Episode 85: Wildfires, Displacement, and Housing Prices with Hannah Hennighausen

Shane Phillips 0:05
Hello, this is the UCLA Housing Voice Podcast, and I'm your host, Shane Phillips. After the devastating fires that destroyed much of the Pacific Palisades neighborhood in West Los Angeles and the community of Altadena, up near the foothills of the San Gabriel Mountains, we wanted to find a guest who could help us understand the relationship between wildfires, gas displacement, and housing prices.

Hannah Hennighausen joined us to talk about exactly those topics from her study of the aftermath of the 2018 Camp Fire, which had the distinction of being the most destructive wildfire in California history prior to the Palisades and Eaton fires this year. The Camp Fire has a lot in common with the fires that started in LA on January 7th of this year, finally reaching 100% containment on February 1st. The Camp Fire and LA fires both killed dozens of people, consumed more than 15,000 structures each, and displaced well over 10,000 households. Hannah and her co-author found that the loss of so much housing from the Camp Fire led to an almost immediate 13% increase in home prices in surrounding communities, and we're seeing evidence of similar short-term impacts here. People were displaced to all corners, but most stayed local if they could. The LA fires are also different in meaningful ways, affecting neighborhoods that are very demographically and socioeconomically distinct from residents of the town of Paradise. The LA housing market, meanwhile, is about as different as could be from the largely rural Butte County where Paradise is located. We talk about what those differences may mean for how LA recovers and how it builds and rebuilds in the future. As you can imagine, Hannah's research and broader insights about this topic matter for more than just LA, and they apply to other disasters besides wildfires. How and where we build homes determines, to a large extent, exactly how destructive natural disasters are and who bears their consequences. It also determines how much greenhouse gas we emit into the atmosphere, driving worse and more frequent fires, floods, tornadoes, and hurricanes. As the fires here show, the way we plan our cities can literally be the difference between life and death. I hope we'll heed that lesson. Just a quick note, while talking to Hannah, I mentioned an upcoming report that we're working on on the neighborhoods affected by the LA fires and research on previous fires in California. That's not quite ready, but keep an eye out because it should be out no later than mid-February. I'll put it in the show notes when it is published, and I'll share it on Blue Sky and LinkedIn if you follow me there.

The Housing Voice podcast is a production of the UCLA Lewis Center for Regional Policy Studies with production support from Claudia Bustamante, Irene Marie Cruz, and Tiffany Liu.

If you enjoy the show, please give us a five-star rating and a review, and send your questions and feedback to shanephilipsatucla.edu. We appreciate it. With that, let's get to our conversation with Hannah Hennighausen.

Hannah Hennighausen is assistant professor of economics at the University of Alaska Anchorage, and she's joining us to share her very timely research on the effect of the Camp Fire of 2018, to that point, the most destructive wildfire in California history, on housing prices and the migration of displaced households. Hannah, thanks for joining us, and welcome to the Housing Voice podcast.

Hannah Hennighausen 3:47
Thanks so much for having me.

Shane Phillips 3:49
We appreciate it. And my co-host today is Mike Manville. Hey, Mike.

Mike Manville 3:52
Hey, guys. Pleasure to be here.

Shane Phillips 3:54
Hannah, we start each episode with our guest giving us a quick tour of a place that they want to share with our audience. I don't think we've ever had anyone talk about Alaska before, so I'm hoping that your tour is going to be somewhere there, but where are we headed?

Hannah Hennighausen 4:08
You're in luck. We are headed to Anchorage, Alaska. Nice. My other option was Innsbruck, Austria, a city that has my heart, but we are going to Anchorage today. All right. In terms of Anchorage, the way I like to describe it to people, and Mike, you said you were in Anchorage this past summer. I was. So you might corroborate this, but Anchorage, in my mind, is possibly the most intense mix of natural beauty and grittiness in the country.

Mike Manville 4:31
I could see that.

Hannah Hennighausen 4:32
By that, I mean Anchorage is situated between the ocean and the Chugach Mountains. It is also a city that has grown quite quickly over the last 80 years. At its core, Anchorage is a boom town. First, it was a railroad town, then a World War II town, and then the Alioska pipeline came through, so it's an oil town. What that means is the city has grown in waves in response to those booms, meaning the infrastructure and the housing stock, and that's quite apparent in the city. Anchorage also, however, has an incredible trail system, both an urbanized trail system and the Chugach State Park, which Anchorage encompasses. What that means is we have moose and bears both in town and also just outside of town. There's a great This American Life podcast that describes Anchorage residents as being the most willing in the country to put up with wildlife in their urban spaces, and I would totally agree. There's a great story about a moose called Buzzwinkle who used to quote unquote get drunk eating fermented apples in downtown Anchorage and get his rack sort of all caught up with Christmas lights. In any case, so we're just sort of this mix of grittiness, wild nature, and boom town oil feelings. I really like it here. Oh, and I also I would be remiss to not mention, of course, the Denino people who have stewarded Anchorage's lands for time immemorial. Shane Phillips 5:55
Mike, what were you doing up in Alaska? Just a trip to sea nature.

Mike Manville 6:00
Mike, what were you doing up in Alaska? Just a trip to see nature? No, I attended a wedding. Some friends of ours got live there. They work for the district attorney, the state's attorney. And yeah, so the wedding was actually outside Anchorage, out near the Alyeska Resort. Oh neat. Yeah, so very, very beautiful, just very rural, but spent a few days in Anchorage proper. And of course, Hannah knows Anchorage way, way better than I do. But everything she said sort of rings true. I found the city, you know, the views of the mountains, of course, were just there everywhere and so, so stunning. And I was surprised by how gritty it was. It has a real, almost a kind of rough and tumble feel to it. And it's not a city that is devoid of urban problems, you know, as you can see when you just kind of walk around, you know, I mean, there were there are elements of it that had a had a real LA vibe in some respects that less traffic. So but I yeah, it was the whole time in Alaska, I was pretty enamored of it. I thought it was great.

