Los Angeles is one of the most active and expensive construction markets in the United States, with building costs averaging $250 to $500 per square foot for standard construction and luxury projects exceeding $700 to $1,200 per square foot. Whether you are planning ground-up multifamily development in Downtown LA, building an ADU in Silver Lake under California's streamlined permitting laws, financing a wildfire rebuild in Pacific Palisades or Altadena, or converting an underutilized commercial building in Hollywood through adaptive reuse, securing the right construction financing is the most critical step in moving your project forward.
Clear House Lending provides construction loan financing across Los Angeles County, from vertical construction loans for mid-rise and high-rise development to horizontal construction financing for site preparation and ground-up projects. This guide covers LA-specific construction costs, LADBS permitting, ADU financing under SB 9 and SB 10, wildfire rebuild programs, seismic retrofit requirements, and the loan structures available to developers and property owners in 2025.
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What Does the Los Angeles Construction Market Look Like in 2025?
Los Angeles construction costs have surged dramatically over the past five years, with residential building costs climbing 44% since 2020 and costs jumping another 6% in the first quarter of 2025 alone. This acceleration is driven by persistent labor shortages, rising material prices, complex permitting requirements, and the massive rebuilding effort triggered by the January 2025 wildfires.
The Palisades and Eaton fires destroyed approximately 11,000 homes across Pacific Palisades, Altadena, and surrounding communities, creating an unprecedented rebuilding demand that is straining an already-tight construction labor pool. As of late 2025, fewer than 10% of destroyed homes have received permits to rebuild, signaling a years-long construction cycle ahead that will keep demand for materials and labor elevated across the entire LA market.
Beyond wildfire recovery, Los Angeles continues to see strong development activity driven by the ADU construction boom, transit-oriented multifamily projects along Metro expansion corridors, adaptive reuse of aging commercial buildings, and entertainment industry studio expansion. The city issued over 20,000 ADU permits between 2017 and 2024, more than any other city in California, and new legislation continues to accelerate this pipeline.
Measure ULA (the "mansion tax"), which took effect in April 2023, has reshaped the development landscape by imposing a 4% transfer tax on properties selling for $5 million to $10 million and 5.5% on properties above $10 million. While the measure funds affordable housing and homelessness prevention, it has pushed some developers to hold assets longer and restructured how investors approach project exits, particularly for larger commercial and multifamily developments.
For developers seeking construction financing, the current market presents a window where lenders are increasingly active after pulling back during 2022-2024. Well-structured projects with experienced sponsors and realistic budgets are finding competitive terms from both bank and non-bank lenders.
What Are the Current Construction Loan Rates and Terms in Los Angeles?
Construction loan rates in Los Angeles currently range from approximately 7.50% to 12.00% depending on the project type, sponsor experience, loan-to-cost ratio, and whether the project involves ground-up development, renovation, or ADU construction. Rates have moderated from their 2024 peaks but remain significantly higher than pre-pandemic levels.
Most LA construction loans are structured as interest-only facilities with 12 to 36 month terms, often including one or two six-month extension options. Funds are disbursed through a draw schedule, with the borrower requesting disbursements as construction milestones are completed and verified by a third-party construction monitor or inspector.
Loan-to-cost (LTC) ratios typically range from 55% to 80%, with higher leverage available for experienced sponsors and projects with pre-sales or pre-leasing commitments. Recent LA market examples include a single-family construction loan in Glassell Park at 11% with a 12-month term and a luxury ground-up project in Beverly Hills at 11.49% with an 18-month term. Experienced developers can access bank rates in the 7.50% to 9.50% range, while hard money construction loans start at 10.25%.
To estimate your construction loan payments and project feasibility, use our commercial bridge loan calculator or commercial mortgage calculator.
What Types of Construction Projects Can Be Financed in Los Angeles?
Los Angeles supports a uniquely diverse range of construction project types, each with distinct financing requirements shaped by the city's geography, regulations, and market dynamics.
Ground-Up Development encompasses new multifamily, mixed-use, and commercial construction from vacant or cleared lots. Costs range from $300 to $650 per square foot, with timelines of 18 to 48 months plus 4 to 12 months for LADBS permitting. Projects in Transit-Oriented Communities (TOC) zones benefit from density bonuses of up to 80% that significantly improve economics. Explore vertical construction financing for mid-rise and high-rise projects.
