Los Angeles stands as one of the most active mixed-use development markets in the United States. With the city's Transit Oriented Communities (TOC) program offering up to 80% density bonuses near Metro stations, and SB 35 streamlining approvals for qualifying projects, investors and developers have unprecedented incentives to build residential-over-retail properties across LA. Securing the right mixed-use loans in Los Angeles demands an understanding of local zoning incentives, current lending conditions, and the financial mechanics that make these projects pencil out.
Whether you are planning a live-work development near a Purple Line extension station, converting ground-floor retail to residential in a shifting submarket, or pursuing a TOC-eligible project in Hollywood, this guide walks you through every financing angle specific to the LA market.
What Makes Los Angeles a Prime Market for Mixed-Use Investment?
Los Angeles has embraced mixed-use development as a core strategy for addressing its housing shortage while maintaining neighborhood commercial vitality. The city now allows higher density and more apartment units in walkable, mixed-use neighborhoods, and recent policy shifts have accelerated this trend.
Several factors set LA apart from other metros:
- TOC Incentive Program: Properties within a half-mile radius of major transit stops qualify for density bonuses of up to 80%, reduced parking requirements (sometimes to zero), and increased floor-area ratios of up to 55% above base zoning, in exchange for including affordable housing units.
- SB 35 Streamlined Approvals: Qualifying mixed-use projects with an affordable housing component can bypass lengthy discretionary review, cutting entitlement timelines from years to months.
- Metro Expansion: The ongoing Purple Line extension, Crenshaw/LAX Line, and Regional Connector have created dozens of new station areas ripe for mixed-use development.
- Ground-Floor Commercial Mandates: Specific plan areas such as Hollywood, Downtown LA, and parts of the Westside require ground-floor commercial uses, ensuring a steady pipeline of mixed-use projects.
The Los Angeles commercial real estate market entered 2025 in a transitional phase, with the multifamily and retail sectors showing signs of stabilization. Cap rates for mixed-use properties in prime LA submarkets typically range from 4.5% to 6.0%, depending on location and tenant mix. Market indicators suggest a robust recovery in investment activity heading into 2026, particularly as institutional investors return and interest rates potentially decline.
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What Loan Types Work Best for LA Mixed-Use Properties?
Mixed-use properties combine residential and commercial elements under one roof, making them more complex to finance than single-use buildings. Lenders evaluate both the residential rental income and the commercial lease revenue, and the loan structure depends on the property's use ratio, location, and your investment timeline.
Here are the primary financing options for LA mixed-use properties:
Conventional Commercial Mortgages offer terms of 5 to 25 years with fixed or adjustable rates. As of early 2026, rates for stabilized mixed-use properties in Los Angeles range from approximately 5.6% to 7.5%, depending on leverage and property quality. Maximum loan-to-value ratios typically fall between 65% and 75%.
SBA 504 Loans are ideal for owner-occupants who use at least 51% of the building. The SBA 504 program provides up to 90% financing with below-market fixed rates on the CDC portion, making it attractive for small business owners who want to occupy the commercial space while renting residential units above. Learn more in our SBA loan guide for commercial real estate or explore SBA loan programs.
Bridge Loans serve investors who need to acquire, reposition, or stabilize a mixed-use property before securing permanent financing. If you are purchasing a value-add mixed-use building with vacant commercial space and below-market residential rents, a bridge loan provides the short-term capital to renovate and lease up. Read our commercial bridge loan guide for detailed terms and strategies.
DSCR Loans qualify borrowers based on the property's debt service coverage ratio rather than personal income, which works well for investors with multiple properties or non-traditional income sources. LA mixed-use properties with strong rental income can qualify with DSCR ratios as low as 1.20x. Check requirements at our DSCR loan requirements page or use the DSCR calculator.
Construction-to-Permanent Loans finance ground-up mixed-use developments from construction through stabilization in a single close, eliminating the need for separate construction and permanent financing.
How Does the TOC Program Change Mixed-Use Financing in LA?
The Transit Oriented Communities program is the single most impactful zoning incentive for mixed-use developers in Los Angeles. By allowing significantly more density near transit, the TOC program changes the fundamental economics of a project and, consequently, how lenders underwrite it.
