Land development loans in California are sized on the land's value and on the exit, not on income, because a vacant site has none. In the quotes we see, unentitled land borrows about 40% to 50% of value from private lenders, and entitled land borrows 50% to 60% from debt funds, usually with 12 to 18 months of interest held back from the loan. What moves a site from the first number to the second is a credible entitlement path, and California has spent five years passing laws that shorten it. Our Los Angeles land guide covers ED1, TOC and the LA-specific programs.

Where things stand, with dates

  • Short rates. The Federal Reserve raised its target range to 3.75% to 4.00% on September 16, 2026, its first increase since 2023. SOFR was 3.89% on October 5, and prime is 7.00%. Most land loans float, so this flows straight into carry.
  • Long rates. The 10-year Treasury closed at 5.31% on October 5, its highest level since 2002 and about 110 basis points above January. That raises the cost of the construction and permanent loans that eventually retire a land loan.
  • Residential credit. Trepp's CMBS multifamily delinquency rate rose 35 basis points in September to 8.04%, the largest increase of any property type Trepp tracks. Land lenders exiting into apartments watch it.
  • SB 79. California's transit upzoning law, signed October 10, 2025, took effect July 1, 2026.
  • San Francisco. The Family Zoning Plan took effect January 12, 2026. A CEQA lawsuit filed January 9 asks the court to order the city to rescind it pending a supplemental environmental review, and in August a pro-housing group sued over the city's SB 79 alternative plan.
  • San Jose. In January 2026 the City Council extended its Multifamily Housing Incentive Program and widened downtown tax and fee reductions to office-to-housing conversions.

Who lends on California land, stage by stage

Unentitled land. Private lenders, pricing real risk. Leverage is low and coupons reach the double digits. Our 2024 land bridge on the Dewitt Ave land portfolio in Morgan Hill, in the South Bay, was $1MM at 11.00% from a private lender. That was a fair price for the risk.

Land in entitlement. Pre-development capital funds the carry, consultants and fees through approvals. Private lenders and debt funds dominate, and for sites that will deliver housing, community development financial institutions (CDFIs) can be the best match. CDFIs lend on entitled housing sites too: our $1.33MM land bridge on an entitled site at 4537 to 4545 Santa Monica Blvd closed at 8.00% with a CDFI.

Entitled land. With approvals in hand, debt funds compete, terms improve and the conversation turns to the construction takeout. Our $11.1MM land loan at 7901 Beverly Blvd came from a debt fund on that profile.

Banks, rarely. Federal supervisory guidelines set bank loan-to-value limits of 65% for raw land and 75% for land development. An acquisition, development or construction loan that does not meet the statute's tests, including borrower capital of at least 15% of the project's appraised as-completed value, is high volatility commercial real estate and carries a 150% capital risk weight. In our experience, banks that do lend on land do it for existing depositors, with recourse.

A land lender is not underwriting the dirt. It is underwriting how long until someone else pays it off.

Why land loans are sized on value and exit, and carry reserves

With no rent there is no debt service coverage to test. The lender sizes to value and basis, then asks what retires the loan: a construction loan or a sale. Because the land pays nothing, interest is prepaid from the loan as a reserve.

Take an illustrative entitled infill site appraised at $6,000,000. A debt fund at 50% loan-to-value commits $3,000,000. Assume a floating rate of SOFR plus 5.00%, or 8.89% today. Interest is about $22,225 a month. An 18-month reserve is about $400,050, and two points add $60,000. The owner nets about $2.54MM at closing, and the carry for 18 months costs about $460,000, roughly 7.7% of the land's value. A 12-month reserve would be about $266,700.

Now the same $6,000,000 site, unentitled, at 40% and 11.00%. The loan is $2,400,000 and interest is $22,000 a month. Eighteen months of reserve is $396,000 and two points are $48,000, so the owner nets about $1.96MM. The carry costs about the same. The owner nets roughly $580,000 less, before any difference in appraised value.

Floating rates add one more line. On the $3,000,000 loan, each 25 basis point move in SOFR changes interest by $7,500 a year, or $11,250 over 18 months. A full point is $45,000 over that term. With the Fed raising in September, size the reserve with room and price a cap on a long term. Points and extensions are covered in what bridge lenders are quoting in 2026. Both examples charge interest on the full balance for simplicity.

The state laws that shorten entitlement, and why lenders care

A lender cannot underwrite a hope. It can underwrite a ministerial approval with a statutory clock. These laws make the path more predictable:

  • SB 9 (effective January 1, 2022): up to two units per single-family lot and a one-time split into two lots of at least 1,200 square feet, approved ministerially. A split requires a three-year owner-occupancy affidavit.
  • SB 684 and SB 1123 (July 1, 2024 and July 1, 2025): subdivisions of up to 10 lots and 10 homes, on multifamily-zoned sites up to 5 acres and, under SB 1123, vacant single-family lots up to 1.5 acres. Sixty days to decide or the project is deemed approved, with no CEQA review.
  • AB 2011 (July 1, 2023, expanded by AB 2243 on January 1, 2025): by-right housing in commercial zones where office, retail or parking is principally permitted, with prevailing wage. Regional mall sites can now reach 100 acres.
  • SB 423: extends SB 35's streamlined ministerial approval to 2036 in jurisdictions behind their housing targets. Projects over 10 units set aside at least 10% as affordable (50% in some jurisdictions). Approval runs 90 days for 150 units or fewer, 180 days above that.
  • State density bonus law: up to a 50% bonus, and since January 1, 2024 (AB 1287) a second bonus that can bring the total to 100%.
  • Builder's remedy: where a city lacks a substantially compliant housing element, a qualifying project need not match local zoning. Since January 1, 2025 (AB 1893) it takes 7% extremely low, 10% very low or 13% lower-income units, with density up to the greater of several formulas, including three times the density allowed by local rules or state law, whichever is greater.
  • CEQA infill exemption (AB 130 and SB 131, June 30, 2025): exempts qualifying urban infill housing on sites up to 20 acres.
  • SB 79 (effective July 1, 2026): in counties with more than 15 passenger rail stations, allows housing near qualifying transit stops at state-set heights and densities, up to 75 feet and 120 units per acre within a quarter mile of heavy rail stops such as BART, with a half-mile radius in larger cities.

