Malibu residents flee as international buyers snap up burned-out lots

Wood frames are rising from the ashes of burned-out lots in Pacific Palisades, signaling the start of a new era for the fire-torn community. But down the road in Malibu, the scene is bleak.

Cars wind through a gauntlet of traffic cones and caution tape. Sweeping ocean views are sullied by hollow shells of graffiti-tagged homes and miles of chain-link fencing.

Nearly a year after the Palisades fire, one of Southern California’s most iconic communities is frozen in place.

In Altadena and Pacific Palisades, the two communities hit hardest by the January fires, there are rebuilding permits aplenty. The city of L.A., which is handling most permits in the Palisades, has issued 801 — around 43% of the total applications received, according to data from the state’s rebuilding dashboard. L.A. County, which is handling most permits in Altadena, has issued 577 — around 26% of the total applications received.

So far, Malibu has issued four — about 2% of the total applications received.

“It’s depressing,” said Abe Roy, Malibu resident and professional builder.

In May, Roy was appointed as the city’s first Rebuild Ambassador, a volunteer role created to find solutions to administrative obstacles and speed up the rebuild. He publicly resigned last month, citing frustrations with the slow permitting process.

“If this current pace continues, rebuilding will take way longer than a decade,” he said.

A view of cleared lots and sparse construction after the Palisades fire in the Sunset Mesa neighborhood of eastern Malibu.

(Allen J. Schaben/Los Angeles Times)

A buyer’s market

In contrast to other California communities, where sprawl and expansion led to skyrocketing populations over the last few decades, Malibu has long embraced “slow growth.” Fewer live there now than when the city was incorporated 34 years ago.

But after roughly 720 Malibu homes burned in the Palisades fire, burned-out lots are sitting empty. Locals are worried that the city may never get fully back on its feet, and property values will suffer. And in a place like Malibu — one of the most expensive markets in the country, where a 10% price drop can mean millions of dollars lost — property values are king.

Of the 160 lots listed this year that are still on the market, 47 have received a price cut.

In the Big Rock neighborhood, a burned lot listed for $1.65 million in September, but that price has already been lowered twice. On Las Flores Beach, an oceanfront parcel hit the market for $3 million in April, but with no takers, relisted for $1.95 million in October.

Roughly 75 lots have sold in Malibu since the fire. But as more homeowners decide to sell instead of rebuild, sales are slowing down — and a buyer’s market is emerging.

“Supply is exceeding demand, and lots are selling anywhere from a 20 to 60% discount,” Roy said. “That’s a premonition for a freefall.”

Roy said the overwhelming majority of residents want to stay and simply replace the home they have. But as applications get kicked back for corrections, and the rebuilding timeline turns from months to years, many are getting discouraged and choosing to sell.

“Remodeling a kitchen or bathroom is onerous for most people. But building a house from the ground up is almost impossible,” Roy said. “After a while, you raise your hand and say, ‘I don’t know how long I can be on this treadmill.’”

Real estate agent Daniel Milstein is currently listing a 3.25-acre lot on a promontory in Carbon Canyon that once held a Mediterranean mansion formerly owned by record producer David Foster. Before the fire, it was listed for $35 million.

After it burned, the lot returned to market at $16 million. But with the slowing market, Milstein is planning to trim the price down to $12 million.

“The property is worth a lot more, but the nuances of building here and the limited permits issued have led to a setback in the market,” he said. “The value will be higher down the road, but there’s a discount for buyers right now.”

Milstein added that the buyer pool is limited to people who can afford to park their money for a while — three years, six years, maybe more. For those hoping to build a house right away, Malibu isn’t an option.

But Milstein said that’s by design.

“Malibu is stringent on permits. But that’s where the value is,” Milstein said. “It’s exclusive. And those that understand that value will be very happy with their property values down the road.”

In the meantime, locals who lost homes are stuck in limbo.

Permit trouble

The choice of whether to sell or stay has been well-documented over the last year, with homeowners in Altadena and Pacific Palisades speaking out about their decision-making process.

But Malibu locals — permit-less and facing rebuild timelines significantly longer than their fellow rebuilding communities — are a bit more circumspect. The Times reached out to over a dozen homeowners with lots on the market, but none wanted to publicly participate in the story.

One homeowner, who requested anonymity for fear of retribution from neighbors or the city, called the past few months “a nightmare.”

“I have friends a few miles east in Pacific Palisades who are starting to build already. I submitted my applications in the spring, the same time as them, but it still hasn’t gotten approved,” said the homeowner, whose Malibu home burned down in January.

The homeowner planned to rebuild the same house that was there before, but their application was sent back because the plans didn’t comply with FEMA’s updated flood elevation standards, which require many rebuilt oceanfront homes to sit higher above the sand.

