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Homes Destroyed By California Fires May Take Years to Rebuild

The 3,500 families who lost their homes in the recent California wildfires may have to wait as long as four years to see their homes rebuilt. Two economists say the fires have worsened an existing housing shortage.

Population growth led to a shortfall of one-million homes in California in the 1990's, and the shortage is now growing by 25,000 housing units a year. That has brought the occupancy rate in some communities, such as heavily Latino East Los Angeles, to two-and one-half families per housing unit.

Economist Susanne Trimbath of the Milken Institute says recovery times were long after wildfires in the early 1990s. "With fires we have had in the past, 18 months is probably the fastest to rebuild a house, to as much as two or three years," she says. "With the increased demand that we have for housing now, the people that have been burned out possibly could spend as much as four years waiting for another house to be built."

Delays in settling insurance claims and a shortage of contractors contributed to the wait.

But economist Juan Montoya says the situation is worse today. He says the real estate market changed about 1994, when major homebuilders stopped building on speculation. Today they build houses to order. "What they started doing is, they started getting options on land and they would build a model house, and if they got enough interest in the housing development, they would start constructing," he says. "And so they would only construct the houses that were sold."

California has a complicated process for obtaining building permits, which adds to the delays and boosts costs by at least $60,000 per housing unit. Depending on the community, permits are required to ensure that houses meet environmental, fire and earthquake safety guidelines, and even to ensure that the design is compatible with local aesthetic standards.

In the sprawling suburbs of San Diego and Los Angeles, where most of the houses were lost in the recent wildfires, added restrictions drive up the cost of housing, says Ms. Trimbath. "In Southern California, in particular, we have some restrictions on growth, where there are specific areas where for environmental reasons, protection of wetlands, etc., we're not able to continue to expand the places that we build," she says.

California's housing problem will only get worse if, as expected, the state's population grows by 15 million people in the next 20 years

Some residents who lost their homes to the recent wildfires, especially in rural canyons, may learn that they cannot rebuild without extensive landscaping to reduce the fire danger. Some may find rebuilding impossible. And those who rebuild, and those who buy or rent new housing, all face long waits in a tightening market.