By John Gittelsohn | Bloomberg
Economic losses from the fires that tore through Los Angeles County in January range from $95 billion to $164 billion, according to a new report, potentially making the blazes the second-costliest natural disaster in US history.
The Eaton and Palisades fires, which both erupted Jan. 7, killed at least 29 people, charred more than 37,000 acres and destroyed 16,000 structures, including 11,000 single-family homes. Insured losses are estimated at $75 billion, according to the report released Tuesday by University of California at Los Angeles economists Zhiyun Li and William Yu.
RELATED: State Farm seeks 22% rate hike for California homeowners to cover Los Angeles wildfire losses
Related Articles
‘Absolute hell’: Residents struggle against nature, bureaucrats, banks and builders to recover from 2020 Santa Cruz Mountains inferno
Rent gouging in Los Angeles County will soon carry a maximum $50,000 penalty
Arson suspect tackled, held by residents after he allegedly set a brush fire in Southern California
2.2 billion gallons of water flowed out of two Central California reservoirs because of Trump’s order to open dams
As EV vehicles get heavier, they’re also getting more dangerous, safety experts say
They estimate that the disaster will reduce LA’s gross domestic product by $4.6 billion, or about 0.5%, in 2025.
“In terms of economic magnitude, it’s very big,” Li said in an interview. “It takes time for the local economy to recover from it, and whether it recovers remains to be seen.”
The costs from the blazes are exacerbating an insurance crisis in California after many large companies had dropped coverage, leaving some homeowners without enough funds to rebuild. The state, meanwhile, is working to secure more federal aid. Democratic Governor Gavin Newsom is traveling to Washington on Tuesday for meetings, including one with President Donald Trump, according to an official briefed on the plans. Newsom will also meet members of Congress to lobby for disaster funds, according to his office.
Trump promised federal aid to help wildfire victims when he visited last month to tour the damage, though he has said funds would depend on California changing its water management policies and approving voter identification laws. Some Congressional Republicans have also said any assistance may come with strings attached.
The UCLA economists’ highest estimate — equivalent to more than three times LA County’s annual budget — would rank the wildfire toll second only to Hurricane Katrina, which swept through New Orleans in 2005. That storm caused $200 billion in losses, adjusted for inflation, according to National Oceanic and Atmospheric Administration data. The most expensive California wildfire was the 2018 Camp Fire, which cost an estimated $30 billion.
Estimates and methodologies of calculating costs from the blazes vary widely. The UCLA estimate includes direct property losses as well as cleanup costs and damages to infrastructure such as roads, bridges and sewer systems. CoreLogic, a real estate information service, last month forecast $35 billion to $45 billion in initial property losses.
Wealth Decimation
Insured losses may cover only a fraction of the costs for fire victims, the UCLA economists said. Many property owners seeking to rebuild were underinsured, while those without mortgages may have had no policies or were dropped by private insurers.
Other homeowners were covered by California’s FAIR plan, a bare-bones fire insurance that limits repayments to $3 million, far less than the costs of replacing structures and possessions in high-end neighborhoods such as Malibu and the Pacific Palisades. The median home price in the stricken areas before the fires was $2 million, according to the report.
RELATED: Rent gouging in Los Angeles County will soon carry a maximum $50,000 penalty
“The house is a large portion of wealth of a family,” Li said. “That means they have to pay out of pocket to rebuild. It means a disaster for their wealth.”
The fires will likely drive up the cost of insurance, renting and other expenses of living in Los Angeles, which was increasingly unaffordable before the disasters, the report said. State Farm, the largest insurer in California, on Monday said it is seeking an emergency rate hike to help cover losses.
The fires also bring costs such as the health impact of pollution and toxic waste generated by the burns, a decline in business activity and a population exodus, the UCLA economists said. Preventing more disasters may require additional expenses, such as spending on improved firefighting technology, better forest and water management, upgrading utility infrastructure and subsidizing home hardening, the report concluded.
“All mitigation investments will be justified, considering the astronomical costs associated with wildfires,” the economists said.
–With assistance from Eliyahu Kamisher and Skylar Woodhouse.
More stories like this are available on bloomberg.com
©2025 Bloomberg L.P.