Hannah Hennighausen 7:01
Yeah. I mean, yeah, I totally agree with what you're saying. I think it's a really unique combination that you don't find in many other places, maybe nowhere else. I do think one thing that's also different about Alaska, of course, and Anchorage, including is sort of how responsive to light people are up here, right in the dark, it gets or sorry, in the wintertime, it's dark for much of the day. But the city's response has been to have lighted urban trails everywhere. So you'll see people fat biking and cross country skiing. Kincaid Park is all it up. That's a place that Olympic cross country skiing athletes train. And then in the summertime, it's not unusual to be hiking with a ton of other people on the same trails at 10pm at night.

Mike Manville 7:43
Yeah. And when it's hard, you can't escape noticing in the summer, which is when we were there, that every house has to have high quality blackout curtains. Otherwise, we'll just never sleep. It was crazy.

Hannah Hennighausen 7:56
Yeah, absolutely. And then in the winter, we put up our Christmas lights in October and take them down in April.

Mike Manville 8:02
A different way of life.

Shane Phillips 8:04
So the article that we are talking about today is from the Journal of Housing Economics, and it's titled Catastrophic Fires, Human Displacement, and Real Estate Prices in California. It was co-authored with Alexander James at the University of Wyoming. In this paper, Hannah and Alexander study the effects of the Camp Fire, which in 2018 burned down most of the town of Paradise and multiple surrounding communities in northern California, killing 85 people and destroying roughly 18,000 structures. It also displaced 50,000 people. And this study evaluates how that displacement affected home prices in the region and follows the migration patterns of a large portion of the residents after the fire. Another way of putting this is that they evaluated a few dimensions of how the immediate consequences of the fire led to further hardship and difficulties in its aftermath. We're publishing this episode just a month after the start of the catastrophic Palisades and Eaton fires here in Los Angeles, which together damaged lives and homes on a similar scale to the Camp Fire that will be our focus today. Everyone here in LA wants to better understand what a post-fire recovery looks like, and I'm sure that goes for many of our listeners outside of LA and outside of California and even the US as well. This study happened to be published just a month before the LA fires, and so we quickly reached out to Hannah and moved this episode to the top of our queue for publication. We're going to discuss findings from this study and from prior research on the connections between wildfires, displacement, and housing, and then we're going to talk about how to apply what we know to the LA fires and to future fires. I wonder if we can just start with some of your personal background and what drew you to this subject. What brought you to the study of wildfires and their effects on people's lives?

Hannah Hennighausen 9:57
Yeah, absolutely. Thanks so much for asking. So when I first came to economics, I quickly became interested in understanding behavioral responses to events that are low probability and high consequence. So that includes things like tornadoes, hurricanes, and then also wildfires. I was really interested in how somebody sort of can act rationally in that type of environment. And so I then came to environmental economics, which has a ton of events that are low probability, high consequence. In college when I worked for the National Center for Environmental Economics at the EPA, and then later during graduate school when I was affiliated with a climate change center in Austria. How I came specifically to wildfire is actually via flooding. Austria has a ton of flooding, so I was focused on that. I then moved back to the US and wildfire was an important topic here. And that's how I started working on wildfire.

Shane Phillips 10:58
And you share that of the 20 most destructive wildfires in California's history, and I don't know how far back this goes exactly, but of those, 16 occurred in the past 10 years, including seven since 2020. Wildfires certainly seem to be getting more frequent and destructive. So tell us first if that impression is correct. And if so, what do we know about why? Is this something we understand really well or are there still important unanswered questions?

Hannah Hennighausen 11:27
So you're absolutely correct. Wildfires are getting more destructive over time. And I like to think about risk, whether that's risk of a car crash, flooding, or wildfire as being the combination of three components. And those components are hazard, vulnerability, and exposure. And so we can think of risk increasing with an increase in exposure, an increase in vulnerability, or an increase in hazard. And actually, it's potentially happening across all three. So in terms of hazard, that's the actual fire risk. And we know that over the last 40 years, the burned area from wildfires, at least in the western United States, has roughly quadrupled in size. So we're having bigger fires and more of them. And that's because of two things. One, there's been this accumulation of fuels from a legacy of poor forest management. So fuels in this context is combustible material like grass, shrubs, and trees. But there's also been a more recent increase in fuel aridity. So what that means is those shrubs are drier, and that aridity then can be contributed to climate change. And we can expect that trend to continue. So the hazard part of risk is increasing. The exposure to that risk is also increasing. So in the last 20 years or so, there's been an increase by about 350,000 homes per year in the wildland-urban interface. So that's that area where people are building, but it's in a fire-risky area. Currently, there's about 49 million homes in the WUI, the wildland-urban interface. And we're seeing an increase in the number of homes being built in that area. So that's increasing the exposure. The vulnerability, whether that portion is increasing, not so sure. That's really a policy intervention space where we can think about insurance, updated building codes, risk awareness interventions, that type of thing.

Shane Phillips 13:28
So vulnerability is essentially, if it happens to you, what protections do you have? How are you being helped to recover from it? That kind of thing.

Hannah Hennighausen 13:37
Exactly. Both protections for literally your life, but also your assets. Okay. I think that breakdown that Hannah just gave is really helpful.

