Demand Surge and the California Wildfires of 2018 and 2019: Lessons for the Future
The California wildfires of 2018 and 2019 devastated communities, destroyed thousands of homes, and caused billions of dollars in damage. The 2018 Camp Fire alone, which razed the town of Paradise, was the deadliest and most destructive wildfire in California history, causing an estimated $16.5 billion in damages. In 2019, fires like the Kincade Fire continued to wreak havoc across the state.
One of the most significant challenges during these years was demand surge—a sharp increase in the cost of labor, materials, and services due to heightened demand. While demand surge is a common challenge in disaster recovery, the scale and unique circumstances of these fires highlighted new issues and opportunities for improvement. This article examines how demand surge unfolded during the 2018 and 2019 wildfires, how it differed from previous disasters, and what lessons California can learn to prepare for future fires.
Quick Reminder
Demand surge refers to the economic ripple effect after a disaster, where widespread damage causes a surge in demand for construction materials, skilled labor, and services. This imbalance between supply and demand drives up prices, prolongs recovery timelines, and creates significant financial strain for homeowners, businesses, and insurers.
The Scale of the California Wildfires (2018-2019)
2018 Wildfires
Camp Fire: Destroyed more than 18,800 structures, including most of Paradise, and caused 85 deaths.
Woolsey Fire: Burned nearly 97,000 acres and destroyed over 1,600 structures in Southern California.
Total Damage: The 2018 wildfires caused an estimated $25 billion in damages, with much of the cost borne by homeowners and insurers.
2019 Wildfires
Kincade Fire: Burned nearly 78,000 acres in Sonoma County and destroyed 374 structures.
Saddleridge Fire: Threatened urban areas in Los Angeles, emphasizing the growing risk of wildfires encroaching on densely populated regions.
Total Impact: While less destructive overall than 2018, the 2019 wildfires caused significant disruptions, particularly in areas already struggling to recover from previous disasters.
Demand Surge During the 2018-2019 Wildfires
1. Extreme Labor Shortages
The destruction in Paradise and surrounding areas created an overwhelming demand for contractors, roofers, electricians, and other skilled laborers. The local workforce was insufficient to meet the demand, and out-of-area workers were brought in, further increasing costs:
Labor Costs: Contractors reported labor costs increasing by as much as 30-40% compared to pre-fire levels.
Delayed Repairs: Many homeowners faced long waits for skilled labor, with some waiting years for rebuilding to begin.
2. Material Shortages and Rising Prices
The widespread damage caused by the fires strained supply chains:
Lumber and Roofing Materials: Prices for lumber, shingles, and other essential building materials surged due to heightened demand across multiple wildfire-affected areas.
Transportation Challenges: Damaged infrastructure and high demand for freight services delayed deliveries to remote locations like Paradise.
Global Market Pressures: Trade disputes and tariffs in 2018 also contributed to rising costs for materials like steel and aluminum.
3. Insurance Payout Delays
While insurance companies paid out billions in claims, processing delays left many homeowners without the funds needed to begin repairs:
Underinsured Homes: Many homeowners discovered that their policies were insufficient to cover rebuilding costs, particularly given the inflated prices caused by demand surge.
Increased Premiums: Insurers raised premiums in high-risk areas or stopped offering coverage altogether, leaving homeowners to rely on the California FAIR Plan for basic protection.
4. Impact on Underserved Communities
Lower-income and rural communities, such as Paradise, were disproportionately affected:
Out-of-Pocket Costs: Residents without adequate savings or insurance struggled to cover rising rebuilding costs.
Delayed Recovery: Wealthier areas, such as Malibu (affected by the Woolsey Fire), often recovered faster due to greater financial resources and access to contractors.
How Demand Surge Differed from Past Disasters
1. Repeated Disasters
Unlike Hurricane Katrina or Harvey, which were singular catastrophic events, California experienced back-to-back wildfire seasons. This compounded demand surge, as recovery from 2017 wildfires (e.g., the Tubbs Fire) was still underway when the 2018 and 2019 fires struck.
2. Urban Interface Fires
The 2019 fires underscored the growing threat of urban interface fires, where wildfires encroach on densely populated areas. This created demand not only for residential rebuilding but also for infrastructure repairs in urban settings, further straining resources.
3. Rising Wildfire Risk
The frequency and intensity of wildfires in California have increased due to climate change, leading to a continuous cycle of demand surge. Unlike past disasters, where recovery efforts eventually stabilized, California faces a sustained high demand for rebuilding resources.
Lessons Learned from the 2018-2019 Wildfires
1. Prioritize Resilient Rebuilding
To mitigate future costs and reduce the risk of repeated destruction, rebuilding efforts should focus on resilience:
Fire-Resistant Materials: Incentivize the use of non-combustible roofing, Siding, and windows.
Defensible Space: Enforce strict vegetation management and defensible space requirements.
Upgraded Building Codes: Require structures in high-risk areas to meet wildfire-resistant standards.
2. Strengthen Local Workforce Development
Labor shortages were a significant driver of demand surge. California should:
Invest in Training Programs: Establish programs to train local workers in construction, electrical work, and other trades.
Expand Apprenticeships: Partner with unions and trade schools to increase the supply of skilled labor in wildfire-prone areas.
3. Improve Insurance Awareness and Coverage
The fires revealed significant gaps in insurance coverage:
Extended Replacement Cost Coverage: Educate homeowners on the importance of policies that account for demand surge.
Government Support: Expand programs like the California FAIR Plan to provide more comprehensive options for homeowners in high-risk areas.
4. Develop Material Stockpiles
Establishing regional stockpiles of essential building materials could reduce shortages and stabilize prices during recovery.
5. Streamline Recovery Funding
Insurance companies and government agencies must work to accelerate payouts and aid distribution:
Faster Claims Processing: Implement technology and streamlined processes to reduce delays.
Disaster Recovery Loans: Provide low-interest loans to cover the gap between insurance payouts and rebuilding costs.
How Homeowners Can Prepare
1. Secure Adequate Insurance
Ensure your policy includes extended replacement cost and additional living expenses coverage.
Consider supplemental wildfire insurance for high-risk areas.
2. Advocate for Community Preparedness
Support local fire mitigation efforts, such as vegetation management programs.
Participate in community rebuilding initiatives to pool resources and reduce costs.
3. Build an Emergency Fund
Set aside funds to cover out-of-pocket expenses, especially in areas prone to demand surge.
Additional Resources
California FAIR Plan: Basic Property Insurance for high-risk areas. Visit cfpnet.com.
FEMA: Disaster recovery assistance and mitigation grants. Visit FEMA.gov.
Insurance Information Institute (III): Guidance on wildfire insurance and recovery. Visit III.org.
Wrap-Up
The 2018 and 2019 California wildfires exposed the long-term challenges of demand surge in a state increasingly prone to wildfires. While lessons from previous disasters helped improve some aspects of recovery, the scale and frequency of recent fires highlight the need for greater resilience, workforce development, and insurance reform. By preparing now, homeowners and policymakers can mitigate the financial and logistical impacts of future disasters and help communities recover more effectively.