TOC incentives are organized into four tiers based on proximity to transit:
- Tier 1 (within 750 feet of a major bus stop): Up to 50% density bonus
- Tier 2 (within 750 feet of a rail station or BRT): Up to 60% density bonus
- Tier 3 (within 500 feet of a rail station): Up to 70% density bonus
- Tier 4 (within 250 feet of a major rail station): Up to 80% density bonus
For financing purposes, the TOC program impacts mixed-use loans in several critical ways:
Higher Achievable Density Means Higher Loan Amounts. A site zoned for 20 units under base zoning might support 36 units under a Tier 4 TOC bonus. The increased unit count raises total projected rental income, which supports a larger loan. Lenders experienced with LA mixed-use projects will underwrite to the entitled density, not just base zoning.
Reduced Parking Requirements Lower Construction Costs. Parking is one of the most expensive components of LA development, with structured parking costing $40,000 to $80,000 per space. TOC projects near rail stations can reduce required parking to as low as 0.5 spaces per unit, saving hundreds of thousands of dollars that improve project feasibility and loan-to-cost ratios.
Affordable Housing Set-Asides Affect Cash Flow Projections. To receive TOC incentives, developers must include deed-restricted affordable units (typically 8% to 25% of total units at various AMI levels). Lenders must account for below-market rents on these units when projecting cash flow, which affects debt service coverage ratios.
Streamlined Approvals Reduce Predevelopment Risk. The ministerial approval process for TOC-compliant projects reduces entitlement risk, which makes lenders more comfortable with construction financing for these developments.
What Are Current Mixed-Use Loan Rates and Terms in Los Angeles?
Loan rates for mixed-use properties in Los Angeles vary based on property type, leverage, borrower strength, and market conditions. As of early 2026, here is a snapshot of typical terms:
| Loan Type | Rate Range | LTV | Term | Amortization |
|---|---|---|---|---|
| Conventional Fixed | 5.8% - 7.0% | 65% - 75% | 5 - 10 yr | 25 - 30 yr |
| SBA 504 | 5.5% - 6.5% | Up to 90% | 10 - 25 yr | 10 - 25 yr |
| Bridge | 7.5% - 10.0% | 65% - 80% | 12 - 36 mo | Interest-only |
| DSCR | 6.0% - 8.0% | 65% - 80% | 5 - 30 yr | 25 - 30 yr |
| Construction | 7.0% - 9.5% | 60% - 75% LTC | 18 - 36 mo | Interest-only |
| HUD/FHA 221(d)(4) | 5.5% - 6.2% | Up to 85% | 40 yr | 40 yr |
With many rates in the 6% to 7% range, cash flow analysis is more critical than ever. Borrowers should run projections using our commercial mortgage calculator to ensure positive leverage on their LA mixed-use investment.
Lenders evaluating mixed-use properties in LA pay close attention to the residential-to-commercial ratio. Properties with 70% or more residential use generally qualify for more favorable residential lending terms, while those with a larger commercial component face stricter underwriting. The ideal mix for most LA mixed-use buildings falls between 65% and 80% residential, with ground-floor retail or office space making up the balance.
How Does Measure ULA Affect Mixed-Use Property Transactions?
Measure ULA, often called the "mansion tax," has reshaped the economics of buying and selling commercial and mixed-use properties in Los Angeles. Effective since April 2023, and with updated thresholds as of July 2025, the tax applies to property transfers as follows:
- 4% transfer tax on sales between $5,300,000 and $10,600,000
- 5.5% transfer tax on sales of $10,600,000 and above
The impact on mixed-use property transactions has been significant. Research from UCLA's Lewis Center found that high-value property sales in Los Angeles fell by approximately 50% in the first two years after ULA took effect, a far steeper decline than in the rest of LA County during the same period. Apartment building, commercial, and industrial property sales dropped 30% to 50% because these properties are more likely to exceed the $5 million threshold.
For mixed-use investors and borrowers, Measure ULA creates several financing considerations:
- Higher acquisition costs require more equity or creative deal structures to maintain acceptable returns
- Sellers may inflate asking prices to offset their tax burden, compressing buyer returns
- 1031 exchanges within LA face a double tax hit (selling and buying), pushing some investors toward properties outside city limits
- Refinancing becomes more attractive than selling, as the tax only applies to transfers of ownership
Some developers have structured deals to avoid triggering ULA, such as selling partial interests or using ground leases. Your lender and tax advisor should collaborate to structure mixed-use transactions that minimize ULA exposure while maintaining favorable loan terms.
