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This is a thought exercise.
Suppose that you owned a home in Pacific Palisades, or Altadena that was destroyed by one of the wildfires. You have been through a very tough time. The fires are out, and after reporting your loss, you are waiting to hear from the company adjuster. You have a big decision to make……Will you rebuild?
Our little housing area here in the PNW has about 2000 single family homes. The first ones were built in 1976, and the build out was completed 20 years later. Between the start, and today, there has been only one structure totally destroyed by fire. And, I think this is really the norm with modern building codes. There have been a number of other fires but none with 6 digit damage amounts. The 2200SF home that was destroyed was owned by an elderly man and he elected not to rebuild. His homeowner’s insurance paid to have the debris removed, and he sold the lot to a builder. Our HO association had the plans for the home and the builder was able to rebuild using those plans with only minor updates for changes in the building code. The whole process took about 9 months. The original owner settled his claim with his insurance company and received the Actual Cash Value of the structure, plus his additional living expenses up to the time of the sale of the lot. You cannot collect the cost to rebuild unless you actually do so. ACV is defined in most policies as the Replacement Cost of the structure using “materials of like kind and quality” less depreciation. The home had been built in 1978 and the fire occurred in late 2009. I don’t know how much depreciation was deducted; perhaps 20%.
Let us think for a minute about what the property owners faced after the Paradise, CA fire (Camp Fire 18000 structures burned) in 2018, and what the people who have lost their homes in the current fires in Los Angeles will face.
1. Hazardous waste. Fire debris from modern materials including plastics and electronics is hazardous and must have special, expensive handling. In some cases top soil will need to be removed as well. Your HO insurance usually includes an additional 10% for debris removal. Because so many homes have been destroyed the government will have to make a decision about what to do with this waste.
2. Damage to infrastructure. All above ground utilities will need to be replaced. There may be damage to some in the ground utilities. Without electricity to your lot, you cannot rebuild.
3. Shortage of contractors and building materials. This will cause rebuilding to be MUCH more expensive through supply and demand, and profiteering.
4. Redesign and creation of building plans, and permitting. With thousand of people trying to do the same thing, the bureaucracy will be burdened and slow. There are only so many architects.
5. Insufficient insurance coverage. Typically in a catastrophe , a significant % of destroyed houses will not have enough coverage to pay for replacement. Many existing policies will not have coverage for required building code upgrades. There will be disagreements with the insurance company about what existed before the fire. (We had gold door knobs and marble floors.) Many people who rebuild will want to build something different than what they had…
6. The time required to replace the home will be much longer than people imagine. With 12000 buildings destroyed, just going through the adjustment process with the insurance companies will be difficult and time consuming and emotionally draining.
7. Living in the rebuilding area while reconstruction is going on is going to be very, very difficult. If your home is done first, you will be living in a place with no stores, no restaurants, no schools, and the constant din of rebuilding. The rebuilding zone will be visually sterile, with no vegetation, no landscaping, etc. There will be odors both from the fire, and construction.
8. You don’t know if you will you be able to insure your new home both during the course of construction, and after it is completed. Only one insurance company has begun selling policies in Paradise.
9. Just finding temporary housing for the residents of 12000 homes is going to really stress the rental housing market.
So, after going through all the trauma of being burned out of your home, seeing everything you own destroyed, knowing that it is going to take years before you can be in your rebuilt home, are you going to want to rebuild? Or perhaps, will you take the ACV payment settle up with your mortgage company, sell your lot, and relocate somewhere else?
I had thought about many of the things that you mentioned. At 75, I could easily be in assisted living or even deceased by the time the home would be livable again.
I live in an area (Rochester NY) which isn’t prone to natural disasters, but other factors, such as how much longer I can drive safely, already come into consideration when I ponder any major purchase or other change in my life.
the online version of the Wall Street Journal published an article on January 17: “His Malibu House Burned Down Six Years Ago. He’s Finally Done Rebuilding”. Worth a read to get an understanding.
I’d re-evaluate. If I had to start over, that would open a lot of possibilities. I don’t view this as financially much different than a severe business failure, or a marital divorce, etc. The emotional toll, that’s another thing but perhaps moving on, starting over and never looking back would be a good choice. Speaking from experience. In a massive fire, entire infrastructure is destroyed. Where this occurs makes a difference. Towns get wiped off the map by tornadoes every year. Different geographical areas offer impediments to rebuilding and restoration.