Mike Manville 13:45
And I think it's an important way to contextualize, because we do often see this in the media, especially around here in recent weeks, that fires have become more destructive often, but not always. What that is being measured in is the value of destroyed property. And that really is going to be a combination of both where the fire is and how intense it is, but also where we built our houses. And in the California case, just over time, the average value of that house is just growing and growing and growing because of housing scarcity. And so had something terrible happened to Pacific Palisades 40 years ago, the village of Pacific Palisades didn't look much different. But the housing was worth so much less that that fire would have been measured as substantially less destructive, quote unquote, because of the appreciation or at that point, the lack of appreciation of what was destroyed. Because we don't really, Hannah, please correct me if I'm wrong, we don't have a good way of really measuring sort of the intensity of a fire as like a physical thing over time. What we can measure is how much it destroyed. And that really is where I think the economics comes in, because as Hannah says, people make this calculation when they choose to live, particularly in a really stunning place like Pacific Palisades, but also in the foothills of Altadena or in a place like Paradise, which is that, you know, it's how much it costs, it's how much you value that amenity. But then, of course, in the back of your mind, I mean, everybody in California understands that fire is always there.

Hannah Hennighausen 15:18
Mike, I totally agree. And I also wanted to add in terms of thinking about that exposure and that human element of risk, I think it really highlights an important tension that's currently happening, which is the need for more housing stock, right, as we're seeing upward pressure on property prices, but then the riskiness of the available land to build.

Mike Manville 15:41
That's right.

Shane Phillips 15:42
Yeah. And I did want to highlight that just a very large share of the land, especially near the coast of California, within, let's say, 50 miles of the coast, is in what the state has deemed either high or very high fire hazard areas or fire severity. And it's either that or it's just literally in the mountains or something where you just can't build a lot of housing. And some people want to point to that as a reason just not to build housing along the coast. But I think the appropriate response to that is to identify the places that are not in those high risk areas, but are along the coasts where, A, people want to live, but also where it's more sustainable to live for a whole variety of reasons and build more and more densely in those locations. I mean, I'm sure we'll get to this later, but this is really one of the conversations that's going on right now in Los Angeles as we talk about what rebuilding looks like.

Hannah Hennighausen 16:38
Absolutely. I think we'll get to later in the conversation probably about adaptation, but everything comes with trade-offs. And I think that's an important lesson.

Shane Phillips 16:47
So you cite quite a lot of prior research looking at the effects of wildfires on everything from prices to crime to homelessness and a whole bunch else. I came away with the impression that for as bad as we recognize wildfires to be and how viscerally we feel that at times like right now, most of us still don't grasp the full extent of their consequences. It might just be too much to fully absorb. What do you think is worth highlighting from that literature? What have we learned from other research on the campfire and on previous wildfires, whether in California or elsewhere?

Hannah Hennighausen 17:21
When I think about the impacts of wildfire, I like to put things into buckets. So first would be sort of this local versus non-local distinction, right? So what's happening immediately around the fire or even within the burn scar versus a place maybe a hundred or a thousand miles away. And then we also have different dimensions of impacts. So there could be health impacts, economic impacts, and then of course also ecosystem impacts. So first maybe we'll think locally and then we'll think a little bit more regionally or even bigger than that, right? So locally of course the most immediate impact to health is just this threat to life from the actual fire, right? That's really, really important. But then of course locally you're also going to have health impacts related to smoke. So PM 2.5 plus everything else that's nasty in that smoke. And this is especially important to, or rather this is especially meaningful for vulnerable individuals like the elderly or infants. And then finally actually a project that some colleagues and I are working on right now is that there may be some mental health impacts for those immediately affected by the fire. In terms of economic impacts and on a more local scale, we'll see property value impacts and we'll get to that later in the paper, right? But those are a bit ambiguous. They could go up or they could go down depending on the dynamics of the housing market. There's also amenity value impacts. So if the campground burns down, or the forest around the campground burns down, maybe that's a less desirable place to recreate. And then finally there's employment impacts and some of this is a bit ambiguous, but the employment impacts could be that there's a decrease in employment because there's literally business disruptions or an increase in employment due to increased construction. In terms of ecosystem impacts on a local scale, so of course we've got this reduced probability of fire, at least in the immediate term, just as the fuel burns up, as the trees burn up, right? It's not going to happen anytime soon again. But there is an increase in flood risk in the immediate term. On a more regional or even broader scale, what we're really thinking about is smoke in terms of health. So again, those are respiratory issues, heart issues. Economically, you know, again there might be some sort of like positive impact within the construction industry, but there may also be negative impacts, or studies have shown that there are negative impacts on employment and wages as people avoid the smoke, right? So you don't go to your job that's outside and you miss that day's wages because you're trying to avoid that smoke and the health impacts associated with it. And then finally there's also some reduced recreation behavior because of that smoke. So you're not going camping because it's smoky. So two things I do want to highlight within this literature is the fact that we're going to have differences across populations. So particularly with smoke avoidance behavior, so whether that's buying an air filtration system or needing to go to work, you'll have differences. So based on probably socioeconomic characteristics. So for example, during smoke events, residents of lower income areas tend to search on the internet less for health protective information and also spend less time at home than higher income areas. And so what that means is this adaptive behavior to wildfires will differ across socioeconomic groups.

Shane Phillips 20:47
And I'm curious about that response or lack of response to some extent by low income households. Is there a hypothesis about why that's the case? Is it, you know, I already know I can't afford to buy a filter or some, you know, solution to this problem, so why bother searching for it or is something else there going on?

Hannah Hennighausen 21:05
That would be my guess. I think it would be some sort of income constraint in terms of, you know, not buying an air purifier because it's not even available to you as an option. And then in terms of like exposure, you know, people are leaving the house more to go to work if they are lower income because that's the option that they have. As an anecdote, I was living in Oakland during the campfire and there was a ton of smoke coming into Oakland and it was very apparent to me, just as this anecdotal outside observer, the extent to which smoke exposure differed by the types of jobs people worked and then probably also the incomes that they have.

