| A Commercial Lending Solutions Publication |
Issue No. 11 | September 2026 |
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The Legislative Edge |
California housing bills, decoded into deals. |
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This week's theme
Eleven housing bills sit with the Governor. On September 30, silence is a signature.
Most coverage this month says the housing package is "awaiting the Governor's decision." That undersells it. Under Article IV, Section 10(b)(2) of the California Constitution, any bill passed before September 1 that is in the Governor's possession on or after September 1 becomes a statute if he does not return it on or before September 30. There is no pocket veto for these bills. Doing nothing is signing.
Eleven housing bills from the 2025-26 session are in that window. Seven of them touch a parcel, a permit, or a loan. The question is not whether they become law. It is what each one does to land you own or a deal you are quoting. AB 2074, the Downtown Revitalization Act, is the one that matters most to Los Angeles.
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The clock under AB 2074
We covered the mechanics in Issue 10. Here is the clock a lender and a landowner need to underwrite against, straight from the enrolled text:
| 1 | Los Angeles owes the state 1.5 square miles of transit hub districts by July 1, 2027. Cities of 2 million or more owe 1.5 square miles, cities of 1 to 2 million owe one square mile, and cities of 400,000 to 1 million owe half a square mile. Each district must be contiguous, at least 0.25 square miles, and contain at least one transit-oriented development stop. |
| 2 | Miss the deadline and the state draws the district for you. If a city does not comply, the equivalent area in a uniform radius around its highest-ridership transit stop is deemed a regional transit hub district automatically. Ridership is measured from July 1, 2026 through July 1, 2027 across all operators. For LA that stop is expected to be 7th Street/Metro Center, but the statute does not name it. |
| 3 | The envelope is the floor. Inside a district: no height cap below 150 feet, with at least 25% of the aggregate district area allowing 450 feet or more; no FAR cap below 6.0, with 25% at FAR 12 or higher; no density cap below 200 units per acre, with 25% uncapped. Qualifying projects of 60 or more units per acre get ministerial approval with a phase I environmental assessment, and the state density bonus stacks on top of this envelope as the base. |
AB 2074 was enrolled September 3 after the Senate passed it 40-0 and the Assembly concurred 66-9. It is with the Governor now, and September 30 is the decision date.
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The rest of the package, and the financing read
AB 956 (two ADUs). Two detached backyard units per single-family lot, and HOA bans on them are void. Presented to the Governor September 4. Financing read: doubled backyard units turn a side-yard project into a small rental portfolio; that is a stronger small-balance loan.
SB 1117 (ADU fees). ADUs up to 750 square feet are exempt from impact fees entirely, and larger ones are charged only on the footage above 750. Presented August 30. Financing read: fee drag was the quiet killer on small ADU deals. Removing it improves the return on cost on exactly the product most homeowners can finance.
SB 1014 (infrastructure cost transparency). Cities must itemize all onsite and offsite improvement requirements with good-faith cost estimates within 30 business days, and cannot layer on new requirements after a permit application. Presented August 31. Financing read: surprise offsites are a top construction-loan killer. This is the bill that de-risks the budget.
SB 1116 (starter homes). Rewrites the small-lot starter-home rules with height measured in physical feet rather than stories, no front-setback games, and rules construed in favor of maximum units. New applications from January 1, 2027. Presented August 31. Financing read: more for-sale townhome units per lot, faster presales, better construction-loan coverage.
SB 677 (faster approvals). Expands joint powers authority jurisdiction, speeds bond approvals, and limits who can appeal a subdivision map. Presented September 8. Financing read: a shorter gap between approval and construction start, which is the gap most developers finance with expensive money.
The caution flag: AB 2576. It expands the historic-site exclusions cities can claim against SB 79 upzoning to contributing sites inside historic districts and individually listed parcels on the State Historic Resources Inventory, designated before January 1, 2025. The 10 percent cap on the excluded share of a transit zone is unchanged. Presented August 27. Financing read: before you pay an upzoned price for an older parcel, confirm whether the parcel just became excludable. Eligibility is parcel-specific, not corridor-wide.
