California governor bans 'predatory' land offers following Los Angeles wildfires

PACIFIC PALISADES - Beleaguered residents who lost their homes in the Los Angeles-area wildfires a week ago are already being offered buyouts for their prime real estate - and now Gov. Gavin Newsom is stepping in to block land speculators.

In an executive order issued Tuesday, Newsom temporarily banned "unsolicited undervalued offers" to buy properties in 15 specific fire-damaged ZIP codes, including Altadena and Pacific Palisades, which were burned by the Eaton and Palisades fires respectively.

In his order, Newsom said he worried that "predatory" developers would try to buy land from traumatized residents facing the loss of everything they own. Buyers in post-disaster areas have historically argued they provide much-needed cash infusions to people who've lost everything and face years of fighting with their insurance, if they had it at all.

"As families mourn, the last thing they need is greedy speculators taking advantage of their pain," Newsom said in a statement. "I have heard first-hand from community members and victims who have received unsolicited and predatory offers from speculators offering cash far below market value — some while their homes were burning. We will not allow greedy developers to rip off these working-class communities at a time when they need more support than ever before."

Pacific Palisades resident Beverley Auerbach said someone has already tried to buy the land - sight unseen - where her house once sat, telling her to name the price. She declined, telling the prospective buyer that she and her husband were well insured and plan to rebuild.

Auerbach and her husband bought their house in 1980, periodically renovating and upgrading.

Before the fire, real estate company Zillow estimated that Auerbach's three-bedroom, 1,676 square foot home was worth around $3.1 million. An empty and slightly smaller lot up for sale before the fire was listed at $3.2 million.

"Here, what's really valuable is the land," said Auerbach of her neighborhood overlooking Santa Monica Bay. At least 30 of her neighbors also lost their homes in the Alphabets neighborhood when the Palisades Fire stormed through.

Auerbach said she expects an "extended" bout of litigation before anyone rebuilds. But she's looking forward to living around her neighbors again.

"We are going to rebuild. And almost everybody else is saying that," she said. "It's going to be a long row to hoe to get back. But we'll do it."

The core of Pacific Palisades was originally developed by the Methodist Church as an affordable retirement area for church employees that was close to but cheaper than Los Angeles, Malibu or Santa Monica. Once home to carpenters, electricians and mail carriers, property values have skyrocketed over the intervening decades, especially as owners have renovated the once-small houses to add more bedrooms and bathrooms.

In Altadena, longtime residents also worry that the historically minority community will be priced out as during the recovery and rebuilding process.

Fears of speculators and developers swooping on the tails of a disaster are a longstanding concern, although there's mixed evidence about whether it reflects reality.

An August 2024 review by the Texas Real Estate Research Center at Texas A&M found “no systematic increase of investor purchases” following recent floods there.

But a 2023 analysis of hurricane-hit areas in Florida from 2000-2016 found that neighborhoods damaged by hurricanes saw richer people moving back in as damage was restored.

“Using mortgage application data, we find that incoming homeowners in this period have higher incomes, leading to an overall shift toward wealthier groups,” concluded the study in the Journal of Environmental Economics and Management. "Our findings suggest that market responses to natural disasters can lead to uneven and lasting demographic changes in affected communities, even with a full recovery in physical capital."

Contributing: Dinah Voyles Pulver, USA TODAY

This article originally appeared on USA TODAY: Newsom bans 'predatory' land buying in wildfire-scorched neighborhoods