LA rental market gets even more competitive after wildfires

Spencer Kallick, a land use and real estate partner with Allen Matkins, says that he knows over 300 people in his direct sphere — friends, colleagues, and clients — who have faced displacement and pricing issues as a result of the fires. Kallick says he’s done a “tremendous amount” of pro-bono legal work in advising people with difficult landlords, lease issues, insurance issues and mortgage issues.

“There absolutely was price gouging going on because nobody knew what the rules were,” Kallick explained. “This is kind of a once-in-a-lifetime thing. Those price-gouging laws, I believe, were put on the books many years ago when there was a fire up in Northern California, but you don’t know what the laws are in this area.”

Michael Lucarelli, co-founder and CEO of LA-based RentSpree, says that his company’s data does not support the price-gouging narrative associated with the aftermath of the fires. “We saw some instances of higher rent prices, but when we look at the data by and large, we didn’t see any market-wide spike in response to these recent events,” he shared. “I think that what was impactful was a lot of the regulations around rent price gouging were widely disseminated by some of the organizations that we work with, like the California Association of Realtors.”

Increased competition for rentals

Lucarelli says that what RentSpree did observe was a spike in competition during January and February. “We had about 13 to 14% more applicants per property in January and February of this year compared to January and February of last year,” he said. “It’s the same in regions like Santa Monica, Calabasas, the San Fernando Valley area — these are where people would be relocating after being displaced. The rent prices are more or less staying consistent with what they were, but the demand has spiked significantly from the data that we can see. In January, it did go up 15%, and in February, the demand went up 12 to 13%.”

A market increase in overall transactions also occurred, Lucarelli added. “So not only are we seeing a higher increased average, meaning average applicants or average renters vying for these properties, but we saw almost 60% increase in just total activity, compared to from this year, year-to-date to last year.” 

The California-to-Florida pipeline

Former Congressman Patrick E. Murphy, now executive vice president at Miami-based Coastal Construction, hypothesizes that a cloud of uncertainty regarding tariffs and the economy is also contributing to the rental crisis, never mind displaced borrowers. The former has created a dichotomy between people renting out of necessity versus people renting who aren’t ready to enter the marketplace.

“Tariffs, immigration policies, and overall a lot of uncertainty has a lot of potential buyers on the sidelines wondering if there’s going to be a pullback, is there going to be a recession? So renting all of a sudden looks like a potentially better option in many markets,” Murphy said. “And what’s happening in places like LA is increased uncertainty and unpredictability for how that market is going to recover. Is it going to be two or three years, or is it going to be 20 or 30 years?”

Murphy continued, “Folks I’m talking to have noticed a decent amount of folks coming to South Florida from that have been displaced because of the fires. But I think there are a lot of people that don’t have that luxury necessarily.”

Brokers and real estate agents that Murphy works with shared with him that there is a slowdown of people from the northeast relocating to Florida and, instead, an uptick in Californians relocating. “A lot of them seem to gravitate towards the ultra luxury, ultra high-end, $10 million-plus sort of properties. And it seems that before, they probably wouldn’t have been thinking about Florida. But all of a sudden, they’re thinking of taxes and thinking about how long it’ll take them to rebuild if they stay in California,” Murphy said.

Kallick says many of his colleagues and friends rented places close by as quickly as possible to keep their children’s lives as close to normal as before the fires. “I can think of at least a couple of friends and colleagues who moved to New York or moved to Manhattan Beach, but I also have several other friends and colleagues who are still trying to figure out what’s next, whether they’re going to rebuild, buy another place and sell their lot, or are they going to try and uproot their lives and move to another space?”