Mike Manville 21:48
One other potential explanation for that disparity in reactions or preparation might just be related to the finding that I think is pretty common now that, you know, lower income people just have more cognitive burden that, you know, for people who are relatively comfortable, life doesn't have too much urgency or emergency on a daily basis and then a fire comes and then you can focus all your attention on it. Whereas if you have a lot of material deprivation, you know, there's a sense of urgency and emergency that's happening almost every day and it might be a little bit harder for something like the fire to punch through that and, you know, to send you to the internet to read an air quality monitor or something like that. And I think it's just another thing that the people who aren't lower income just take for granted is the sheer number of things that each day we really don't have to think about. So when we do have to focus, it's a little bit easier.

Shane Phillips 22:39
Mm-hmm. Yeah, that makes sense. Well, as I mentioned, your study, Hannah, looks at the campfire, which started on November 8th, 2018 in Butte County, California. Tell us about that fire and some of its immediate consequences.

Hannah Hennighausen 22:54
Actually the best person to ask is my co-author, Alex James. His family is from Paradise. He grew up in Paradise. So this study was quite personal for him. So actually I just talked to him on the phone about a half hour before we started talking to get his anecdotal view of what happened. So the fire began with a sparking transmission line from PG&E and that in combination with red flag fire conditions and high winds led to this very hot, very intense, very quickly moving fire. And importantly, this fire started and was quickly moving towards Paradise and through Paradise relatively early in the morning when people were sleeping, maybe had just dropped off their kids at school, right? So lots was going on. And also cell towers were being burned. So there was poor communication. The other bit to note is that there's only two roads out of town, which means that very quickly the evacuation routes were congested as people were trying to flee the fire. What happened is that 85 people lost their lives. One anecdote is that PG&E pled guilty to involuntary manslaughter to only 84 people because one person committed suicide. So I think sort of take that as you will in terms of like what the direct health impacts are versus indirect health impacts are of a fire. But importantly, nine out of 10 homes burned in Paradise in the end, and this is a town of 30,000 people. And of course those people had to move somewhere and we ended up finding that they preferred to stay local. But really, really intense experience that we hoped as we were writing the paper wouldn't happen again, but it happened in Maui, right, and it's happening in LA now.

Shane Phillips 24:41
Yeah, the conditions you described that led to the fire and immediately followed its ignition sound very, very familiar right now. So in this study, I would say you're investigating two big picture questions. One is how did displacement affect housing prices in the areas surrounding the campfire? And the other is where did the displaced households end up? We'll start with housing prices and your research design for answering that first question. I know this may seem obvious, but just to make sure we don't gloss over it, why would we expect prices to change after this kind of disaster? And then how did you set out to estimate the campfire's effect on prices?

Hannah Hennighausen 25:22
So prices are in a very, you know, principles of microeconomics way. Prices are the result of supply and demand, right? People looking for something and people selling something or offering something up. And so if we see a reduction in supply or if we see an increase in demand, a rightward shift in demand, a leftward shift in supply, we would expect prices to increase, all right? At its sort of most fundamental level, if we have a ton of people rushing in to purchase something where previously only a few people were after it, we should expect the price to be bid up. And so that's sort of the hypothesis that we were coming from. Now economics often is operating within a cause and effect framework within its research questions. So what that means is that when we set up a research question, we need some treatment groups and then we need a control group that will account for things like seasonality and housing prices. So what we ended up doing to answer this question of what was the impact of the campfire on housing prices is we gathered data on all property sales in California, I believe from 2012 to 2019, and each property in California, based on its geographic location, was assigned to a treatment group or the control group. And those treatment groups were either being located in the burn scar or one of a few concentric doughnuts radiating out from the burn scar, basically representing different distances away from the campfire. And then the control group was properties 500 miles away from the campfire. We then, in this cause and effect framework, we compared property prices in its most simple form, compared property prices close to the fire to those far away from the fire, both before and after the campfire. And if property prices near the fire increased more significantly than those farther away, we would attribute that excess increase to the fire itself. So that demonstrates that cause and effect relationship.

Shane Phillips 27:30
And you found an almost immediate and pretty substantial effect on sale prices after the fires. And we don't have this study to confirm this yet for Los Angeles, but I think we're seeing something similar here as well. Tell us about your results, not just in the magnitude and geographic reach of these effects, but also in terms of the immediacy and the persistence of the changes.

Hannah Hennighausen 27:55
By about four weeks after the fire, home prices within 25 miles of the fire had risen by 11%. So that's very quickly and a really strong increase in the grand scheme of sort of all housing price movements. We see some evidence of increased prices within 50 or even 100 miles, but with less confidence and a lower magnitude in price increase. And then those effects, at least within 25 miles, they persisted up to 10 months after the fire. And 10 months is the kind of stopping point for this analysis. Just so our listeners have a sense for this, what was the reason that it stopped there? Was it just this analysis took place quite a while ago and that was the data available at the time? So there's two reasons. The first is that COVID happened after about, what would it be, maybe 12 or 14 months later or something. And there's just a lot of moving parts during COVID and it was hard to nail down that cause and effect relationship when COVID was causing preferences to change and incomes to change and that type of thing. And then also we really wanted to focus on the short run impacts because it really does help us isolate the very specific sort of supply shock or on the other side of the coin, demand shock because of the fire.

Shane Phillips 29:11
And I'll provide a link to this episode, but we were talking about 99% invisible just a minute ago, I think. And there's a series called Not Built for This where they talk about the campfire and Paradise specifically, and some of the details about this, about people's experiences after the fire in particular, trying to find housing. Is there anything you can share about that either at the data level or just anecdotally about the experiences of people trying to find housing in the aftermath? Because I think it's important to have a sense for what all this means, what this rise in prices and this limited supply of homes that really drove it really means for people.

