The catastrophic Eaton and Palisades wildfires served as an unprecedented stress test on the disaster response and recovery systems that Los Angeles residents depend on during times of crisis. That is the core finding of a new recovery playbook released by the community development nonprofit the Center by Lendistry, which examines the immense hurdles facing homeowners, small businesses, and local communities in the aftermath of major climate disasters.
Most of the more than 16,000 structures destroyed in Altadena and the Palisades were single-family homes, according to Center by Lendistry President and CEO Tunua Thrash-Ntuk. In an interview with Smart Cities Dive, Thrash-Ntuk explained that the vast majority of these displaced homeowners were entirely unfamiliar with how to navigate the complex process of applying for construction loans. Compounding the challenge, private financial institutions largely lack the specialized financial products needed to help families bridge massive funding gaps in this kind of emergency situation.
It is one thing to raise money for immediate necessities like water and food, Thrash-Ntuk noted, but it is an entirely different challenge to raise the necessary funds to fill a $500,000 funding gap required to rebuild a primary residence. Long-term displacement frequently occurs simply because communities lack a timely and efficient financial solution to cover that significant deficit.
During the recovery phase, Community Development Financial Institutions (CDFIs) stepped in to deploy grants and loans ranging from under $1,000 to several million dollars to assist affordable housing developers and residents. Even with these interventions, just 35% of Los Angeles wildfire applicants who sought disaster recovery capital through CDFIs were ultimately approved. The low approval rate was driven by overwhelming demand that far exceeded available funding pools, documentation deemed insufficient by lenders, and rigid eligibility requirements that failed to account for the harsh realities on the ground following a major disaster, the playbook states.
Making CDFIs a permanent part of local government disaster recovery programs and securing dependable, pre-allocated pools of available money to deploy immediately after disasters occur are two critical steps for improving the capital landscape for communities most in need, according to the playbook’s recommendations.
Reimagining Post-Disaster Financial Products and Infrastructure
To address these systemic shortcomings, the newly released playbook recommends seven specialized financial products that CDFIs could offer to meet the unique post-disaster needs of single-family homeowners, multifamily developers, small businesses, and community facilities. Thrash-Ntuk emphasized that these recommendations place a special emphasis on supporting child-care centers, which are vital to community stability and economic recovery.
As part of this forward-looking vision, FORGE LA aims to establish a robust network of CDFIs that can be mobilized both proactively before disasters strike and reactively in their immediate aftermath. Too few people truly understand that the core mission of a community development financial institution is to serve whoever happens to be vulnerable at any given moment, Thrash-Ntuk said. While some regions have historically lacked access to these organizations, a vast network of CDFIs exists across the country, and many are willing and eager to travel and assist with long-term rebuilding efforts.
To streamline the chaotic recovery process, FORGE LA envisions creating "one door for the community." Under this model, displaced homeowners, struggling small businesses, and local community groups could apply for financial assistance and explore all of their available recovery options in one centralized, accessible location.
The Crucial Role of Local Government Policy
While alternative financial institutions and nonprofit networks can provide critical capital, Thrash-Ntuk stressed that local governments must also take proactive steps to reform their regulatory environments. Municipalities can help by adopting 13 specific policies that the playbook highlights as essential for creating immediate economic opportunity and loosening up the financial resources necessary to get the rebuilding work done.
These recommended municipal policy shifts include building strong, collaborative working partnerships with CDFIs, instituting by-right permitting processes, and removing parking minimums for builders to reduce construction costs and delays. Furthermore, local governments should pre-approve architectural designs to expedite rebuilding and actively identify new opportunities to expand and sustain funding for long-term disaster recovery.
Cities and municipalities simply have to get serious about the reality that future disasters are coming, and they must establish dedicated financial reserves to handle them, Thrash-Ntuk said. Local leaders need to plan for these crises as a standard line item, treating disaster preparedness and recovery just like everything else within the municipal budget.