Buy a small trailer, park it on the lot. The utility hookups might need to be redone above ground but should be fine below. Once the rebuilding surge is done then rebuild (if your insurance company will let you). But of course rebuild to be fire resistant or fire proof. Don’t forget the windows or shutters. Many houses burn from the inside out because of the radiant energy of the fire coming through the windows. Good aluminum clad double pane windows or non-wood shutters can make a difference.
#1- can you afford to rebuild? Many lost insurance not long before the fires.i
I wouldn’t rebuild, esp in CA, where govt is focused on all the wrong things. I’d be scared to find out that I couldn’t get a permit for 12-18 months as the wealthy have likely already started the process with lawyers and architects.
A good question is what are the best places for a retiree to go to? Most lists I see tend to gloss over the issues that places present.
I loved visiting New Orleans before Katrina and have gone back since. Every time, looking up at the water, I thought that it was ridiculous.
After Katrina, I did not support rebuilding.
Pacific Palisades along the water, no. Make it a public beach until the ocean claims it.
Altadena, maybe.
Go read the recent article in this newsletter about the benefits of renting. Every time I think about natural disasters or war, I think of the benefits of renting.
Pacific Palisades will never be the same. It is Pacific Scarred Earth, and it may well be decades before any real normalcy returns, because even if you can rebuild in a year or two, most of the owners of lots around you probably cannot, and the land itself will look bleak indefinitely. That goes way beyond my time horizons. So, even if my property was on the oceanfront, I’d call it a day there, sell the dirt to someone younger who is willing to accept the tradeoffs to achieve their own future dreams, and leave California for a place that offers beauty, more calm and better public services at a lower price. I wonder what the result has been in Maui and Banff. I expect similar views there.
We were in Banff in September, and judging by the crowds, it is doing fine. Jasper, however, is different. The highway was closed so we couldn’t even consider visiting.
I believe the very wealthy with money and other living options will rebuild. They can afford to wait it out and they will build “more fireproof structures or fire-deterrent estates.” This devastation will spawn technological improvements in the field. Eventually those improvements will trickle down to the masses but the majority of residents who lost their homes do not have the resource options of the super wealthy. In many ways people have been given a clean slate in life, a forced restart. Will they stay in the area? Will they move to another country, state, city? Take the insurance money, sell the land, rent and become nomads? Divorce? It is a lot easier when it is just money to divide. I know many have children but the loss of possessions and financial responsibilities brings freedom.
I lived a bit of a nomad life after my children graduated from college. I sold my family home, most of my furniture (I was fortunate to store the sentimental things-not like the CA fire residents) and explored the country, figuring out where I wanted to grow roots again. I learned much about myself, the different parts of the country, and when I eventually settled again and bought another home it felt right, fit my lifestyle and income.
Spot on. The land is still very desirable. Similar to I have observed in Florida after disasters, generally wealthier buyers move in (private, or increasingly investment companies). They can afford to live elsewhere until the new home is constructed. As you note, on the plus side, the homes will be constructed to current code and likely survive future fires (as newer homes survived the recent fire).
There was a chance that the existing housing stock would have fared better had they retrofitted their homes for fire resistance. None of what happened was not predictable – winds, fire, happens every year and has gotten progressively worse….
Another update:https://www.cnn.com/2025/01/16/climate/la-fires-clean-up-recovery/index.html
At least 6 months to remove toxic and hazardous debris……
We lived in Pasadena near the Altadena border in the late 80s while going to grad school at USC. From the maps I’ve seen, I’m pretty sure the neighborhood where we rented was destroyed last week.
We also own timeshare about 5 miles north of Lahaina on Maui and are very connected to that area, so we’ve been paying close attention to their recovery process. It’s been 17 months since that fire, and the toxic/hazardous debris removal phase is just coming to a close. And that’s a much smaller footprint to think about, though conversely it’s harder to get stuff done on a small island in the middle of the Pacific than it will be in LA. Paradise (CA) is more like Lahaina in being rather remote. But the issue with LA will be scale—just multiply everything on your list in Paradise or Lahaina by about a cajillion.