Which LA Neighborhoods Offer the Best Mixed-Use Opportunities?
Not all Los Angeles submarkets offer equal opportunity for mixed-use investment. The strongest performers combine transit access, zoning that supports density, population growth, and tenant demand for both residential and commercial space.
Downtown Los Angeles (DTLA) remains the epicenter of mixed-use development, with dozens of projects ranging from luxury high-rises to adaptive reuse conversions. The Regional Connector's completion has improved transit connectivity, and ground-floor retail mandates ensure ongoing commercial activation. Cap rates range from 4.5% to 5.5% for stabilized assets.
Hollywood benefits from the Red Line, strong TOC incentives, and a deep pool of residential tenants. Mixed-use projects along Hollywood Boulevard and Vine Street corridor continue to attract institutional capital, with significant development in the pipeline for 2026 and beyond.
Koreatown offers some of the highest-density zoning in LA combined with proximity to multiple Metro stations (Purple and Red Lines). Investor demand for mixed-use properties here is strong, with live-work concepts and residential-over-retail buildings performing well. The neighborhood's TOC eligibility makes it one of the most attractive submarkets for density-bonus projects.
East Hollywood and Westlake are emerging mixed-use corridors along the Metro B Line, with a 668-unit mixed-use development proposed near the Westlake/MacArthur Park Metro Station featuring residential, commercial, office, medical, and hotel uses.
Culver City and Expo Line Corridor have seen a surge in mixed-use development following the Expo Line opening, with tech tenants driving demand for ground-floor commercial space and strong residential absorption above.
North Hollywood Arts District benefits from the B Line terminus and upcoming East San Fernando Valley Transit Corridor, with relatively lower land costs that improve project feasibility for mixed-use developers.
What Role Does SB 35 Play in LA Mixed-Use Developments?
Senate Bill 35 provides a streamlined, ministerial approval process for housing developments (including mixed-use projects) in jurisdictions that have not met their Regional Housing Needs Assessment (RHNA) goals. Los Angeles has consistently fallen short of its housing production targets, making most of the city eligible for SB 35 streamlining.
For mixed-use projects, SB 35 offers several critical advantages:
- No discretionary review: Qualifying projects bypass planning commission hearings, community opposition, and environmental review under CEQA
- Faster timelines: Approval can take 90 to 180 days instead of 1 to 3 years for standard entitlement
- Reduced predevelopment costs: Eliminating drawn-out entitlement processes saves on legal, consulting, and carrying costs
- Greater lender confidence: The reduced entitlement risk makes lenders more willing to provide construction financing
To qualify for SB 35 streamlining in Los Angeles, a mixed-use project must:
- Include at least two-thirds residential use
- Provide a minimum percentage of affordable units (typically 10% at below-market rents)
- Comply with objective zoning and design standards
- Be located on an infill site in an urbanized area
- Pay prevailing wages for construction labor
- Not demolish rent-stabilized or occupied affordable housing
The combination of SB 35 streamlining with TOC density bonuses creates a powerful development pathway. A mixed-use project near a Metro station can receive both the density bonus and the streamlined approval, dramatically improving project economics and financing feasibility.
How Should You Underwrite a Mixed-Use Property in Los Angeles?
Underwriting a mixed-use property in LA requires evaluating both the residential and commercial components separately, then combining them into a blended analysis. Lenders focus on several key metrics:
Debt Service Coverage Ratio (DSCR): Most lenders require a minimum DSCR of 1.20x to 1.25x for stabilized mixed-use properties. This means the property's net operating income must exceed annual debt service by 20% to 25%. For value-add properties, lenders may underwrite to a projected DSCR upon stabilization. Use our DSCR calculator to model your numbers, and review DSCR loan requirements for qualification details.
Vacancy Assumptions: Lenders typically assume 5% vacancy for residential units and 10% to 15% vacancy for commercial space in LA mixed-use buildings. In submarkets with high retail vacancy (parts of DTLA, for example), lenders may apply even higher commercial vacancy factors.
Expense Ratios: LA mixed-use properties carry higher operating expenses than single-use buildings due to shared systems, separate utility metering, and potentially higher insurance costs. Typical expense ratios range from 35% to 45% of effective gross income, with the higher end reflecting buildings with elevators, structured parking, and on-site management.
