California Wild Fires Spur Rapid Rent Increases

California wild fires are only increasing in frequency and severity. As we head into fire season, CoreLogic deputy chief economist Selma Hepp took an in-depth look at how the largest fires in the state impact rents and housing costs. She found that the fires often create new demand for rental housing—due to property loss—often leading to increased rents.

Of course, much of the impact on rent trends is determined by the physical structures destroyed by the fires. The North Complex Fire burned in August 2020 and was the most destructive fire of the year in California, impacting Butte, Plumas and Yuba Counties. However, the fire burned mostly acreage, not physical structures. As a result, the impact on housing was limited. This is in direct contrast to the Camp Fire in 2018, which damaged 20% of the area’s single-family homes—a total of 18,000 strucutres. Following that fire, rents increased 25% compared to the statewide growth rate of 2%.

The second most destructive fire of 2020 was the Glass Fire, which burned in September through Sonoma and Napa Counties. Like the North Complex Fire, the Glass Fire also burned through more acreage than property, and as a result the impact on housing was also limited. Comparatively, the Tubbs Fire, which burned in 2017, had considerably more property damage, destroying 6% of the area’s single-family housing stock. As a result, rents in the area surged past the statewide level after the fire, taking nearly a year to return to a normal growth rate, according to Hepp’s report.

The Dixie Fire, which is currently burning in Butte and Plumas counties and has been since July 13, is only 59% contained. It is likely to become the largest fire in California history. The fire has destroyed 840,000 acres and about 1,000 structures. Hepp says that it will take time to see how the rent trends unfold. Rent trends generally emerge immediately as people seek shelter after displacement; however, housing price trends take longer to surface. Usually the impact is nominal, but the frequency of these fires in certain counties, like Butte and Plumas and Yuba, the fires could ultimately hamper demand and therefore price growth.