Rebuilding after the fires will take years. But insurance for temporary housing will run out first

Homeowners who lost everything in the January wildfires are still on the hook for their mortgage payments. And in the coming months, some of them could end up paying rent for their temporary housing too.

It could take years for displaced homeowners to rebuild and move back into their neighborhoods. But some fire survivors will run out of insurance money to pay for temporary housing before they can return home, according to a new survey of nearly 2,000 survivors compiled by the organization Department of Angels.

Some people have already run out. Others didn't have coverage for costs like temporary housing — typically known as "loss of use" or "additional living expenses" coverage.

In all, the report found that 6 in 10 of people displaced by the Eaton and Palisades fires won't have coverage left for temporary housing within the year.

The same report found that 77% of survivors who are displaced estimated rebuilding would take two years or more. This could stick displaced families with yet another challenge to returning to their neighborhoods: paying rent and a mortgage at the same time.

Andrew King, who has been helping neighbors navigate fire recovery since their block went up in flames, said he sees a crisis brewing that could upend plans to rebuild.

" If they run out of the temporary housing coverage, then they're gonna be forced to make a really difficult decision about whether or not they have to sell their home or figure out a way to keep paying their rent and their mortgage," he said. " I started kind of imagining this as a ticking time bomb."

How did we get here? 

Home insurance typically includes coverage for “loss of use” or “additional living expenses” that come from not being able to use a home after a loss. This bucket of coverage pays for things like rent for a temporary home. Under the California FAIR Plan, the insurance pot used for these costs is “fair rental value," which is coverage based on the rental value of the home before the loss.

The problem is that money for displacement costs has a limit that often doesn't cover all of survivors' needs, according to Amy Bach with the advocacy organization United Policyholders. She helps disaster survivors navigate their insurance policies and said it's a problem she's seen after other fires.

" People running out — it's been such a big problem," she said.

Rents skyrocketed in the weeks after the January fires, as displaced families entered an already tight housing market. Angela Giacchetti, who works for the Department of Angels, said this means that many families are paying rent far higher than their mortgage.

"People are kind of burning through that money very quickly," Giacchetti said. "And so what we're looking at essentially is a cliff of displacement on top of displacement."

It's a problem Nicole Wirth saw coming when she and her husband lost their Altadena home in the Eaton Fire. Her insurance offers a maximum of $95,000 for "loss of use" of their house, and she worried that wouldn't last them until their rebuild was over.

After looking at the high price of rentals, including a back house across the street from the rubble of their home going for $4,250 a month, they decided not to move into a short-term or year-long rental right away. Instead they moved around, living with family, in hotels, in back houses, and even in their camper van for periods.

Over five months, Wirth estimated that she moved 26 times, including extended stays at campsites, before landing at a place in May that is affordable enough to last until their rebuild is complete.

" This whole loss-of-use situation was probably the most traumatic part of all of it," she said, speaking about life since January. "Just because of trying to find a place within the budget that we were given by our insurance."

Options once you run out

Disaster experts told LAist that one option for people facing an insurance cliff is appealing a claim with the Federal Emergency Management Agency, which can cover up to 18 months of rental assistance.

FEMA has faced criticisms from some fire survivors who say it hasn't met their expectations. According to a recent LAist analysis of FEMA data, assistance to eligible survivors has covered around 7% of their assessed damage costs so far on average.

The deadline for filing an application with FEMA has passed, but it's still possible to appeal its decisions.

Aimee Williams, who works with homeowners at Bet Tzedek Legal Services in Los Angeles, said in past disasters, some homeowners have moved back onto their lots during the rebuilding process and lived in an ADU or tiny house to avoid paying rent and a mortgage at the same time.

" We are seeing a lot of people who are underinsured," Williams said. "Unfortunately that's really common. And people often find that out only when a disaster like this happens, how common that actually is."

Could this lead people to sell?

Coming insurance woes aren't the only issue for homeowners. Some are already struggling to pay their mortgages. Homeowners who delayed payments through a state forbearance program told LAist that their mortgage companies are now demanding quick, full repayment despite state rules.

Andrew King, who lost his home in the Eaton Fire, said he fears that insurance money running dry will derail his neighbors' plans to return to Altadena.

" You are going to have folks that are likely not going to be able to stay in their homes, and that is going to dramatically impact recovery," he said.

Most survey respondents who were displaced by the Eaton and Palisades fires said they want to return and rebuild.

It remains unclear how many of them will be able to.