Commercial Tenant Quality: Ground-floor tenants with national credit (pharmacies, banks, grocery stores) strengthen the underwriting, while local small businesses may require the lender to discount that income or apply a higher vacancy factor. Lease terms matter as well: lenders prefer commercial leases with at least 5 years remaining and annual rent escalations.
LA-Specific Considerations:
- Rent-stabilized residential units (RSO) limit rent increases to 3% to 4% annually for existing tenants, which affects income growth projections
- Seismic retrofit requirements (mandatory soft-story retrofit program) can create significant capital expenditure needs
- Measure ULA must be factored into exit strategy and disposition modeling
What Are the Parking and Density Bonus Calculations for LA Mixed-Use?
Parking requirements can make or break a mixed-use project's financial feasibility in Los Angeles. The city's base zoning typically requires 1 to 2 parking spaces per residential unit and 1 space per 250 to 500 square feet of commercial space. At construction costs of $40,000 to $80,000 per structured parking space, these requirements add millions to project budgets.
The TOC program and other incentive programs offer significant parking reductions:
- TOC Tier 4 (near major rail stations): As low as 0.5 spaces per unit
- TOC Tier 3: 0.5 spaces per unit
- TOC Tier 2: 0.5 spaces per unit
- Base Density Bonus (non-TOC): Reduced parking ratios for projects with affordable units
- Adaptive Reuse Ordinance: No additional parking required for converting commercial buildings to residential use in Downtown LA
For a hypothetical 50-unit mixed-use project with 5,000 square feet of ground-floor retail:
| Scenario | Residential Spaces | Commercial Spaces | Total | Estimated Cost |
|---|---|---|---|---|
| Base Zoning | 75 | 15 | 90 | $4,500,000 - $7,200,000 |
| Density Bonus | 50 | 15 | 65 | $3,250,000 - $5,200,000 |
| TOC Tier 4 | 25 | 10 | 35 | $1,750,000 - $2,800,000 |
The savings from reduced parking translate directly into improved loan-to-cost ratios and higher returns on equity, making TOC-eligible sites significantly more attractive to both developers and lenders.
How Is the Mixed-Use Development Pipeline Shaping LA's Future?
Los Angeles has one of the largest mixed-use development pipelines in the country, with projects concentrated around Metro stations, major boulevards, and designated specific plan areas. The surge in mixed-use development has contributed greatly toward the urbanization of LA, and the trend is accelerating.
Notable pipeline trends for 2025 and 2026 include:
- Residential-over-retail dominance: The vast majority of new mixed-use projects feature residential units above ground-floor retail, reflecting tenant demand and zoning requirements
- Retail-to-residential conversions: Some property owners are rethinking their commercial spaces, with projects like the Dinerstein Companies' Santa Monica complex converting approximately 20,300 square feet of retail into 18 residential units
- Live-work concepts: Growing demand from remote workers and small business owners is driving live-work unit development, particularly in arts districts and creative corridors
- Micro-unit and co-living integration: Some mixed-use projects incorporate smaller, more affordable unit types to meet demand and satisfy affordable housing requirements
The investment outlook for 2026 suggests continued momentum. Multifamily and mixed-use vacancies may have peaked, rents appear to be nearing their bottom, and more active market activity is anticipated if interest rates decline and the broader economy strengthens. Major institutional investors are expected to return to the LA market, helping restore liquidity for larger mixed-use transactions.
What Steps Should You Take to Finance Your LA Mixed-Use Project?
Financing a mixed-use property in Los Angeles requires careful preparation and a strategic approach. Follow this process to position your project for the best possible terms:
Step 1: Evaluate TOC and Density Bonus Eligibility. Before making an offer on a site, determine whether it falls within a TOC tier. The LA Department of City Planning's ZIMAS tool provides zoning and TOC eligibility data for any parcel in the city. This information directly affects your development potential and financing options.
Step 2: Assemble Your Pro Forma. Build a detailed development budget and operating pro forma that accounts for LA-specific costs including seismic compliance, Measure ULA transfer taxes (for acquisitions), prevailing wage requirements (for SB 35 projects), and RSO rent limitations. Use the commercial mortgage calculator to test different financing scenarios.
Step 3: Choose the Right Loan Product. Match your financing to your investment strategy. Stabilized acquisitions may work best with conventional commercial mortgages or DSCR loans. Owner-occupied properties benefit from SBA 504 financing. Value-add projects require bridge loans before transitioning to permanent financing.