Hannah Hennighausen 29:51
So anecdotally, my co-author Alex James happened to be in Paradise when the fire occurred. And the day after the fire, I think it was, he happened to be anyways wanting to look for a home to invest in, in Chico, California, which is the closest city to Paradise. And so, you know, they were checking out houses that day. This is the day after the fire, maybe two days after the fire. And at the beginning of the day, he said things were pretty slow and, you know, it was just sort of a normal house viewing process. But by the end of the day, there was like 20 people in each open house saying things like, I will pay this much above your asking price and please let me know within three hours if that would be suitable. So he really experienced sort of the on the ground fervor of looking for housing after the campfire.

Shane Phillips 30:45
Yeah. And I mean, you can understand people's desperation after that kind of event experience of, you know, there's only so many homes available at any given time. And people I'm sure had a very clear sense that they were not the only ones that were going to be looking for housing and if they didn't get something quickly at whatever price, they might not get anything at all. So that's the the short term effect on house prices. And I was curious about the the longer term effects and I've been working on a report on neighborhood characteristics of the areas that have been most affected by the L.A. fires, as well as some research on previous fires that might tell us something about our recovery locally. And that's actually how we came across your article. If all goes as planned, that report will hopefully be published by the time this episode airs. I obviously do not intend this as a criticism, but one limitation of your study, which every study has, is that you only had that data up to 10 months after the fire. And that leaves a big open question about whether these elevated prices that you observed end up persisting for long after the fire. If it's something that's just, you know, the new normal or if it's something that goes away is transitory. I don't have the skills to recreate your analysis, but I did at least want to do a simple evaluation using some more up to date data. And Zillow's home value index and observed rent index turned out to be a good resource for that. I shared the results with you just a moment ago off off microphone. But to summarize for the listeners, I basically found that rents and sale prices both sharply increased in Butte County in the year following the fire and actually in the county ordering it as well. But then they actually increased slower than the average county in California in later years. And if we look at the cumulative change in rents and prices since 2018, Butte County actually ended up in the middle of the pack roughly, if not a little lower. If we can put aside the simplicity of this analysis and accept that it's missing a bunch of important nuances, do those results sound broadly plausible? Is that something that has been seen in other disasters and the recovery longer term? What do we know or what are your intuitions about differences between short term and long term effects of these wildfires on housing markets?

Hannah Hennighausen 32:55
I think that's a great question. I agree, actually, that a limitation of our studies that we ignore long term effects.

Shane Phillips 33:01
Again, not a criticism.

Hannah Hennighausen 33:03
That's okay. It's okay if it is. Science is based on criticism.

Shane Phillips 33:07
So yeah, economists are used to that, I guess.

Hannah Hennighausen 33:10
So I certainly think it is plausible. What we see in some other literature, related but flooding focus, so different mechanics going on, is that we'll see a price change for a few years, then things go back to baseline. So we shouldn't necessarily expect for effects to persist. I will say, though, when we start looking at longer run analyses, all of a sudden we're bringing in things that aren't necessarily tied to the fire, right? So longer run changes in preferences for certain areas can change property prices. If we see a ton of building after a fire and more dense building, we might see a slowing of housing price growth. So I certainly think it's plausible that things at least sort of return to baseline because of the fire, but there's also a ton of other things that could be going on.

Shane Phillips 34:08
Yeah, yeah, certainly. I did find that only about 45% of the homes that were lost in the fire had been rebuilt by 2024, so partial recovery, but certainly not a full recovery. You have to imagine that a lot of people just had to make the difficult decision, even though they didn't really want to, to go somewhere else, another housing market. Either they couldn't afford it in the near term or there just weren't enough homes available.

Mike Manville 34:35
I mean, I think that's, you both raise important points that I think help contextualize these results. Shane, your point that not much, relatively speaking, of paradise had been rebuilt even six years after, I think maybe this is obvious, but it's good to emphasize for the audience that when we talk about prices rising sharply in the aftermath of that fire, it obviously was not prices in paradise, right?

Mike Manville 35:00
Paradise is sort of an exceptional situation compared to other urban areas in that it really is kind of remote, and so the places nearest to it were not what we would normally call near. They were probably the best substitute for someone who wanted to stay in that area, had family, had a job, et cetera, but we're not talking about something has happened in Pacific Palisades, and so I'm looking in Hollywood. Something has happened in Altadena, and so I'm looking in La Cañada Flintridge. I mean, it's a displacement of pressure to a somewhat further location, and then the other thing I think, this is a literature I'm only somewhat familiar with, but there's just a general, the agglomeration literature that just says, in many instances, we shouldn't expect even very large sort of unexpected events to knock a place off its long run trajectory. The classic example, of course, is just how quickly cities in Japan came back after the devastating bombing in World War II, and the reason for that, of course, is just that these events have huge life-changing consequences for people who may move, but that if the place was a vital sort of growing dynamic economy beforehand, it's not guaranteed, but probably it will be afterwards, and I think one thing about Paradise, and I've never been there, but everybody tells me it was absolutely beautiful and still is, but it wasn't necessarily a job center, and so in that sense, it would make sense, just on a superficial level, to say like, oh, you would see this, that area would have a big spike in prices because people were, they were looking for housing, but that spike wouldn't maintain because it's not Silicon Valley. It's not sort of a constantly pulling people in from all over the world to work and do things, and so I think that's an important thing for folks to keep in mind, which is this distinction between what it does, what these events do for the people who are there at that time, you know, which is just almost unfathomable change in their lives, and how quickly that can be blurred if you just look at a 10 or 20 year sort of set of statistics about the place.

