Economic Fallout from Los Angeles Wildfires Could Reach $164 Billion, UCLA Forecasts

The January 2025 wildfires in Los Angeles County, driven by strong Santa Ana winds and dry conditions, have caused unprecedented devastation. The Palisades and Eaton Fires alone scorched over 55,000 acres, destroying more than 16,240 structures and tragically claiming at least 28 lives. The economic impact is expected to be massive, with total property and capital losses ranging from $95 billion to $164 billion. Insured losses alone are estimated at $75 billion.

The wildfires are projected to cause a 0.48% decline in LA County’s GDP in 2025, translating to approximately $4.6 billion in lost economic output. Additionally, local businesses and employees could face $297 million in wage losses due to property destruction, business closures, and reduced economic activity. The fires have also exacerbated California’s ongoing insurance crisis, leading to higher premiums and greater reliance on the state’s FAIR Plan for coverage.

Beyond immediate financial losses, the wildfires will likely have long-term consequences on housing affordability and insurance markets. The destruction of thousands of homes will increase rental demand, further driving up costs in an already expensive market. Meanwhile, insurers may seek substantial rate hikes to account for growing wildfire risks, making coverage even less accessible for homeowners. The report underscores the need for significant investment in wildfire mitigation efforts, including improved building codes, enhanced firefighting resources, and better land management strategies. Without such measures, Californians will continue to face rising economic and environmental risks from wildfires.