One of the wealthiest enclaves in California is uninsurable against wildfires

How Montecito became Montecito

From an outsider’s point of view, Montecito, just 90 miles northwest of Los Angeles, may seem like it is all sprawling estates nestled among the Santa Ynez Mountains. Historic villas and mansions, worth tens of millions of dollars, with beautifully manicured gardens and lawns, are home to its residents, living in paradise.

Such a lifestyle also poses its own hidden costs. 

In the mid-19th century, wealthy landowners took notice of the area’s secluded landscape and started to buy up large swaths of Montecito, which was already establishing a favorable reputation for its Eden-like surroundings, Mediterranean climate and the rejuvenating power of its natural hot springs. 

By the early 20th century, famed architect George Washington Smith, who brought Spanish Colonial Revival architecture to the fore in California, watched as some of his sprawling creations come to life and quickly define the area. 

Today, Montecito still has many historic structures — some even available for sale. El Fureidis, the historic mansion most notably featured as the home of Al Pacino’s Tony Montana in 1983’s “Scarface,” hit the market in March for $40 million. There is also this 1929 George Washington Smith original, an 8,700-square-foot single-family home conveniently set back from the arterial Hot Springs Road on almost 2 acres. The asking price, it should be noted, is now nearly $20 million, more than quadruple its 2019 sale price of $4.4 million.

Montecito’s list of residents, both past and present, are a roll call of A-listers from their era. From Charlie Chaplin to Tom Cruise, Julia Child to Gwyneth Paltrow, Robert Mitchum to Christopher Lloyd, Kenny Loggins to Ariana Grande — if a star were ever to crash down on Earth, Montecito is where they’d likely land. 

Montecito is ripe for risk

Part of what makes Montecito so alluring to its well-known residents is the way it combines natural beauty with urban convenience. Dense foliage and windy, dead-end drives create a barrier between them and the rest of the curious, gawking world. But living in the cradle of a wealth of natural fauna — the same topography that so readily obscures the whereabouts of the elite — is also what fire scientists say makes conditions in the age of climate disaster so ripe for risk. 

Over the past few years, less wealthy communities with similar wildland-urban interface characteristics, like Paradise in Northern California or large swaths of suburban Sonoma County, have seen the worst-case scenarios of living in such regions come to fruition.

Montecitans have already experienced firsthand what that can look like. Five years ago, on Dec. 4, 2017, the Thomas Fire sparked near Santa Paula, a small inland Ventura County town just 40 miles southeast of Montecito. It would go on to burn more than 281,000 acres and wasn’t fully put out until June 2018. 

In that time, what was then the largest fire in California history destroyed more than 1,000 structures and caused an estimated $2.2 billion in damages. The fire required more than $230 million in state and federal resources to fight it. Though Montecito was not in the epicenter of the blaze, several mansions and notable buildings — including the sprawling home where soft rock act the Eagles first laid down “Hotel California” — would go up in flames. 

But the Thomas Fire also started a domino effect that resulted in residents evacuating five times in four months — the kind of disaster frequency that fire scientists and climate scientists have been warning us about in the era of extreme climate change. 

Because the blaze occurred in the winter months, the fire burned and scarred the Santa Ynez Mountains just in time for the year’s biggest storm events. The conflagration had a devastating effect on the stability of the mountains, which rise up to 3,997 feet above Santa Barbara County. The dirt and rocks on the steep slopes above were charred and loose, creating the perfect conditions for a disaster for Montecito, whose upper village abuts the hillside. 

It happened in the middle of the night on Jan. 9, 2018. A brief but torrential downpour ripped through the southern part of Santa Barbara County. The rain unleashed severe mudslides and dislodged boulders — which ranged in size from an SUV to a small bungalow — from the hillsides and tumbled down. 

A wall of mud rushed down into the arterial zone of the tiny hamlet, up to 15 feet deep, engulfing entire houses and covering the long country blocks. By dawn, a major swath of the town was leveled, buried, no longer there. 