Shane Phillips 37:05
Mm-hmm. I'm glad you brought that up because something that I recall from The Not Built for This podcast is they talk about how Paradise sort of served as a refuge from Chico in terms of affordability for people who just could not afford to live in Chico, where there was not enough housing, there's a university there, home prices were, from what I just looked up a few days ago, about 50% higher, and incomes in both areas were roughly the same at the median level, but that's probably just because there's a lot of students in Chico, and if you look at just homeowners in Chico and Paradise, the ones in Chico are also had much higher incomes, and so, this is another area where the Palisades and the Eaton Fire neighborhoods in Altadena, in both of those communities, to different extents, but in both communities, the incomes there are quite a bit above the median for the city or county in Los Angeles, and so I think it remains to be seen how that has different effects, but I think there's very little question that it will have some impact that is different from the Camp Fire. Okay, so maybe we'll come back to housing prices in some ways, but beyond estimating the effect on housing prices, you also used US Postal Service change of address data to identify where people living inside the Camp Fire's footprint moved in the months that followed. The idea here was to see if there were any trends where displaced people ended up in terms of distance from the fire, neighborhood characteristics, what have you. As you know in the article, the data is not complete, and only 35% or so of the displaced population had registered a permanent change of address by September 2019, about 10 months later, with homeowners also being disproportionately represented, but even if incomplete, I think it's a useful look at migration trends for a pretty large share of the affected households, so what stood out to you from that? So the biggest thing that stood out to me from looking at the USPS change of address data is how quote-unquote sticky people are and their lives are, so the vast, vast majority of people wanted to, at least in the short term, which is what we have the data for, stay close to where they used to live, right? People are sticky to their situations. This is likely because this is where their jobs are, the schools are, their community networks are, sort of everything that they know in life, that's where it is, and so while this stickiness is not necessarily surprising, I do think it is meaningful when we start to talk about migration as a vehicle for climate adaptation. In other words, to what extent can we expect people to move away on their own volition from places that are becoming increasingly risky, whether that's from wildfire or hurricanes? And that's not just moving away ahead of a disaster or in anticipation of a disaster, but also after a disaster, right? Whether you rebuild essentially as you were and people want to come back to that same kind of neighborhood or whether they are open to a different kind of neighborhood or living in a different place, maybe not so far away, but not the same high-risk location, there's just a lot of things to balance there.

Hannah Hennighausen 40:14
Exactly. I think there's stickiness no matter when that risk signal comes, whether that risk signal is via a government intervention that's communicating risk or the actual disaster occurring, I think that there's stickiness.

Shane Phillips 40:30
Or the insurance company saying we're not going to insure your home anymore because the risk is too high, which is, of course, another probably a topic we're going to have to actually do an episode on at some point, because it's becoming such a big deal and not just for fires.

Hannah Hennighausen 40:44
If I can talk a little bit more about that stickiness, I'd love to, because I think it's really important in terms of climate adaptation and sort of how we can think about different interventions that can be done to encourage climate adaptation if that even is a societal goal that we have. Importantly, when that risk signal isn't high enough or meaningful enough for people to alter their behavior in reaction to it, policymakers can step in with various interventions. One option, for example, within flood-prone areas is FEMA buyouts, which is when the government comes in and purchases homes in very, very flood-risky areas. Now, my understanding is that does not happen in wildfire-risky areas, at least not yet. We can also make insurance costs actuarially fair, which can be politically tenuous and has historically been, particularly in California with respect to wildfires, but also even the National Flood Insurance Program. The government can promote vegetation management around individual properties, improve building codes, that type of thing.

Shane Phillips 41:52
Yeah. I feel like that's something, if we have issues with wildfires, then Florida has issues with flooding and with hurricanes. Particularly after, I forget the name of the hurricane or the building, but the building that collapsed, I feel like there's been a push to really strengthen the building codes there. That seems like a common response. There's been a lot of news and commentary on the buildings that survived the Palisades and Eaton fires and the design features that may not be required right now in many places, but some homeowners complied with voluntarily or just did on their own and really seemed to make a difference.

Mike Manville 42:28
I'm struck by the proportions that you found of people who had not moved. From one perspective, the proportion that did move is sizable. It's not a majority, but I guess what I'm thinking of is, in other cases of a region or a city and going under a downturn, that level of migration would be more than enough, we would say, for an adjustment. If a city had a recession and 30 percent of its workers moved away, you'd probably be out of your recession. You would stabilize your unemployment and things like that. There's a famous work in economics about how most spells of unemployment are actually broken by migration. I think what you found in your remarks just a moment ago, they really highlight how difficult a problem this is because you need such a massive adjustment in migration to reduce the risk. You're not just saying, okay, well, this place doesn't offer as much economic opportunity as it once did, whether we're talking about Flint, Michigan or Cleveland or something like that. If over time 10 percent of working age people leave, you're going to equalize that out. What you're really talking about with respect to a place that's in a sort of low probability any given year, but very high cost danger is if you want to remove that risk, everybody's got to go. I'm simplifying a little bit. For your finding to say that Paradise, which was, again, a very nice place and still is, but it's just not nearly as built, but also was functioning largely as a refuge from Chico, if you don't get that much migration there after that devastation, it's hard to imagine people just saying, well, no one's going to go to Pacific Palisades. No one's going to go to Altadena. These were not refuges for anybody. They're highly coveted places. The Palisades, of course, is much more familiar to a national audience. Celebrities live there, but Altadena near downtown Los Angeles, near the Jet Propulsion Laboratory, near Caltech, people wanted to live in these places and still do. Even if everybody who had been living in the Palisades prior to our current fire said they weren't going to move back, there would be people in line to take their place. It really is just to say, well, we should retreat from these vulnerable areas. I understand the kind of abstract appeal to it, but it's just so difficult.

Shane Phillips 44:51
Just so I understand, I think Mike's understanding of the 35% of households having a reported change of address is that the other two-thirds didn't move or maybe they rebuilt or something like that. Is that correct? Or is it just for any number of reasons, the data is not there, but we can't really say whether- It's probably hard to know.

