The wildfire season in the U.S. West seems to be causing more damage with each passing year. This past year, the town of Paradise, California, was largely destroyed; the public utility PG&E filed for bankruptcy protection due to potential liability costs associated with recent wildfires; and multimillion-dollar homes were destroyed in Malibu, California. With so much destruction, what can be done to produce more positive outcomes? The real estate industry is learning to adapt and rebuild in a way that minimizes future risk.
An emerging field of study called “post-traumatic growth” focuses on why some people end up better off after a traumatic event than they once were. After a traumatic event, people either dive, survive, or thrive, with “diving” meaning that one is worse off than prior to the event, “surviving” meaning that one returns to his or her baseline, and “thriving” indicating that one exhibits post-traumatic growth. The term resilience is often used to depict a return to baseline, but how do you create a marketplace with a higher rate of rebuilding after a wildfire?
In 2018, the California Fire Science Consortium estimated that the rate of rebuilding within fire zones five years after a wildfire is only about 25 percent. Yet studies indicate that other natural-disaster events have much higher rates of rebuilding. Why is the rate so low and what can be done to encourage rebuilding? One answer is that there is a lack of capacity to take on a massive surge in rebuilding. There also are socioeconomic factors. When economic incentive outweighs risk, a homeowner should be willing to rebuild. Numerous academic articles study whether homeowners are willing to rebuild after a natural disaster and, if so, what influences them to do so. Findings indicate a few common themes: attachment to place and a strong sense of community.
Attachment to place and a sense of community are interrelated; they tend to coexist. In my career, I have seen examples of homeowners who lost everything, and they are determined to rebuild what they once had. Contrary to those homeowners determined to rebuild, I have also seen homeowners without significant loses, yet they want nothing more than to move away to start a fresh life elsewhere. Natural disasters interrupt the comforts of homeowners, forcing them to consider what their home means to them. In some cases, homeowners find natural disasters to be a blessing—an opportunity to start fresh by moving away or an opportunity to rebuild stronger and better than before.
The impact of wildfires on a real estate marketplace is typically community-wide, not just on an individual asset basis. Numerous articles discussing the impact of wildfire on property values indicate that wildfires can negatively influence the value of properties that were never burned but are within a general vicinity of burn sites. It is important to note that while the literature indicates this trend, every disaster should be analyzed on its own basis, given appropriate data are available. The literature is a telling tale as to the power of nature and its ability to influence the perception of a marketplace. As such, nature is a proven force not to be reckoned with. Nonetheless, measures to deter potential destruction can still be taken.
Wildfire mitigation measures provide homeowners with the ability to protect their investment. While studying the California wildfires, I came across two neighboring homes. One home lost everything; the structure was uninhabitable. Their neighbors’ structure, however, was still standing.
It seemed remarkable that the fire did not burn right through both houses, but there were some key differences between the two homes, and they had to do with the surrounding space. There are two factors that have emerged as wildfire deterrents: a home’s defensible space and a structure’s ignitability. Together they make up what is known as the home ignition zone (HIZ), depicted in the following exhibit. It is noted that the zone special characteristics are referenced from the Colorado State Forest Service and may or may not be applicable to every property.
Defensible space refers to the area around a home or structure. It is broken down into three zones. Zone 1 is nearest structures; ideally, flammable vegetation is removed from this zone. Zone 2 is designed to diminish the intensity of a fire. Thinning and pruning of trees and shrubs are encouraged in this space. Additional measures include stacking wood uphill and away from structures, as well as propane tanks and gas meters. Since this zone might extend across property lines, working with neighbors in the mitigation process is encouraged. Zone 3 does not have a specified width; rather, it generally refers to space surrounding general property lines. Mitigating zone 3 may involve developing community-based plans, such as debris cleanups and maintaining vegetation quality.
Structural ignitability addresses structural ignition risk. The most common areas of concern include roofs, decks, exterior walls, and windows. The ideal time to address structural mitigation is during the design phase of a home. This is not always possible, however, since homes are often purchased used. In that case, roofs and windows can always be replaced and cleaned, as can decks and exterior walls.
Sometimes, the best defense is preparation. Community-based mitigation plans can better protect from disaster. Wildfire + unprepared = disaster versus management + community engagement = protection. Although nature has the ability to influence a marketplace, so does human action. When human action lacks, disaster risk increases. Indeed, while disaster preparedness might help reduce wildfire risk for homeowners, it is not a perfect solution. When wildfires take a turn for the worse, however, market opportunity also arises. What does this mean for a homeowner or developer? Once again, it comes back to the importance of community, getting involved, communicating, and being proactive.
The 2012 Waldo Canyon Fire in Colorado Springs, Colorado, provides a case study of a community that saw a 75 percent rate of rebuilding two years after the fire. In this case, the local government implemented design code improvements immediately after the fire and coordinated a study to assess wildfire damages. The studies were performed in connection with building community and residents to ease concerns about costs and the difficulties of rebuilding with fire-resistant materials. In addition, an expansion of home defensible space was implemented. In this case, community-based efforts resulted in a rapid rate of rebuilding.
In the case study of the Fourmile Fire, the local building department offered homeowners an incentive to rebuild. Homeowners who lost their homes were granted expedited permitting in order to encourage a rebuilding process. In addition, local community groups set up donation centers, such as the Boulder Community Chipping Reimbursement program, designed to provide financial assistance to mountain communities through community-based chipping projects. Projects such as these not only encourage homeowners to rebuild, but also promote a sense of community. A sense of community spreads beyond those who lost their homes and to those who might want to relocate, even though their home never burned.
Another, alternate opportunity arises after wildfires that have caused significant structural damage. In these cases, thousands of homeowners can be displaced, creating an immediate need for somewhere to live. A surge in rental properties, both multifamily and single-family residential, may be seen. When opportunities such as these arise, opportunity seekers generally come knocking. It is not an easy job, since it can come with community criticism. Although, if handled with care, efforts can be mutually beneficial for the seeker and the community.
When it comes to identifying housing needs, there are many ways to discern what and where by consulting data sources. One way to predict housing needs is by analyzing employment trends within the burn zones. These data can be analyzed many ways, including from public sources such as the Bureau of Labor Statistics or a multitude of private sources. One key statistic includes the major employers and whether or not the employers require on-site work or remote work. This can be used to indicate whether a displaced homeowner will likely want to stay within the area. Another key statistic includes median household income and home values. These statistics can be used to predict likely housing reimbursements from insurers. With this information, GIS mapping systems can be used to depict similar nonburn areas and predict potential migration patterns. The idea is that homeowners may seek temporary housing in an area that reflects similarities to location of their prior home. These are just a couple of examples where data can be used to analyze the aftereffects of a wildfire; there are many more.
Indeed, not every community returns to the way things once were after a wildfire. Communities can shift direction through changes in land use. For example, what was once agricultural farming may become residential development. Land use changes generally occur by market forces interacting with local, state, and federal land use regulations. As discussed, nature is a powerful market force. Wildfires present opportunities for changes in land use. Interaction within the community is the other side of the equation that is necessary to push land use changes.
Wildfires are largely unpredictable, presenting a real threat to wildfire-prone areas. Community efforts provide an opportunity to combat disaster before it strikes and incorporate resilience after it strikes. Viable mitigation plans can reduce risk, and community-based disaster relief can increase rebuilding rates. Opportunities do arise after disasters, and those who seek opportunity tend to come under scrutiny. While opportunity seekers may be scrutinized, they can provide the extra bit of resilience needed to move forward. At the same time, opportunity seekers should pay close attention to voices within the community, since working with a community can lead to a strengthened marketplace.