ADU Construction is one of the most active segments in Los Angeles. Under SB 9, SB 10, and AB 2221, cities must process ADU permits within 60 days through ministerial approval. Costs range from $150 to $400 per square foot ($90,000 to $400,000 total), and the CalHFA ADU Grant Program provides up to $40,000 for pre-development costs and permits.
Wildfire Rebuild Financing is a critical need following the January 2025 Palisades and Eaton fires. Rebuilding costs start at $1 million for a typical home, and many homeowners face gaps between insurance payouts and reconstruction costs. Specialized construction loan programs accept insurance proceeds as equity. The County has tripled permitting speed and deferred fees to save residents up to $30,000.
Adaptive Reuse and Conversions are increasingly common in LA, converting aging office buildings, warehouses, and retail spaces into residential or mixed-use projects. The city's Adaptive Reuse Ordinance (expanded since 1999) covers broad geographic areas. These projects cost $200 to $400 per square foot and offer a faster path to market. Our commercial bridge loan guide explores bridge financing for acquisition and early conversion stages.
Entertainment Studio and Production Facility Construction is a uniquely LA project type. The region's entertainment industry continues to expand production capacity, with sound stage construction and production facility development commanding premium construction costs of $400 to $800 per square foot due to specialized acoustic, electrical, and structural requirements.
How Do LADBS Permits and Zoning Affect Construction Financing in LA?
Navigating the Los Angeles Department of Building and Safety (LADBS) permit process is one of the most time-intensive aspects of any construction project in the city, and lenders closely evaluate a project's permitting status when underwriting construction loans.
LADBS processes several categories of permits, each with different timelines and requirements. New construction permits require full plan check review, which takes 15 to 30 business days for standard projects but can extend significantly for larger or more complex developments. Express plan check is available for smaller residential projects and costs an additional fee but can reduce review time to 3 to 5 business days. Over-the-counter permits are available for minor alterations and repairs, providing same-day issuance.
Permit costs are substantial, with total permitting-related soft costs reaching $10,000 to $50,000 for residential projects and significantly more for commercial development. For wildfire rebuild zones, the County has deferred or reduced many fees.
Zoning and Density Bonuses play a major role in project feasibility. The city's Transit-Oriented Communities (TOC) program provides density bonuses of up to 80% for projects near major transit stops that include affordable housing, dramatically increasing buildable square footage and improving project economics for lenders.
Seismic Retrofit Requirements are a significant cost factor unique to California construction. LA's mandatory soft-story retrofit ordinance requires wood-frame buildings with tuck-under parking or soft ground-floor configurations to be structurally reinforced. These retrofits typically cost $60,000 to $200,000 per building and may be required before or in conjunction with renovation financing. For new ground-up construction, current seismic codes add approximately $10 to $30 per square foot to structural costs compared to less seismically active markets.
Lenders strongly prefer projects with approved permits or a clear path to approval. Financing a project that has not yet received LADBS approval typically requires a pre-development bridge loan, which carries higher rates and shorter terms. Getting your permits in order before approaching construction lenders will save significant time and money.
Contact Clear House Lending to discuss construction financing for your LA development project.
How Does California's ADU Legislation Affect Construction Financing in LA?
California's aggressive ADU legislation has transformed Los Angeles into the nation's most active market for accessory dwelling unit construction. Understanding these laws and their financing implications is essential for property owners looking to add units to their properties.
SB 9 (California HOME Act) allows owners of single-family lots to split their property and build up to four units on parcels previously zoned for one home. This law effectively eliminates single-family-only zoning across the state, creating substantial development opportunities in neighborhoods throughout LA that were previously restricted to single-unit construction.
SB 10 allows local governments to rezone any parcel for up to 10 units near transit or in urban infill areas without environmental review (CEQA). While LA has been selective in its implementation, the law creates a framework for significantly increased density in transit-rich neighborhoods.
AB 2221 further streamlined the ADU permitting process by prohibiting cities from imposing design review standards, owner-occupancy requirements (suspended through 2025), and other subjective approval criteria that previously delayed ADU projects.
