With estimates of the economic damage running as high as $275 billion, the Los Angeles fires are "shaping up to be one of the most expensive calamities on American soil", said Parintha R. Sastry and Ishita Sen in The New York Times. And it's not all down to bad luck. This is a notoriously fire-prone area, and climate change is exacerbating the problem. Why, then, have people continued setting up home there?
One big reason is that they've been shielded from the true financial costs of doing so. For decades, California has imposed price controls to keep home insurance premiums artificially low. These prevented companies from, among other things, using catastrophe modelling to predict future risk; they could only assess premiums based on historical data. In response to ever more insurers fleeing the state, Californian lawmakers recently relaxed some of these controls, but insurance prices still don't truly reflect the level of risk.
California's insurance regime is a mess, said The Wall Street Journal. Unable to raise premiums to a fair level, many companies have instead capped maximum payouts, leaving some homeowners liable for hefty rebuilding costs. Luckily for them, the Federal Emergency Management Agency covers losses if homeowners are "under-insured". The result? Taxpayers in Texas and Arkansas are subsidising the rebuilding of multimillion-dollar homes in California. The latest fires should prompt a whole new approach to housing in the state, said Rachel Cohen on Vox. Insurance rules must evolve, but there must also be a shift "away from fire-prone suburban sprawl and toward denser urban neighbourhoods that are naturally more fire-resistant".
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It does seem crazy that planners ever allowed development in the foothills and canyons outside LA, said Robin Abcarian in the Los Angeles Times. With the wet winters to grow vegetation, the hot summers to dry it, and the "devilish winds" to stoke flames, the area is "a veritable gift to the fire gods". Arguments about whether to rebuild after fires, and about who should pay for it, have been going on in the state for decades. Mike Davis's 1995 polemic, "The Case for Letting Malibu Burn", is as relevant as ever. Yet nothing really changes. "Within five years, I predict, most of the Palisades, Malibu and Altadena will be rebuilt. Memories will fade, insurance rates will rise, life will go on – until the next fire."