The milestones that change the loan follow the same logic. An SB 330 preliminary application freezes the zoning rules once it is deemed complete. Approval moves the site toward the entitled tier. The end of the challenge window removes litigation risk. A building permit is where rights truly vest: under California case law, absent a development agreement or vesting tentative map, only a valid permit plus substantial work done in reliance on it protects a project if the zoning changes.

The Bay Area: San Francisco and the South Bay

SB 79 reaches Alameda, San Francisco, San Mateo and Santa Clara counties, and the Bay Area is expected to feel it most.

San Francisco. The Family Zoning Plan, signed December 12, 2025, rezones about 96,000 parcels for capacity of roughly 36,000 homes, mostly on the west and north sides, with mid-rise and high-rise heights on transit and commercial corridors. Two lawsuits hang over it: the January CEQA challenge seeking rescission pending further review, and an August suit arguing the city's SB 79 alternative plan, which exempts parts of SoMa, the Bayview and the Bayshore, counts capacity the city had already created. Until those resolve, we would size a San Francisco land loan to the zoning that existed before the plan, and treat the new heights as upside the borrower carries with equity.

San Jose and the South Bay. The problem is not entitlements, it is starts. San Jose has approved tens of thousands of units since 2020, fewer than a third have broken ground, and the city recorded no new market-rate multifamily starts in 2024. SPUR told the council in January that fewer than 10% of projects covered by the inclusionary ordinance pencil under current rules. The incentive program the council extended has helped unlock about 1,400 units. For a lender, an entitled South Bay site is only as strong as the construction loan behind it, so expect the exit to be underwritten harder than the approvals.

What owners should do this quarter

  • Lead with the path. Show the lender which statute or local program the project uses, the statutory clock, and the date of each milestone.
  • File the preliminary application early. Frozen standards make the loan easier to defend.
  • Size the reserve to the real timeline, plus six months. Entitlements slip. Running out of reserve forces an extension on the lender's terms.
  • Price the float. Ask about rate floors, model 100 basis points of SOFR movement, and compare the cost of a cap.
  • Map the takeout from day one. Our construction financing work starts at the land loan, as it did on our $30.36MM Echo Park construction loan.

Quick answers

Can you get a loan on unentitled land in California? Yes, mostly from private lenders, at about 40% to 50% of value in the quotes we see, with coupons that can reach the double digits. Our Morgan Hill land bridge was 11.00%.

What is the typical loan-to-value on a land development loan? About 50% to 60% of value for entitled land from debt funds in the quotes we see. Federal supervisory guidelines set bank limits of 65% for raw land and 75% for land development, and few banks go that far.

Why do land loans have interest reserves? Land produces no income, so the lender holds back 12 to 18 months of interest from the loan proceeds to cover payments until the exit.

Does SB 79 make my land worth more? Only if the site qualifies and the city has not excluded or deferred it. Confirm with the local planning department's SB 79 map before you underwrite the upside.

If you own or are buying a development site anywhere in California, send us the site, your basis and the entitlement status. We will tell you within two business days what the market will lend, from which kind of capital, and what the exit needs to look like. Our land financing page has more on how we work.

Sources. Treasury yields: Federal Reserve H.15 and FRED DGS10, October 5, 2026. SOFR: FRED SOFR, October 5, 2026. Fed decision: Federal Reserve, September 16, 2026. CMBS delinquency: Trepp via Yield PRO, October 4, 2026. Bank LTV limits: 12 CFR Part 365, Appendix A; HVCRE: 12 U.S.C. 1831bb and 12 CFR 324.32, accessed October 7, 2026. SB 79: Allen Matkins, October 10, 2025; ABAG, updated July 17, 2026. SB 9: HCD fact sheet, September 2024; Ventura County Planning, updated March 26, 2026. SB 684 and SB 1123: Allen Matkins, November 21, 2024. AB 2011 and AB 2243: Burke, Williams & Sorensen; Allen Matkins, June 18, 2025. SB 423: San Francisco City Attorney, November 8, 2023. Density bonus: Hanson Bridgett, December 7, 2023. Builder's remedy: Allen Matkins, June 18, 2025. CEQA infill exemption: Burke, Williams & Sorensen, July 8, 2025. SB 330: Los Angeles County Planning, March 17, 2022. San Francisco: SF Planning; KQED, December 2, 2025; Reed Smith, January 29, 2026; San Francisco Standard, August 13, 2026. San Jose: City of San Jose, January 28, 2026; Local News Matters, February 6, 2026; SPUR, January 23, 2026. The loan examples are illustrative.

Rates and terms referenced are drawn from public market data, transactions arranged by Piccard Financial and recent lender quotes, reflect conditions on the dates shown, and change with the market. Summaries of laws are general information, not legal advice. Nothing here is an offer or a commitment to lend. Piccard Financial is a capital markets advisory firm, not a lender.