While some were awakened by the rumblings from above and knew to evacuate right away, others slept right through it. In total, 23 people died, 243 structures received enough damage to be red tagged, and 57 homes were destroyed. 

‘I’m always about telling people what they need to hear, not what they want to hear’

Today, the memory of the Thomas Fire and the mudslides that ensued “looms large and also doesn’t,” says Montecito real estate agent Kendrick Guehr. An influx of new pandemic-era residents emigrating from other metros in California, the East Coast and around the globe has brought new perspectives, and ever deeper pockets, to the area — and prices “continue to rise.”

Any serious buyer who approaches him, Guehr says, realizes quickly the village is not only different, but worth it. “There’s always been that cache around Montecito,” he continues. “Yes, I think there was more of it when Meghan and Prince Harry moved in. But … I don’t know that it’s them so much. I think Montecito was publicized — the area and what it offers — showcased. We have a lot of money and tons of celebrities. But they can get away from paparazzi — go to the store, go out to dinner and be left alone. We also have a lot of people with money: $50, $100, $200 million — or billions of dollars. 

“If you’re in that stratosphere, the celebrities aren’t as big of an appeal to you,” Guehr points out. “You’re either intertwined or not. So it’s not the big name people that brought the reputation, but they shed light on it.”

That means that Montecito, in spite of its known risk, is currently in the highest of high demand. 

As of April of this year, Montecito’s median sold home price was $11 million (up from $4 million in 2018), according to Realtor.com. While local real estate agents say most home purchases are strictly all-cash propositions, in the rare instance that a buyer wants to purchase a home with a lender, there has to be proof of insurance before the property closes. Even if you have the scratch to write the big check outright, the amount just to insure the purchase starts in the tens of thousands and can go up to seven figures per year.

But the overall cost to call Montecito home is far beyond what’s just on paper. “I’m always about telling people what they need to hear, not what they want to hear,” Guehr says.

The notion that disasters don’t care who you are was most recently exemplified during the mudslides. Former world tennis No. 1 and eight-time Grand Slam winner Jimmy Connors was among those who were stranded in the wake of the slides, eventually being airlifted from his home by the Coast Guard. “Montecito — fires burn- rain comes- mud slides and devastation- evacuated today by helicopter- thoughts and prayers for all !!!” he tweeted.

While her home was spared, long-time resident Oprah Winfrey posted photos and video on Instagram of nearly knee-deep mud covering her backyard, along with rescue helicopters buzzing by. “What a day! Praying for our community again in Santa Barbara,” she wrote. “Woke up to this blazing gas fire. Helicopters rescuing my neighbors. Looking for missing persons. 13 lives lost.”

Insuring the uninsurable

In the wake of the fire and floods, the region is now nearly uninsurable. Because of this, the state of California has stepped in with its FAIR Plan, California’s own insurance solution, a plan spun up in August 1968 after a series of brushfires and riots. The plan subsidizes an increasing number of homes in the footprint of fire or otherwise dangerous environmental outcomes.

Places that are, for the most part, uninsurable, even though homes can be worth tens of millions of dollars in communities like Montecito. 

“It now covers up to $3 million, which is still a fraction of what homes cost,” real estate agent Guehr says. “Government-subsidized insurance is never great, but I guess it’s something.”

The gap between a $3 million maximum policy and the actual value of their homes is why buyers and sellers in Montecito tend to get creative and have the means to do so, says Montecito real estate agent Maureen McDermut. If there’s one thing she says she’s learned in her profession over the past 22 years in the area, it’s that the chance of insuring a Montecito home depends not only on its specific location, but the day the inquiry is made. 

“What’s happening is the insurance agencies are coming in and out of the market constantly,” she says. “You have to be quick to know who currently has the appetite to take on more products. One insurance agency may refuse houses today, but two months from now, they’re not at capacity. It’s a very fluid situation, it changes all the time, because their appetite is changing.