Hannah Hennighausen 45:13
Yeah, yeah. I think it's hard to know. I would lean more towards the data is just not there. With a change of address, that doesn't happen automatically. You really have to go in and change your address. It might be just that it didn't register and we don't have that data. My guess is anyone that burned down, they had to move, right? They moved somewhere. Whether we have that data or not, it's hard to say. The folks whose homes didn't burn down, they might've left as well because maybe their neighbors aren't there anymore, and the school isn't there anymore, and the grocery store isn't there anymore.

Shane Phillips 45:46
Well, I don't doubt that we can learn a lot from the campfire from November 2018. That could be applied to the LA fires in January 2025 and to other past and future fires. But that said, as we've been talking about, Paradise and Butte County are very different from the Pacific Palisades and Altadena in LA County. We should also offer a bit of caution about reading too much into one fire to predict the impacts of another. Something that came to mind for me, which you mentioned in your conclusion as well, is that the effects really depend on the density and other characteristics of the local housing market. So I already mentioned incomes and home values, but just looking at distance, the shortest distance in your analysis was 25 miles, which I think in a more kind of rural to suburban environment makes a lot of sense. And if you draw a 25 mile radius around the campfire, you're encompassing no more than a couple hundred thousand people and probably 60 to 80,000 homes or less. Draw that same radius around the Eaton or Palisades fires and you've circumscribed somewhere around 4 to 8 million people and millions of homes. It's too early to be sure, but I would guess that the effect on home prices in LA starts attenuating at much less than 25 miles, both because of housing densities in LA County being so high, relatively speaking, and because the neighborhoods destroyed by the fires here just represent a much smaller share of the region. I don't mean for that to lessen the hardships of people who lost friends or family members or whose homes were destroyed or damaged. I don't think that cheapens or invalidates their experience in any way, but it is a distinction that I expect would lead to different results if this same study was done on the fires here in LA in a few years down the road. I'm curious to hear your thoughts on that and anything else as we think about the lessons for the recovery here and for future fires elsewhere. Just, you know, what applies? What should we really be, you know, careful about over-learning maybe from the campfire that might just not work here?

Hannah Hennighausen 47:48
I agree that it's hard to predict exactly what's going to happen in LA based on what we learned from the campfire, only because these are two vastly different environments and there's a lot of moving parts going. You know, those moving parts, as you say, include, for example, the density of homes around the fire, but also the number of homes that were destroyed, differing preferences, you know, comparing the people that used to live in paradise versus the people that live in LA, preferences surrounding commute times, schools, community networks, monetary resources available, insurance payouts, vacancy rates, there's a number of things. We could disentangle some of those. So, for example, all else equal, the more homes that are destroyed, the larger the price impact. Just, you know, we've got more people looking for a home, so we'd expect to see a relatively larger increase in price. I do have here that I believe that LA saw or has seen approximately 10,000 homes destroyed in the most recent fire, and the campfire destroyed nearly 14,000 homes.

Shane Phillips 48:50
I think the latest estimates I've seen, which are from January 23rd, and we're recording on the 28th, so these may be a little bit out of date, but it's probably got most of it at this point, Cal Fire estimates that the Palisades Fire burned more than 6,600 structures and the Eden Fire burned over 9,400, but that is not all housing. I think even cars count as structures for their assessments, if I'm not mistaken.

Mike Manville 49:16
But certainly, to Hannah's point, the absolute number in paradise is proportionately such a larger share of that housing market.

Shane Phillips 49:24
Yeah. I mean, even the absolute number, we're talking 16,000 total that we've counted so far in LA to 18,000 in Eden, and yes, definitely a much smaller share of the housing market here.

Hannah Hennighausen 49:36
Right. I think share of the housing market is the key point, right, that incorporates in that supply side of the market, aka that housing stock part of the market. And like you said, you know, if we see we have more housing, more density, the market is better able to absorb those evacuees into it without increasing prices too much. And then, of course, the vacancy rate is really important. And my understanding is LA has one of the lowest vacancy rates in the country, which would further push up prices.

Shane Phillips 50:04
Yeah, it's kind of on the opposite side of, yes, we have a large housing stock, but we also have a low vacancy rate, and those don't entirely balance out, but they're pushing in different directions.

Hannah Hennighausen 50:12
Some other things that would differ between the two areas, like I said before, is just like preferences around like how long you're willing to commute. And that would show up then sort of in how far away we expect to see property price impacts. And then also, of course, monetary resources, all else equal, if you have more money or maybe a larger insurance payout or whatever it may be, we would see a relatively larger increase in prices.

Shane Phillips 50:37
Yeah, that's somewhere where it's very easy to imagine, you know, whereas someone in Paradise or, you know, certainly there are lower income people maybe who, you know, are retired and just happened to buy a house a long time ago in Altadena, or even the Palisades, who I just don't want to paint with too broad a brush here and just say they're all wealthy, even though the median household is quite wealthy in both neighborhoods. But you can just imagine that someone in Paradise is in a position where, you know, they want to stay, but they just don't have the resources to afford housing elsewhere, especially after these price increases that occur. And the typical person in the Palisades and to a lesser extent in Altadena is definitely able to find something not too far away that they can afford, even with elevated prices.

Hannah Hennighausen 51:24
One thing I wanted to add is I did do a quick analysis on an increase in rents or whether there's been any rental price changes. Now, I'll preface this with this is crowdsourced data that I saw referenced in a tweet by somebody called the Mexican rug dealer. There we are. Exactly. So I think there's about 1400 observations of people self reporting data that they found on Zillow in terms of rental price increases. So major caveats in terms of the quality of the data.

