Predicted Demand Surge: The Impacts of the Major Wildfires in Los Angeles
In January of 2024, a number of wildfires engulfed parts of Los Angeles, destroying 12,000 structures and causing an estimated $150 billion in economic damages. The ripple effects will include demand surge—a sharp increase in the cost of materials, labor, and services as homeowners, businesses, and municipalities compete for resources to rebuild. Such an event will strain recovery efforts and test the resilience of one of the largest urban centers in the U.S.
This article examines the potential impacts of demand surge over the next few years, the challenges it will create, and strategies for mitigating its effects.
Quick Review of Demand Surge
Demand surge refers to the economic phenomenon that occurs when a disaster causes widespread destruction, resulting in a sudden and overwhelming demand for construction materials, skilled labor, and essential services. The imbalance between supply and demand leads to:
Price Inflation: Costs for materials like lumber, Drywall, and roofing skyrocket.
Labor Shortages: Skilled workers, including contractors, electricians, and plumbers, become scarce and command higher wages.
Professional Shortages: In addition to construction resources, the surrounding support network of professionals including architects, adjusters, engineers and more will also become overwhelmed.
Delays: Extended timelines for rebuilding as resources become harder to procure.
The Potential Scale of Demand Surge in Los Angeles
A wildfire destroying 12,000 structures in Los Angeles is unprecedented in scale. With a population of nearly 4 million and dense housing and commercial developments, the competition for rebuilding resources will far exceed what California has experienced in previous wildfires.
Factors Contributing to Demand Surge
Urban Density
Los Angeles is one of the most densely populated cities in the U.S., meaning that damage to residential, commercial, and public infrastructure will create demand across multiple sectors simultaneously.
The sheer number of people displaced by such a fire is already exacerbating competition for temporary housing, repairs, and essential services.
High Economic Stakes
With damages estimated at $150 billion, the economic ripple effects will extend beyond construction and labor to include losses in tourism, business closures, and disrupted supply chains.
Rebuilding critical infrastructure—like transportation systems, utilities, and public facilities—will further increase competition for resources.
Supply Chain Constraints
The demand for materials like fire-resistant Siding, roofing, and windows will surge across California and beyond, straining already fragile supply chains.
Transportation bottlenecks in and around Los Angeles, worsened by damaged roads or infrastructure, will delay material deliveries.
Labor Market Strain
Contractors and laborers would be in short supply, especially since California already faces a labor shortage in the construction sector.
Professional services such as architects, engineers, adjusters, inspectors and similar support industries will equally be overwhelmed and in many cases will be the gating factors to rebuilding in a timely manner.
Out-of-state workers will need to be brought in, increasing costs due to travel and lodging expenses.
Predicted Impacts of Demand Surge
1. Skyrocketing Costs
Material Costs: Prices for construction materials like lumber, Concrete, and Steel could increase by 20-50% or more.
Labor Costs: Contractor fees could rise significantly as the demand for skilled labor exceeds supply.
Housing Costs: Rent and temporary housing costs will surge as displaced residents compete for limited accommodations.
2. Delayed Recovery
Homeowners and businesses could face delays of months or even years to begin repairs or rebuilding.
Critical infrastructure projects, such as road repairs or utility restoration, could be deprioritized due to competition for resources.
3. Insurance Challenges
Insurers will face unprecedented claims, potentially leading to delayed payouts and strained reserves.
Many homeowners will discover they are underinsured or lack coverage for wildfire-specific damages.
Adjusters will be needed by thousands of homeowners to help navigate the insurance process for both total and partial loss situations.
4. Economic Disruption
Displaced residents and closed businesses could lead to long-term economic challenges, including job losses and reduced tax revenues for the city.
Tourism, a key driver of Los Angeles’ economy, will likely take a significant hit.
Lessons from Previous Wildfires
Camp Fire (2018)
The destruction of Paradise, California, highlighted the challenges of demand surge in rural areas, where limited local labor and supply chains delayed recovery for years.
Insufficient insurance coverage left many residents unable to rebuild.
2018-2019 Los Angeles Fires
Urban-interface fires like the Woolsey Fire demonstrated how wildfires can strain resources in densely populated areas.
Wealthier neighborhoods recovered more quickly due to better access to resources, highlighting the need for equitable recovery strategies.
Practical Strategies for Homeowners to Mitigate Demand Surge in Los Angeles
1. Stay Ahead
Be proactive in recovery related activities before services such as Debris Removal, surveying, permitting, adjusting and construction are backed up.
Understand the overall process and work in parallel so you can plan the next steps while implementing the current ones.
2. Work Together and Strengthen Community Collaboration
Neighborhoods can pool resources to negotiate group rates for contractors, adjusters and bulk material purchases. This helps keep costs down for homeowners and ensures steady business with lower marketing and sales costs for the the construction teams.
Consider onsite work trailers so contractors can manage multiple projects simultaneously in one neighborhood.
Explore out of town warehouses to store materials such as lumber, roofing, tile and fixtures in advance of onsite needs.
Share schedules and timelines to optimize labor pool management on a weekly or even daily basis.
3. Advocate for State and Federal Support
Secure state and federal funding for disaster recovery programs, including grants and low-interest loans for rebuilding.
Lobby for investments in wildfire prevention infrastructure, such as firebreaks and defensible space programs.
Look for local, state and federal tax breaks to help mitigate recovery costs.
Wrap-Up
A wildfire destroying 12,000 structures in Los Angeles will unleash unprecedented demand surge, driving up costs and delaying recovery for years. By learning from past disasters in the previous articles and implementing practical solutions such as working together as a community, homeowners can rebuild faster. Collaboration and resource planning will be key to navigating the challenges of these horrible events.
Additional Resources
Ready for Wildfire: Wildfire preparedness resources for homeowners. Visit ReadyForWildfire.org.
California Department of Insurance: Guidance on wildfire insurance coverage. Visit Insurance.CA.gov.
FEMA: Disaster recovery programs and mitigation grants. Visit FEMA.gov.