McDermut also notes getting insurance in Montecito isn’t just going to your local agent and seeing what’s available. She has insurers across the country and internationally, with even high-stakes, high-risk entities like Lloyd’s of London that come into play. 

As for how much it actually costs the luminaries who call Montecito home, McDermut says that can “change day-to-day.” Meghan and Harry’s house, for example, cost $14.7 million when the Sussexes bought it in June 2020 from Russian oligarch Sergey Grishin. McDermut says it’s “impossible to speculate” what the Sussexes or any individual property owner pays for insurance — and a particular rate, if one can be had at all, depends on the timing and where, specifically, the property is on the map.

One thing is for certain: Premiums are continuing to rise. 

Real estate agent Guehr says he just sold a $12 million house, and the buyers secured a $160,000 per year insurance plan. McDermut says she has a client who found out this week they will pay $45,000 per year on a “modest” home that was insured previously for $8,000. Both say that if the individual pays cash, as high-profile, high-net worth buyers usually do, policy details are rarely revealed. “Many take on the risk themselves,” Guehr says. “Literally every case is its own unique thing.” 

Is it really worth it?

But all that maneuvering, all the money, all the time and risk — is it worth it?

For Montecito’s moneyed residents, the short answer, at least for now, is yes. 

“As you start to look globally, we have tornados, hurricanes, fires, floods, there’s a natural disaster in almost every place you look,” McDermut says. “Choose what threshold of risk you put yourself in personally. We tell people when you come into the market, insurance is going to be expensive. It doesn’t matter what the people before you are paying, your rate is your rate. And that hasn’t stopped people.”

But has Montecito specifically found itself in the spotlight as an extraordinarily unsafe place, or as an extraordinarily expensive place, or both?

National fire officials seem to think it’s both, referring to Montecito as being in the heart of a “Goldilocks zone,” a term for a spot that can create perfect opportunities for fire and flood and other climate change-caused disasters to comingle and make life untenable.

“I don’t know that we have a stance on Montecito specifically,” says Tina Boehle, spokesperson for the National Interagency Fire Center, “but it fits well into what we consider a wildland-urban interface. Places like Montecito are places where we’re starting to see local agencies work with developers and the insurance companies — all working with planning commissions. We encourage that. But to make a blanket statement is really tough. Each part of the country, each community, has its own set of issues.” 

As Montecito continues to address the next potential conflagration or flood, groups like the Montecito Association are doing exactly what Boehle says, bringing together agencies and helping residents proactively navigate the challenges of protecting themselves, their communities and their homes. 

In 2019, the association spun up a committee to address the fire insurance problem specifically. They even share resources with similar neighborhoods in Santa Barbara that are in a fire danger footprint, as well as Malibu, a similarly well-heeled, yet risky, swath of exclusive California coastline. 

Cal Fire officials say they’re looking ahead to this summer and beyond, specifically encouraging areas like Montecito to remain as ready as they can be. The agency kicked off May, already the beginning of California’s red flag season, with Wildfire Preparedness Week, where crews traveled up and down the state to give residents in potential high-risk spots advice on how they can continue to prepare. 

That usually requires homeowners in places like Montecito — as well as Santa Rosa, Big Sur, and Malibu —  to complete defensible space work around individual homes before fire season gets into full swing. 

“We don’t necessarily have a wait-and-see attitude,” says Isaac Sanchez, battalion chief of communications for Cal Fire. “We can’t afford to take a wait-and-see attitude. We have to be prepared for the worst-case scenario.”

In the end, the enormous cost and high risk of coming into a community like Montecito are both well-known and well-disclosed, says real estate agent McDermut. The rich and famous continue to come, even if it means evacuating in a natural disaster. 

“People don’t have to live and work in the same location anymore, and Montecito has always looked like a tremendous value even compared to LA, SF and Malibu,” she says. “People said ‘Look, it’s beautiful and a higher quality of life.’ We became discovered during the pandemic. And that trend is carrying on today.”