ADU loan rates in California currently range from 6.75% to 8.25%, higher than standard mortgage rates due to the construction component and specialized nature of these loans. Most lenders finance 75% to 90% of total project cost for qualified borrowers with adequate equity in the existing property.
Financing options for ADU construction include:
- Home Equity Loans and HELOCs: Allow homeowners to keep their existing low-rate first mortgage while accessing equity for construction
- Cash-Out Refinance: Replaces the first mortgage with a new, larger loan to extract construction capital
- Construction-to-Permanent Loans: Single-close products that convert from a construction loan to permanent financing upon completion
- CalHFA ADU Grant: Up to $40,000 for pre-development costs including permits, design, and impact fees for income-qualifying homeowners
ADUs in desirable LA neighborhoods generate monthly rental income of $1,800 to $3,500, with break-even periods of 5 to 8 years. ADUs add an estimated 20% to 35% to property values, making ADU construction one of the most accessible entry points into LA real estate development.
What Are the True Costs of Building in Los Angeles Per Square Foot?
Los Angeles consistently ranks among the most expensive construction markets in the United States, and understanding the full cost picture is essential for structuring a viable financing plan.
For ground-up multifamily construction, total development costs (including land, hard costs, and soft costs) range from $350 to $650 per square foot across LA County, with projects in West LA, Beverly Hills, and Santa Monica regularly exceeding $600 per square foot. Hard construction costs alone average $250 to $500 per square foot for standard construction.
Key cost drivers that are specific to Los Angeles include:
- Seismic engineering and construction: Current California Building Code seismic requirements add $10 to $30 per square foot compared to non-seismic markets
- Fire-zone construction: Properties in Very High Fire Hazard Severity Zones require fire-resistant materials, defensible space, and enhanced sprinkler systems, adding $15 to $40 per square foot
- Hillside construction: Projects on slopes require additional grading, retaining walls, and specialized foundation work, increasing costs by 25% to 50% over flat-lot construction
- Permit and regulatory compliance: LADBS fees, school fees, park fees, and environmental review requirements add $30 to $80 per square foot in soft costs
- Labor market tightness: LA's construction labor shortage, intensified by wildfire rebuild demand, has pushed wages up 15% to 25% over the past two years
These costs directly impact construction loan sizing. Lenders commission independent cost estimates and compare them against your budget, so realistic projections that account for LA's unique expense profile are essential for securing favorable terms.
How Does Wildfire Rebuild Financing Work in Los Angeles?
The January 2025 Palisades and Eaton fires created an unprecedented rebuilding challenge in Los Angeles, with approximately 11,000 homes destroyed and billions of dollars in reconstruction needed. Understanding the financing landscape for wildfire rebuilds is critical for affected homeowners and investors.
Rebuilding costs present a major challenge. A typical 1,500 to 2,000 square foot home in Pacific Palisades will require at least $1 million to rebuild, and many homes in the affected areas were significantly larger. Insurance payouts, while substantial, often fall short of actual reconstruction costs due to coverage limits, rising material prices, and code upgrade requirements that mandate building to current (more expensive) standards.
Southern California Edison announced a compensation program for victims of the Eaton Fire, offering $550 to $750 per square foot for destroyed single-family residences. This compensation, combined with insurance proceeds, can provide a strong equity base for construction financing to cover any remaining gap.
Government Support Programs are substantial. Governor Newsom committed $101 million to jumpstart rebuilding, LA County offers Household Relief Grants of up to $18,000 for eligible homeowners, and the County has tripled permitting speed while deferring fees to save residents up to $30,000 per project. An additional $10 million in state funding supports factory-built housing solutions to accelerate recovery.
Construction Loan Structures for Rebuilds typically use insurance proceeds as the borrower's equity contribution, with a construction loan covering the gap between insurance payout and total reconstruction cost. Lenders evaluate the completed home value to determine the loan-to-value ratio upon completion. For rebuilds on previously developed lots, permitting and construction timelines are generally shorter than ground-up development on raw land.
Homeowners rebuilding in fire zones should also consider SBA disaster loans, which offer low-interest financing for rebuilding. For more information about structuring an SBA loan for commercial real estate, including owner-occupied properties with commercial components, our detailed guide covers the qualification requirements and process.
How Do You Qualify for a Construction Loan in Los Angeles?
