hogin and Michael Gardner (Credit: Flickr)

The Woolsey Fire destroyed at least 400 Malibu homes as it swept through the tony seaside enclave in early November. But in the weeks following the devastating blaze, the Malibu rental market has scrambled to meet the sudden demand from hundreds of returning residents.

Many of those people who came back later that month following mandatory evacuations discovered their homes damaged, destroyed or uninhabitable.

The sudden loss in housing created a surge in the renter pool as people searched for temporary housing. At the same time, the number of listings spiked as owners offered up homes that had never been on the market.

There were 106 new listings in the 30 days after Nov. 9, the day authorities issued mandatory evacuations in Malibu, compared to just 18 new listings in the 30 days prior to that date, according to Sotheby’s International Realty Malibu agent Mike Gardner. At least 64 more homes hit the market between Dec. 9 and Jan. 7.

Many renters are eager to lock down a rental, especially near their properties, Gardner said. That allows them to oversee reconstruction and repairs to their homes. In the first days after officials lifted the evacuation order, Gardner saw a prospective renter offer a client — sight unseen — $7,000 per month for a home that was listed for about $5,700.

“The whole deal was done without the tenant even visiting the property,” he said. “There was that much urgency for some of the fire victims to obtain housing before it all ran out.”

Hefty insurance payouts are contributing to the surge in rental listings. Insurance companies are in some cases paying well-covered clients tens of thousands of dollars for rent per month, Gardner said. Owners, he said, have listed their properties after getting wind of the payouts.

“We’re seeing people with houses that haven’t been on the market say ‘hey, if I can get X, I would lease it,’” Gardner said. “Since some insurance companies are willing to pay, you’re seeing transactions.”

Similar spikes in demand and pricing for hotel rooms were seen near areas evacuated as the fire swept through 97,000 acres.

The Woolsey Fire caused an estimated $1.6 billion in damage to real estate in Malibu alone — that’s a significant chunk of the $5 billion in estimated damage it did across northwest Los Angeles and Ventura counties.

Price gouging rules went into effect Nov. 10, the day then-Acting Governor Gavin Newsom declared a state of emergency in affected areas. At the time, the rules were somewhat ambiguous. The law made it illegal to hike prices for essential goods, including rental housing, by more than 10 percent above the price charged “immediately prior to the proclamation or declaration of emergency.” But it didn’t address housing that was not listed before to the state of emergency.

On Dec. 27, an amendment took effect. The law now applies to any residential unit listed or rented within the last year. The owners of units that were not rented within the last year can only change rents up to 160 percent of fair market rent established by the Department of Housing and Urban Development.

Price gouging laws apply for 30 days after the declaration of a state of emergency, but a Malibu city ordinance passed in mid-December extended that and the city plans to extend it for another 60 days on January 14. The City of Malibu is undertaking several measures to make it easier for residents to rebuild homes.

Malibu City Attorney Christi Hogan said the price gouging rules would be in place for “a while” given the state of the areas affected by the fire.

“Frankly, the place is a mess,” she said. “It’s otherworldly, there’s a film crew that’s been up in affected areas taking stock footage for alien planets and post-apocalyptic footage.”

Agent Sandro Dazzan of The Agency said he saw homes hit the market “every other day” after the fire. One of his clients planned to list a rental after the new year, but soon after the fire decided to quickly list it.

“I think a lot were people listing second or third homes — people who weren’t using them and deciding to put them on the market,” Dazzan said.

Some people who lost homes — and could afford it — simply left the country for the rest of the year, he said. The market cooled during the holidays, but it could pick back up as people return, he added.

Hogan said her office had received “only a couple” of complaints of price gouging related to rents. The city formed a task force with the L.A. County District Attorney’s Office to investigate the complaints, but no charges have been filed yet.

“We’re definitely working hard to get out the word to property owners that the fire was not an economic opportunity,” she said. “We don’t like to unduly introduce ourselves into the market, especially the real estate market, but obviously this is a different circumstance and there’s a need for a tamp-down.”

But not every displaced resident is in the market for a local rental, at least not in Malibu. Some have decamped for neighboring communities, including Pacific Palisades and Santa Monica, and Gardner thinks some might not return for a while.

“Some people who went to Santa Monica told me that living in the city is kind of nice,” he said. “They like being out of Malibu.”