Like Katrina and like Lahaina, I suspect some people will indeed leave the LA area for good. It’s just going to be too hard and too expensive to re-establish life there for many.
Despite its vast size and population, California faces a land scarcity. There are only so many places where construction can take place. In my opinion, this constraint will drive the rebuilding efforts in Los Angeles, similar to what happened in major cities like London, San Francisco, and Tokyo, which were devastated by devastating fires and bombings, respectively.
However, it’s important to note that rebuilding efforts will take time.
From the L.A. Times today: https://www.latimes.com/california/story/2025-01-11/their-houses-burned-down-now-they-are-fighting-for-the-few-homes-left-on-the-market
I want to compliment you on such a well written column. For me this was one of the most thought provoking posts I have read on this site.
Like HS – we thought long and hard after the Marshall fire. My retired Insurance Claims Manager husband began reviewing our insurance coverage and options to make sure we are up to date on our coverage. Lo and behold, getting appropriate coverage was not even a possibility. The recent correction the market made in housing values was not recognized by the insurance companies. So a home previously valued at $500,000. is now worth $700,000. and all insurance companies were unwilling to insure for more than $400,000.
Now, my husband, the insurance guy, took care of this. (I let the professional deal with it.) And I don’t presume to understand all the details. But we paid extra for coverage to make sure that in case of a catastrophe we would financially be in the same place as before the event.
I thought about this question a good deal when we lived on the beach in southern Oregon, threatened by not only storms and tsunamis but also by wildfires on a yearly basis. There was simply no question — my wife and I would have have taken the check, sold the lot and departed.
But we had no deep emotional ties to the area.
Contrast that to the folks in Lahaina, a town that will always have a special place in our hearts. They had lived in those homes for generations, attached to their land with a depth and intensity that most people can’t imagine. But in parts of town the lots are tiny, so tiny that the houses were just a few feet apart — which aided the fire — and under current laws the minimum setbacks literally wouldn’t allow a house to be built. Will those setback rules be waived to allow Lahaina families to restore themselves on their own land? It’s unclear at this time.
There are more major complications — a new shoreline setback law to protect the coast, modern zoning laws, a previous 40% premium on Maui building costs that will undoubtedly be higher in the Lahaina rebuild, and longtime shortages of skilled construction workers (who mostly commute from Oahu) and building materials (which must be shipped from the mainland) — that serve as obstacles to restoring the town. As of last month, 14 months after the fire, exactly one Lahaina home had been rebuilt. One.
And finally, the people themselves are not in the same financial position as those in Pacific Palisades or even Paradise, which was by no means a wealthy town. Many Lahaina families lived close to the poverty line. Now, in temporary or FEMA housing, they’re even closer to the edge financially. Many will have no choice but to accept offers from redevelopers and leave their ancestral land behind.
To add to what you said about Lahaina, besides losing primary residences, many of the same people lost workplaces in businesses that burned down. And tourism has been way down to Maui since the fire, so that affects people’s jobs, too. As you said, a number of people have already given up and moved either to Oahu or the mainland.
Very nice post. You clearly know a lot about the subject.
There are insurers who do not require rebuilding in order to pay full fare on the claim. The premiums for such reflect the privilege.
I’ll take an opposing view to HS’s Marshall Fire comments below. I’ve been very impressed with the degree of rebuilding that has occurred in the aftermath. But it has taken many years.
The CA fires dwarf what happened here in Boulder County.
It seems no matter where we live all of us are at risk and perhaps we have to consider this post seriously. I live 6 months in Athens Greece and 6 months in Baltimore. In Athens the wildfires are getting closer and closer to the city. In Baltimore, flooding is a problem since I live a few blocks from Chesapeake Bay and the area floods often. I’ve been lucky so far but for how long?
Personally I would try to get whatever insurance pay out I could get and relocate as quickly as possible out of southern CA. This does assume I’d have no important obligations forcing me to stay there. I can’t imagine investing years and all the struggles you list just to rebuild. The other issue is that the threat of fires in vulnerable areas of California will probably only increase given the political priorities there.
