|
A Commercial Lending Solutions Publication
|
|
Issue No. 1 · Week of May 25, 2026
|
|
|
The Legislative Edge
|
|
California housing bills, decoded into deals. New issue every Monday.
|
|
|
|
Hi ,
|
|
This Week's Featured Bill
SB 1123: Up to 10 Starter Homes on a Vacant Single Family Lot
On July 1, 2025, the rules quietly changed. Vacant single family parcels in California can now be subdivided into as many as 10 fee simple starter homes with no CEQA, no public hearings, and no discretionary review. Developers who recognize this first will capture the cheapest land basis the city has seen in a decade.
|
What the Bill Does
SB 1123 (Caballero) was signed into law on September 19, 2024 and became operative on July 1, 2025. It expands the Starter Home Revitalization Act and the prior SB 684 framework to cover vacant lots in single family zones for the first time.
Local agencies must approve qualifying parcel maps and tentative maps ministerially within 60 days. That means no CEQA, no public hearings, no appeals, and no discretionary review. For a developer used to LA entitlement timelines, this is the single largest cycle time reduction since AB 2011.
In LA City, eligible single family zones include A, RA, RE, RS, R1, RU, RZ, and RW1. Eligible multifamily zones include R2, RD, RW2, R3, RAS3, R4, RAS4, R5, and all commercial zones.
|
Does Your Site Qualify
| 1. |
Vacant and infill. The parcel has no permanent structure (or only an abandoned, uninhabitable one) and sits inside an urbanized area surrounded by qualified urban uses. |
| 2. |
Right zone and size. Single family zoned and 1.5 acres or smaller, OR multifamily zoned and 5 acres or smaller. New parcels at least 1,200 sf (SF zones) or 600 sf (MF zones). |
| 3. |
10 units or fewer. The project produces 10 or fewer residential units, with ADUs and JADUs excluded from the unit count. Average unit size 1,750 net habitable sf or less. |
| 4. |
Density floor met. The project delivers at least 66 percent of the maximum allowable density (or 20 units per acre, whichever is greater) and the site is not in a High or Very High Fire Hazard Severity Zone. |
|
The Opportunity: 6446 Columbus Ave, Van Nuys
Hypothetical analysis. Real listing data, illustrative assumptions. Not a guarantee of investment return.
|
Site snapshot. A 5,612 sf vacant R1 lot in East Van Nuys, listed at $600,000 by Redpoint Realty (MLS 25529189). Flat, no demo, near transit and the 405. SB 1123 unlocks a small lot subdivision and up to 4 fee simple starter homes on a lot that would otherwise be capped at one SFR plus an ADU.
|
|
Sources and Uses
| Line Item |
Amount |
| Land acquisition (5,612 sf R1) |
$600,000 |
| Hard costs (6,600 sf at $375 / sf) |
$2,475,000 |
| Soft costs and contingency (18 percent) |
$445,000 |
| Total Project Cost |
$3,520,000 |
|
Exit and Returns
| Metric |
Value |
| Sell-out (4 homes at $1.24M each) |
$4,950,000 |
| Selling costs (5 percent) |
($247,500) |
| Net sale proceeds |
$4,702,500 |
| Developer profit |
$1,182,500 |
| Yield on cost |
33.6 percent |
| Profit per home (4 homes) |
$295,625 |
| Levered IRR (24 month hold, 65 percent LTC) |
~40 percent |
Construction loan modeled at 65 percent loan to cost, 9.5 percent interest, interest reserve included. Equity check approximately $1.23M. Sell-out comp basis: Van Nuys new construction averaging $700 to $800 per sf in early 2026.
|
How We Finance These Deals
SB 1123 projects fit cleanly into two of our most active programs.
| Ground-Up Construction |
Up to 80 percent LTC, 70 percent LTV. 12 to 24 month terms. Best fit for the for-sale exit modeled above. |
| Build-to-Rent |
Construction-to-perm with DSCR takeout. Hold all 4 units as a small portfolio. Stabilized rents around $4,100 per unit support 5.5 to 6.0 percent stabilized cap. |
| Fix and Flip Bridge |
For acquisition and entitlement, then refinance into construction. Useful when the lot is not yet ministerially approved. |
|
|
|
Site Screening: 4 LA Parcels That May Qualify
Pulled from active listings. Always verify vacancy status, exact zoning, and density with qualified counsel before underwriting.
| Address |
Submarket |
Lot SF |
Zoning |
Ask |
| 6446 Columbus Ave, 91411 |
Van Nuys |
5,612 |
R1 (vacant) |
$600,000 |
| 14822 Delano St, 91411 |
Van Nuys |
7,500 |
Residential (verify) |
$1,950,000 |
| 2800 Wabash Ave, 90033 |
Boyle Heights |
~11,761 |
Residential (verify) |
$1,500,000 |
| 210 N Berendo St, 90004 |
Koreatown |
7,502 |
LAR3 (MF path) |
$1,550,000 |
|
|
Have a different parcel in mind? Run it through our LA County parcel screener for an instant highest and best use score, SB feasibility, and pro forma.
|
Closing Thought
Legislative tailwinds like SB 1123 do not stay under the radar forever. The first developers through the door capture the cheapest land basis, the friendliest planning departments, and the highest absorption. By the time the comps catch up, the spread is gone.
If you want us to underwrite a specific parcel or stress test your capital stack, reach out directly. We close ground-up and BTR construction loans nationally and we know this bill cold.
Until next week,
|
Trevor Damyan
President, Commercial Lending Solutions
The developer's first choice for construction lending
|
|
|
|
|
|
Disclosures. This newsletter is for informational purposes only and does not constitute legal, tax, or investment advice. All deals shown are hypothetical. Verify all legislative criteria with qualified legal counsel before relying on any bill for project approvals. Not a guarantee of investment return. Loan programs subject to underwriting, credit approval, and market conditions.
|
|
|