Qualifying for a construction loan in Los Angeles requires meeting a higher standard than permanent financing on completed properties. Lenders evaluate the sponsor, the project, and the market conditions as an integrated package.
Sponsor Experience is the most important qualification factor for commercial construction projects. LA construction lenders prefer developers with a track record of completing similar projects in the Southern California market. First-time developers can improve their chances by partnering with an experienced general contractor or development partner with a proven LA track record.
Equity Contribution typically ranges from 20% to 45% of total project cost, depending on the project type and sponsor strength. ADU construction loans and residential ground-up loans generally require 20% to 30% equity, while larger commercial and multifamily projects require 30% to 45%. Insurance proceeds from wildfire claims can serve as equity for rebuild projects.
Project Feasibility is evaluated through detailed construction budgets, proformas, and market analysis. Lenders in LA pay particular attention to realistic construction timelines that account for LADBS permitting delays, labor availability, and seasonal considerations. A contingency budget of at least 10% of hard costs is expected for LA projects given the market's history of cost escalation.
General Contractor Qualification is scrutinized carefully. Lenders require a licensed (CSLB-licensed in California), bonded, and insured general contractor with a track record on projects of similar scope. The GC must carry adequate liability insurance and workers' compensation coverage.
Permit and Environmental Compliance directly affect your financing terms. Projects with approved LADBS permits command better rates and higher leverage. Lenders require Phase I environmental assessments, CEQA clearance where applicable, and verification that the project meets current California Building Code seismic standards. Projects in landslide zones, liquefaction zones, or fire hazard areas face additional scrutiny.
Ready to discuss your LA construction project? Contact Clear House Lending for a confidential consultation on your development financing options.
Frequently Asked Questions
What is the minimum down payment for a construction loan in Los Angeles?
Construction loans in LA typically require 20% to 45% equity. ADU and residential projects need 20% to 30%, while commercial and multifamily ground-up projects require 30% to 45%. On a $2 million project, expect to contribute $400,000 to $900,000. Mezzanine financing or JV equity can supplement, though senior lenders still require 10% to 15% direct sponsor equity.
How long does it take to get a construction permit from LADBS?
Standard plan check takes 15 to 30 business days, with complex projects extending to 60 to 90 days. Express plan check reduces timelines to 3 to 5 business days for an additional fee. ADU permits must be processed within 60 days under state law. Wildfire rebuild permits are being fast-tracked. Budget 4 to 6 months for the full pre-construction permitting process.
Can I finance an ADU with a construction loan in Los Angeles?
Yes. ADU-specific construction loans offer rates of 6.75% to 8.25% with 75% to 90% LTC. HELOCs and home equity loans let you tap existing equity without refinancing. The CalHFA ADU Grant provides up to $40,000 for pre-development costs. Construction-to-permanent loans convert to a standard mortgage upon completion. Most ADU loans fund within 30 to 60 days.
How do the 2025 wildfires affect construction loan availability in LA?
Lenders remain active despite increased demand. Many have developed specialized rebuild programs that accept insurance proceeds as equity. Properties in Very High Fire Hazard Severity Zones may face additional insurance requirements and slightly higher rates. State and county fee deferrals help offset costs. Construction labor availability is the biggest practical concern, as rebuild demand competes with ongoing projects for a limited workforce.
What is Measure ULA and how does it affect construction financing in Los Angeles?
Measure ULA imposes a 4% transfer tax on sales between $5 million and $10 million and 5.5% above $10 million within the City of LA. It primarily affects exit strategy rather than the construction phase. Developers must factor the tax into proformas, and some are holding projects as rentals or restructuring ownership to minimize exposure. Lenders evaluate exit strategies accordingly during underwriting.
Do I need seismic retrofit work before getting a construction loan for renovation in LA?
It depends on the building type. LA's mandatory soft-story retrofit ordinance requires certain wood-frame buildings to be structurally reinforced. Lenders will require this work to be included in the construction scope and budget if applicable. For new construction, compliance with current seismic standards is mandatory ($10 to $30 per square foot premium). Lenders will not finance projects that do not meet current code requirements.
For more information about commercial real estate financing in Los Angeles, visit our comprehensive Los Angeles commercial loans guide. Take the next step in your development project by contacting Clear House Lending today for a free consultation tailored to your construction financing needs.