It’s a snag that several have run into over the past year. One local, whose house survived but sustained smoke damage, told Fox 11 that he may be forced to demolish the property in order to comply with the heightened elevation standards.

Comedian and podcaster Adam Carolla has emerged as a face of the frustration building in Malibu, vlogging about the bleak state of the city. He claims that Malibu is emphasizing the wrong things in its requirements for rebuilding.

Carolla visited a construction site on the beach that was installing 30 caissons six stories deep into the ground. Between the caissons, the seawall and retaining wall, the crew estimated it would cost $2 million to $3 million to install the foundation.

“It’s totally unnecessary. The former structure that was there lasted 75 years, and the tide didn’t get it, the fire did,” Carolla said. “If telephone poles sunk into the soil worked for 75 years, why do we need to build Hitler’s bunker under the sand?”

Carolla said it’s a symptom of the larger trend across L.A. that he regularly complains about: regulations and over-engineering bogging development down to the point where no one can afford to build.

Real estate agent Jason Ventress said the strict rules are limiting the buyer pool for his latest listing, a $12.5-million burned lot spanning half an acre on the ocean.

“The city is bogged down by confusion and interpretations of newly implemented laws that are being contested,” Ventress said.

In addition to the FEMA height requirements, he pointed to Malibu’s new septic standards, which requires rebuilders to replace existing septic systems with onsite wastewater treatment systems, which can cost hundreds of thousands of dollars to install.

Ventress, a fire victim himself dealing with a daunting rebuild, credited the Malibu Rebuild Center as a helpful resource to locals who lost their homes. Opened in March, it serves as a one-stop shop for both homeowners and contractors to ask questions and get help submitting applications.

Yolanda Bundy, who runs the center under her role as Community Development Director, said of the 720 families impacted by the fire, 585 have visited.

Bundy said it’s a necessary resource, since building in Malibu — a land of eroding cliffs and rising sea levels — is trickier than building in the flat lots found in Altadena and parts of the Palisades. She said 50% of burned homes were on the water, and 30% were on steep slopes.

“These homes require septic systems, sea walls, retaining walls and complex foundations. Those come with restrictions,” Bundy said.

Acknowledging the slow pace of permits, Bundy’s team has launched a handful of strategies aimed at streamlining the approval process, highlighting the changes at an Oct. 15 City Council meeting.

According to Bundy, one of the biggest reasons for applications getting bogged down is architectural plans missing necessary notes and numbers. So the city created templates that architects can use to avoid corrections.

The city also trimmed the 12-step application intake procedure down to six steps and beefed up its staff, hiring a case manager to serve as a bridge between staff and homeowners.

Despite only four building permits being issued, Bundy said the collective rebuild is further along than the number suggests. Applications have to pass through two phases: the planning and entitlement phase, and the building and safety review phase. Bundy said half of the roughly 160 applications have passed through planning, but are still waiting to get through the building phase.

“It’s an oversimplification to say that we’re not making any progress compared to L.A.,” Bundy said. “Families are frustrated, but I want every family to know we’re doing our best to get them home.”

Lost identity

As rebuilds get costlier, locals are getting concerned that by the time Malibu eventually gets back on its feet, it won’t feel the same. Lifelong residences will be replaced by Airbnbs, development groups and deep-pocketed foreign buyers with enough time and money to navigate the laborious permit process.

Two brothers from New Zealand bought up $65 million worth of burned-out lots on the beach this year. Ventress said he’s fielding interest from a Canadian development group and a Miami hedge fund for his oceanfront listing.

Milstein said he’s noticed a surge in interest from Europe, Canada and Asia, and roughly a third of his inquiries this year have come from international networks such as private banks and wealth managers.

“There’s fear that Malibu’s identity will change, and that might fuel folks to move as well,” Roy said. “It might not be the Malibu we loved for years, where the bartender knows your drink and you see your neighbors at the local restaurants.”

But Roy said the city should welcome all buyers, international or not. He spoke with the New Zealand duo and said he supports their vision of adding housing.

“People selling lots are in dire straits. They don’t care whether offers come from international buyers or not,” he said. “As long as those people are believing in the future of Malibu and willing to invest.”

Voices across Malibu say the only solution is issuing permits quicker so fire victims want to come back.

“Malibu is a way of life. Most of us are doing our darndest to maintain that way of life,” Ventress said. Seconds later, while driving down Pacific Coast Highway, he passed a naked man walking down the beach.

“He’s got a metal detector or something...no wait, it’s a golf club!” he exclaimed over the phone. “Right now, it’s the wild, wild west out here.”