Wildfires Exacerbate Los Angeles’ Housing Shortage: What’s Next for the Market?

Los Angeles has long faced a significant housing shortage, with the city grappling to meet the demands of its growing population, the New York Times reports.

However, recent wildfires are set to worsen this crisis, displacing thousands of residents and further tightening the already strained housing market.

As of January 2025, with devastating fires still active, approximately 180,000 people were under evacuation orders, adding a heavy burden to an area that was already dealing with a shortfall of about 337,000 homes in 2022. The region’s housing stock has been further limited, with the number of homes on the market falling 26% below pre-pandemic levels, according to Zillow data. The challenge of finding stable accommodations is already immense, but the impact of the fires could make it even harder for displaced individuals to secure long-term housing options.

As evacuees seek shelter, many are relying on public facilities, friends, family, or hotels. However, as they look to transition into more permanent housing, the region’s tight rental market will only become more competitive. Many displaced families will likely turn to rental units while they rebuild their homes, increasing demand at a time when supply is already constrained.

Carles Vergara-Alert, a finance professor at IESE Business School, notes that the combination of heightened demand and limited availability will inevitably push rental prices higher.

“You’re going to have a positive shock in demand, and a negative shock in supply, so this automatically means prices go up in the rental markets,” he explained.

This price hike will likely affect not only fire victims but also existing renters who are already struggling with high costs.

One such individual, Jonathan Zasloff, a professor at UCLA and a fire victim from Pacific Palisades, expressed concern about how his search for temporary housing could impact the rental market. Zasloff, whose home was destroyed, is now staying with relatives while exploring rental options. With a limited number of available homes in desirable areas like West Los Angeles, the competition for housing could be fierce, displacing other renters and driving up costs across the region.

California has been in the midst of an affordable housing crisis for over a decade. Despite efforts to ease housing development, including the introduction of streamlined permitting processes for affordable projects, the state and local governments have been unable to meet their housing production goals. Recent data indicates that in 2024, the number of apartment units approved by Los Angeles dipped to a 10-year low, a worrying sign for the future of housing availability.

Dave Rand, a land-use lawyer and affordable housing advocate, highlighted the increasing difficulty of addressing the region’s housing challenges.

“This is a place that had massive affordability challenges last week, and after this week it’s going to be that much more challenging,” Rand said.

The combination of high demand from displaced residents and slow construction growth will likely strain an already overwhelmed housing system.

However, there is some hope that the rebuilding process could serve as a catalyst for addressing these long-standing issues. Advocates like Rand hope that the shared effort of rebuilding can be used as an opportunity to reform housing policies, particularly in speeding up the development of affordable housing.

Rebuilding efforts may also be slowed by a shortage of skilled labor in the construction industry. Many workers have left California in recent years, exacerbating the region’s labor deficit. The fire damage, combined with a long-standing construction labor shortage, will likely drive up costs and make rebuilding even more challenging. Andy Howard, a general contractor in Los Angeles, warned that the scarcity of workers and rising costs would only worsen as more people seek to rebuild after the fires.

“It’s going to drive the cost up, for sure,” Howard said.

He reflected the concerns of many in the construction industry about the future of housing availability.

As Los Angeles grapples with both a housing shortage and the aftermath of devastating wildfires, the city faces a complex recovery process. The immediate future is uncertain, with more residents likely to face displacement, and housing options will continue to be in short supply. Additionally, the region’s inability to meet housing production goals and the ongoing labor shortage in construction add further challenges to overcoming this crisis.