Re-pricing insurance seems to be the most effective way to reduce property values right now.
On the other hand, affordability will also be adversely affected in the short and long term if nothing changes. Once the moratorium for insurance companies to leave the state is up in about 1 year, and no one can get a mortgage because no insurance providers are left. Banks will not take on the implicit roles of insurers in a no-recourse loan state.
Doing nothing is not an option. The writing is on the wall.
I agree that doing nothing is an increasingly unviable option
A $600k home that is sure to burn within 20 years will have a much lower premium than a $6m home in the same location, after all.
So, if it costs $6M to rebuild a $600K house due to construction labor shortages and permitting bullshit, you still need to insure for $6M.
It’s basically never a financially good idea to build a house in California, since market value will be below construction cost. (Otherwise, we’d have a housing boom instead of a housing shortage!)
So, decreasing the supply of buildable land (as your proposal would do) will only make housing prices go up.
Worse, all the major cities are prone to flooding and hurricane-force storms thanks to climate change, so we’d need to disallow building there too. That’s on top of earthquake risk.
The market value of almost every single home in the Palisades, as someone with family from there, is due to the location, not the homes themselves.
If the land loses its intrinsic value because it is inherently unsafe, it will be cheaper to buy. Maybe only modest homes get rebuilt because decreased land value cannot support estates anymore, but that is the situation.
> It’s basically never a financially good idea to build a house in California, since market value will be below construction cost
No, I can assure you as someone who has both built and remodeled in Los Angeles, this is not the case. This region is so housing starved that even spending $200k to a convert a 500sqft garage into an ADU (which is extremely high cost per square foot, compared to national averages) immediately increased the property value by almost $400k. The reason Los Angeles has a housing shortage and not a housing boom is entirely self-inflicted: this city has a terrible zoning and NIMBY problem, and the city refuses to meaningfully fix it. Developers would _love_ to build here, if only they could: projects that take 60 days to get permitted in Dallas, TX take 3-5 years here.
If that were true, there would be no new construction in California. There is still plenty, although it might not be where you're looking. And much construction isn't happening where you're looking because 1/the land isn't suitable for construction, or 2/zoning rules forbid building housing in such a way that it would be profitable.