Even before the terrible wildfires in Los Angeles County have been quelled, the dead mourned and evacuees sheltered, California leaders are taking steps to accelerate rebuilding. It’s natural to want to restore what was lost in such a tragedy as quickly as possible. But obscuring the true costs will only exacerbate future climate-fueled natural disasters.

It’s not just Los Angeles. Around the country, rising global temperatures are thought to be making wildfires, hurricanes, floods and droughts more intense and unpredictable.

Insurers, paid to be clear-eyed about risks, have responded by raising premiums in the most vulnerable areas or, in some cases, pulling out altogether. Such price signals should be respected: Properties that become prohibitively expensive to insure should absolutely lose value.

Instead, politicians have devised ways to keep counterproductive policies artificially affordable. Until last month, California suppressed premium prices by forcing insurers to base their rates on historical data, rather than using models to predict future catastrophe risks. Many have fled the market, leaving the state-sponsored insurer of last resort to absorb an escalating amount of risk. The result: Underpriced insurance from an insurer with precarious finances encouraged homeowners to keep building and living in fire-prone areas.

The staggering cost of this month’s wildfires — with insured damages estimated to exceed $20 billion, even before new fires erupted — should make clear the status quo is unsustainable. Forcing residents to follow stricter building codes when rebuilding can only mitigate some fire risks. Californians also need to understand and grapple with the true costs of living in dangerous areas.

As a start, policymakers should allow the market to operate more freely. Banning speculators from making unsolicited bids for property might deter vultures, but it will deprive some needy homeowners of financial options. A one-year moratorium on nonrenewals and cancellations of insurance policies in affected areas risks giving false hope to residents who may ultimately learn they can’t afford to rebuild their homes.

Instead of rushing ahead with a “Marshall Plan” to rebuild, the state should first help property owners establish accurate estimates of the likely cost of their insurance, from private companies freed of price caps. Armed with this knowledge, they can make wiser decisions about where, how and even whether to rebuild.

Americans everywhere ought to pay heed. Nearly a quarter of U.S. properties may be overvalued because their true insurance costs have been understated, according to a 2023 report. The problem will only escalate if policy doesn’t start changing now.

Meanwhile, federal and state money would be better spent on helping communities become more resilient against natural disasters, by adopting new housing codes and providing grants to help homeowners comply, clearing combustible vegetation, and offering low-interest loans to relocate outside the most at-risk zones. One study last year found that every $1 spent on preparedness can save $13 in long-term economic and recovery costs. The challenge of constructing affordable housing in less vulnerable areas must be addressed head-on if residents are to find alternative places to live.

If all that sounds expensive and disruptive, it will be. But failing to act will only lead to more human and financial catastrophes. California ought to help residents deal with their new reality, not ignore it.

_____

The Editorial Board publishes the views of the editors across a range of national and global affairs.

_____

©2025 Bloomberg L.P. Visit bloomberg.com/opinion. Distributed by Tribune Content Agency, LLC.