California wildfire victims face uphill battle as corporations and investors swoop in

Six months after California’s most devastating wildfire, a recovery is underway. Land is changing hands, developers are coming in, permits are being approved, homes are under construction. Yet, for many, the process is still moving slowly.

“This process is going to take time, money and patience,” said real estate agent Laura Alfano, who specializes in Malibu and the Pacific Palisades properties. “And that will lead to a combination of developers, investors and then families who have legacy wealth. And that’s what we’re seeing in terms of purchases. Not only smoke-damaged homes, but of the actual lots themselves.”

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Of the 123 lots sold in the Palisades since the fire, about half have been bought by corporations, the other 50% by individuals. Whereas northeast of L.A. in Altadena, many homes are being snapped up by investors.  One company bought 16 properties, another 13.

“I don’t want an ADU (Accessory Dwelling Unit). I’d rather die,” says Terry Kilgore, 70, who is living out of an RV on his Altadena lot, waiting for an insurance settlement. “What the hell, I don’t like RVs. I don’t want to live in one, but at this point in time, it’s a godsend.”

Many homeowners now realize they were underinsured. They can’t afford to pay off the old mortgage of the destroyed home, two years of rent in a tight market and have enough money left over for a rebuild.

In Altadena, each month, more vacant lots are coming on the market, depressing prices by as much as $100,000 on a $1 million lot.

In the Palisades, it’s the opposite. The number of properties coming on the market is going down, helping fire victims wanting to cash out. The average price is $2.2 million for a vacant lot.

“Construction time, as I’m hearing, could be a year, year and a half, so I think you’re going to see six months from now framing,” said Larry Vein, head of Pali Strong, a citizen group formed after the fires.

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“The trauma has been really tough. A lot of people are still really confused about it. They don’t know what to do. A lot of people are moving forward with their plans. A lot a people are just kind of on hold,” said contractor Michael Shirley.

Right now, about 50 homes are under construction in the Palisades. More are in the pipeline. Of roughly 900 permit applications submitted to the city and county of Los Angeles officials approved 274 to begin construction. Between the two, about 13,000 homes were destroyed. Both entities say they’re approving permits in under 2 months – down from 8 to 18 months before the fires.

Yet on more complicates sites and larger homes, experts say homeowners are looking at a year or more to get approval. To speed up the rebuilding process, Governor Newson extended executive orders to suspend the California Coastal Act as the primary agent in granting permits. This suspension lasts through at least Oct. 1. With the order still in place, homeowners looking to rebuild can start construction with up to 10% increase in size. However, for those looking to expand beyond 10%, they face a $11,579 base fee and a 12-24 month process. 

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Ross Greenberg lost his home in the Palisades fire. And although his rebuilding permits were approved in early June, Los Angeles County still isn’t letting him break ground.

“I’ve paid over $12,000 in my permit fees right now just to get my process moving,” Greenberg said.

Besides battling with regulations, many residents are more focused on their fight with insurance companies.

Before the fires spread across southern California, State Farm dropped 1,600 policies in the Palisades last July. The insurance company faces lawsuits from homeowners who claim they were left “grossly underinsured.” With poor support by insurance providers, many residents solely rely on the California FAIR Plan, which may barely cover the cost of foundational and septic tank development in places like Malibu, which lost 600 homes in the fire, including 300 along the beach.

“You’re going to spend two to three million dollars on just your foundation, your septic system and your seawall,” said Don Schmitz, president and principal planner of real estate consulting company Schmitz & Associates. “And that’s before you put up the very first stick to build the actual house.”