Shane Phillips 51:58
I will say there is a there's been news on this and we'll link to at least one article in the show notes of this is sort of Yeah, a crowdsourced effort to not just identify rent increases, but there are anti gouging laws where you are not allowed legally to, you know, if you had a home listed for $3,000 a month to increase it to 4500 or something, because of this fire, you're actually legally prohibited from doing that. And most circumstances tend to be limited to about a 10% increase in the listing. And so there's a lot of people just on their own time identifying these violations of that law. And we will link to that. But please continue.

Hannah Hennighausen 52:35
No, thank you. That's a great, great explanation. All I did was download the data and just calculated the average and the median price increase was based on this data. You know, obviously, we don't have a control group here. But the median price increase was about 25%.

Shane Phillips 52:50
Exactly. Yeah. So the you know, the control group, you know, the upper bound is 25%.

Hannah Hennighausen 52:57
Exactly. Yeah. So the, you know, the control group, I you know, the upper bound is 25% but yeah, I'm sure it's, yeah

Mike Manville 53:03
Yeah. And that's, you know, that people are only turning in instances where there was a rent increase. Right. So there's no zeros at all in the data set. I mean, again, these are done because people think that someone is violating the state rent gouging law. It's not necessarily a way to track total rent increases that are occurring. But yeah, I mean, you know, this aligns perfectly with Hannah's research findings, which is that there's going to be a short term shock. And those rent increases could be driven by landlords being opportunistic. They could be driven by prices being bid up by someone who has been displaced, having the monetary resources to kind of set the price and showing up and saying like, yeah, man, I'll pay 20% more just like, you know, your co-author found with the housing price.

Shane Phillips 53:48
I think you can easily imagine that the effect on rents, at least in the very near term, might actually be larger. Because, hey, if I've got to pay a 30% premium for six months or a year, that sucks. But like, I can maybe do that. But if I got to pay a 30% premium on a whole house, that is already probably over a million dollars, then that's that's a much bigger ask. And you're going to pay the price for that down the road.

Hannah Hennighausen 54:13
I think that's right, and it's a good opportunity to for me to say how important public access data is. We don't have great rental data in the US that's administrative and uniform. There's decent property transaction data, but a lot of it costs quite a bit of money to access, particularly if we want to do regional or national studies. And so yeah, public data access is really important to start to understand these things.

Shane Phillips 54:37
I think that's right. And it's a good opportunity for me to say how important public access data is. We don't have great rental data in the US that's administrative and uniform. There's decent property transaction data. But a lot of it costs quite a bit of money to access, particularly if we want to do regional or national studies. And so yeah, public data access is really important to start to understand these things. We have decent, decent data on property sales and land uses and so forth in places like Los Angeles County where it's 10 million people and the assessor therefore has a lot of resources. But you know, it's especially challenging, I'm sure in places like Butte County, where there's just not a lot of administration to manage those kinds of things. Well, I want to close here with a more open ended question than we usually do. But I just I almost don't know what to ask. So I'm just gonna ask more generally, do you know of any other research on how, you know, best practices for responding to tragedies like the Camp Fire and like the Palisades and the Eaton fires? And are there any other lessons or takeaways from your research or others that you want to share with our listeners? Yeah, so my biggest takeaway here is that preparation is key. And then also thinking, again, coming back to that risk equation of exposure, vulnerability and hazard, and how we can prepare and reduce all three of those if possible. Right. So, you know, in terms of immediate threats to your life from a fire, having an evacuation bag prepared, knowing your best evacuation route is important. So is government investment in like comprehensive and timely communication networks to make sure that folks get out of the way in time. In terms of threats from wildfire smoke, which applies then to people living right around the fire, but also those a little bit farther away, having a mask handy, air purifiers, and then ideally, although I know this isn't fully controllable, having the flexibility to not be outside when it's hazardous is key to reducing your health risks. And then importantly, if we think sort of on a broader scale, communities and governments can take some bigger, more structural steps to reduce future harm. So they can improve their force management by thinning and prescribed burns. They can promote fire resistant building practices, either with a carrot or a stick. So for example, a metal roof is less likely to burn than a wood shingle roof. You know, I'm going to go a little bit in the extreme here and say that they can go as far as banning development and fire risky areas, right? So you can do things with zoning. And that's what's done a lot in other countries. They can promote actually fair insurance policy prices so that people actually get that correct price signal that accurately reflects the risk that they face. They can engage in other risk communication practices, including, for example, property disclosure laws. They can invest in risk maps. They can invest in compliance. And then, of course, on the biggest scale possible, we can invest in climate change mitigation to reduce future hazard, to reduce the number and intensity of those fires that occur. So there's a lot of tools available to policymakers to reduce future harms. The extent to which they are politically feasible, both on a local and a national and an international scale is questionable. Yeah, I do appreciate a comprehensive list. And we are fans of building housing on this podcast. But I think as long as you're making it easy to build housing in the safe places, yeah, like not such a problem to ban housing in the unsafe places. It's just, you know, ideally we can do both.

Hannah Hennighausen 57:57
Exactly. I mean, as a bit of a self-proclained urbanist, I love dense housing in safe areas. And then we can keep the wildfire risky areas and the more flood prone areas. We can turn those into parks and we can recreate in those areas and have a great time.

Shane Phillips 58:14
That sounds like an excellent plan. All right, Hannah Hennighausen, thank you for joining us on the Housing Voice podcast. We really appreciate it. Thanks so much for having me. I loved being on here and it's not so often that researchers get to share their research in this way. So thank you so much for having me.

You can read more about Hannah's work on our website, lewis.ucla.edu. Show notes and a transcript of the interview are there too. The UCLA Lewis Center is on the socials. I'm on Blue Sky @ShaneDPhillips and Mike is on Twitter @MichaelManvill6. Thanks for listening. We'll see you next time.