I live in Florida, just north of Miami and having lived through several major hurricanes, you have really given me a lot to think about. Yes, our home is in a sub division which has some of the latest hurricane codes, underground utilities and so forth, but all it takes is one good storm that could create the type of devastation you described. I always thought; I am insured, I would just repair the damages and keep going. After reading your article, I don’t know what I would do. I love our city of Pembroke Pines, yet it has became crowded, traffic is a nightmare and property insurance and taxes keep making the place unaffordable. Moving would certainly be a consideration in the future. Then I think of all the reasons this is such a desirable area, such as proximity to two major airports, two cruise ports, decent health care, all the things that one desires during retirement. I turn 54 in 4 days, with the goal of phased retirement at 57ish, I think I want to stay here for a bit longer, but this article raised a lot of good points even if it can be a tad anxiety inducing.
Isn’t coastal flooding also an issue? Wikipedia says you are only seven feet above sea level and have been considered at high risk.
Another consideration: your friends and social support structures are gone.
My mother-in-law lived in Ocean Springs/Biloxi, MS when Katrina hit. The water came up to the threshold of her front door. Her house was the highest on the street. Many neighbors were in her house with her (some swam over) wondering if they were going to have to climb into the attic or on the roof. The house across the street, which was downhill (with a bed-and-breakfast we had stayed in) was just gone. Others floated into the street and sat there for months.
In retrospect, we think she was starting to have cognitive decline before that. Now, her friends and neighbors were gone. The museum (Walter Anderson, painter) that she volunteered at had been underwater. She was a regular at local restaurants and shops and knew the employees/owners. Those were closed. Her walking friends were gone.
The familiar, the friends, the routines of life (including places) are part of what keeps us going, especially as we age. With those gone and less time/energy to literally rebuild, the case for staying seems weaker.
It is indeed a thought provoking post. I would probably not rebuild. But more importantly, the article brings home another perspective on just how hard life is going to continue to be for people there for some time.
Michael1, thanks for emphasizing the more important aspect of the post. We bought our first vacation home at the NJ Shore 8 months before Hurricane
Sandy. I remember the feeling of concern, not knowing what to expect. It was a week before we were allowed on the island to inspect the property. We were very lucky, we had no damage. I can’t imagine the tremendous angst and pain these families are feeling.
This is a really thought provoking post! The honest answer is I don’t know. After Sandy hit our beach town, we had friends who had to rebuild. We were lucky; we had no damage at all. I’m not sure what we would have done.
Rebuilding doesn’t make much sense to me, but I have never been that emotionally attached to a house or location. It’s like the people who jack up their houses on barrier islands in the hope they’ll survive the next storm. Maybe you were living in a safe place twenty years ago, but if wild fire wipes you out this year, no reason to expect it won’t happen again. I wish there was a decent buy out program for situations like this.
Our town had tornadoes in 1999. Most of the people who had total losses chose not to rebuild. The others sold to builders. It started a tear down boom in our suburb b/c it was one of the most attractive ones in our metro area. We benefitted when we sold our small ranch home on a .5 acre lot 13 years later for a handsome price b/c the land was worth so much. Chris
Four years ago the Marshall fire here in Colorado destroyed around 1000 homes. Everything you point out for problems is true here. There are still plenty of homes that have not been rebuilt as off yet. You start off by staying with friends, family or a hotel. Then you realize this may take years. The red tape has been a nightmare for many. Adding insult to injury here all the homeowners that lost everything are still responsible for their HOA fees. They went to court over this but lost. There are people that just said screw it and choose not to rebuild. Colorado has become much like California ( sadly in just my opinion) politically. Seeing what the people here have gone through I truly feel sorry for what’s coming to the people in California that have lost everything. To answer your question would we rebuild here in Colorado my guess is extremely unlikely.
You’ve done a great job laying out the aftermath, living in the PNW you have obviously given this much thought. I just don’t know what I would do. If my livelihood was there I suppose there would be little choice but to rebuild. Finding an existing home nearby to purchase would be difficult. Being retired and in my 70s I would not be excited with the nightmare of rebuilding, so I lean towards throwing in my cards.
Other than a tornado every 10 or 20 years, metro Toledo is a pretty safe place to live.