AB 1903 (condominium construction defect) died. It ran out of time for concurrence. Financing read: for-sale condo and townhome product keeps its defect-liability risk premium for now.
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Real deals, real money
Centro Westlake is still the proof. Two towers of 55 and 39 stories, 450 to 600 feet, 668 homes including 234 affordable, a 300-room hotel and 105,000 square feet of offices above the Westlake/MacArthur Park station, approved by the city this year. It took years of discretionary review to get there. AB 2074 makes that envelope the default inside the districts instead of the exception you fight for.
Entitlement speed is carry. Every year removed from pre-construction is a year of land carry, option extensions, insurance, and rate exposure that never hits the pro forma. On a 450-foot tower, one year of entitlement time is seven figures of preserved return on cost.
The repricing window is open now. Between the expected signature and the July 1, 2027 district maps, parcels near the major rail hubs reprice against an envelope most sellers have not priced. The trade is finding the holder who has not read the bill.
The state is scoping construction capital. AB 2074 requires CalHFA to study existing construction loan programs, identify the gaps, and report to the Legislature by March 1, 2028. That is the first formal step toward a state construction-loan program. Private lenders lead this market until that program exists, and that window is where a borrower should be talking to a broker with the lender map.
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Why the money works
| Faster entitlement, cheaper money. Ministerial approval compresses the pre-construction period that construction lenders actually underwrite. Less carry, tighter basis, better loan-to-cost math on the same project. The low end of the stack moves too. Two ADUs per lot, no impact fees to 750 square feet, and foot-based starter-home heights make the 3 to 8 unit infill deal pencil with less equity. Eligibility is tightening at the edges. AB 2576 widens the historic exclusions, and the state sued five cities in July over housing-element compliance. Run the parcel before you price the deal. |
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The financing tie: this is where CLS shows up
A shorter entitlement calendar changes the loan you can get, not just the timeline. Here is what we are placing right now:
Construction financing for the 60-plus unit-per-acre transit product, sized to maximize proceeds and minimize equity in, structured around a faster path to commencement.
The small-lot and ADU stack where the new fee rules and the two-ADU allowance change the return: bigger backyard units, less fee drag, better debt coverage on a small balance loan.
A watch item we track for you: the CalHFA construction-loan study. If the state becomes a construction lender, it changes the capital stack for every housing developer in California. We will tell you when it moves.
We are commercial lenders, and we are also the people who read the legislation so development rights become lendable deals.
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Closing thought
The 2025-26 session is over, and its housing package becomes law on September 30 whether or not the Governor picks up the pen. The envelopes expand on July 1, 2027, on a clock the state set. The parcels that benefit are knowable now, and the sellers who have not read the bill are still pricing the old envelope.
If you own or control land near an LA rail hub, or you are building small-lot or ADU product, send us the address and we will run the envelope and the financing together.
Or start with the LandToYield parcel screen
Until next Friday,
Trevor Damyan President, Commercial Lending Solutions
The developer's first choice for construction lending |  |
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| Commercial Lending Solutions |
| 5665 W. Wilshire Blvd #1284, Los Angeles, CA 90036 |
| O (310) 758-4042 | M (805) 455-0051 |
| trevor@clscre.com | www.clscre.com |
| CA DRE License #02244836 |
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| Disclosures. This newsletter is for informational purposes only and does not constitute legal, tax, investment, zoning, appraisal, or lending advice. Bill status verified against the California Legislature on September 10, 2026. AB 2074 was enrolled September 3, 2026 and is not yet chaptered; under Article IV, Section 10(b)(2) of the California Constitution it becomes a statute on September 30, 2026 if the Governor does not return it, and its mechanics should be re-verified against the final chaptered text and with counsel before reliance. The remaining bills in this issue were enrolled and presented to the Governor between August 24 and September 8, 2026 and were not yet chaptered as of September 10, 2026. Centro Westlake is as reported by Urbanize LA and city records as of early 2026 and may have evolved. Financing assumptions are illustrative. Loan programs are subject to underwriting, credit approval, and market conditions. |
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