Step 4: Prepare Your Loan Package. Lenders financing LA mixed-use properties will require a completed loan application, personal financial statements, property appraisal, environmental Phase I assessment, rent rolls and lease abstracts, historical operating statements (for existing properties), and a development budget with construction timeline (for new construction).
Step 5: Work with an Experienced Lender. Mixed-use properties are inherently more complex than single-use buildings, and LA's regulatory environment adds another layer. Choose a lender with specific experience in Los Angeles mixed-use financing who understands TOC incentives, SB 35 streamlining, and the city's unique zoning landscape.
Contact our team today to discuss your LA mixed-use financing needs. We specialize in structuring loans for transit-oriented and TOC-eligible mixed-use developments across Los Angeles County.
What Emerging Trends Will Shape LA Mixed-Use Lending in 2026?
The mixed-use lending landscape in Los Angeles continues to evolve. Several trends will influence financing strategies through 2026 and beyond:
Interest Rate Environment: With rates having stabilized in the mid-5% to low-7% range for commercial mortgages, borrowers are finding more predictability in their financing costs. If the Federal Reserve cuts rates further in 2026, mixed-use refinancing activity could accelerate significantly.
Insurance Costs: Wildfire risk and rising insurance premiums across Southern California are affecting property valuations and lending terms. Lenders are increasingly scrutinizing insurance costs as a line item in operating expenses, particularly for mixed-use properties in hillside or high-fire-risk areas.
Adaptive Reuse Growth: Converting underperforming office buildings and retail centers to mixed-use properties is gaining traction in LA, supported by the city's Adaptive Reuse Ordinance and state-level conversion incentive programs. These projects often require creative financing structures that blend acquisition, renovation, and construction lending.
ESG and Green Building Incentives: LA's Green New Deal and building performance standards are pushing mixed-use developers toward energy-efficient construction. Some lenders offer green financing incentives, including rate reductions for LEED-certified or Energy Star-rated mixed-use buildings.
AI and Proptech in Underwriting: Lenders are adopting more sophisticated underwriting tools that analyze mixed-use properties with greater granularity, evaluating residential and commercial components separately while accounting for the synergies between them.
The Los Angeles mixed-use market offers compelling opportunities for investors who understand the local incentive landscape and can navigate the city's complex regulatory environment. With proper financing, a well-located mixed-use property near transit can deliver strong risk-adjusted returns while contributing to LA's urban housing goals.
Ready to explore mixed-use financing in Los Angeles? Our team can help you identify the right loan structure for your project, whether you are acquiring a stabilized asset, pursuing a TOC development, or converting an underperforming property to mixed use.
For a broader overview of commercial lending options in the Los Angeles market, visit our Los Angeles commercial loans page.
Frequently Asked Questions About Mixed-Use Loans in Los Angeles
What is the minimum down payment for a mixed-use property loan in LA?
Down payment requirements depend on the loan type and property characteristics. Conventional commercial loans typically require 25% to 35% down (65% to 75% LTV). SBA 504 loans can go as high as 90% LTV, requiring only 10% down for owner-occupied mixed-use properties. Bridge loans range from 20% to 35% down depending on the lender and project risk profile.
Can I use a residential loan for a mixed-use property in Los Angeles?
In some cases, yes. If the property has four or fewer residential units and the commercial space occupies less than 25% to 30% of the total square footage, some residential lenders will finance the purchase. However, properties with a larger commercial component or more than four units require commercial financing. Many LA mixed-use buildings exceed these thresholds and need commercial or DSCR loan structures.
How does the TOC program affect my loan approval?
The TOC program can positively impact your loan approval by increasing the property's development potential and income capacity. Lenders familiar with LA zoning will underwrite to the TOC-entitled density, not just base zoning. However, the required affordable housing set-asides reduce projected rental income on those units, which must be reflected in cash flow projections. Overall, the net effect of TOC on financing is strongly positive for most projects.
What DSCR do lenders require for LA mixed-use properties?
Most lenders require a debt service coverage ratio between 1.20x and 1.30x for stabilized mixed-use properties in Los Angeles. Properties with strong commercial tenants and high residential occupancy may qualify at the lower end of this range, while those with shorter commercial leases or higher vacancy may face stricter requirements. Run your numbers through our DSCR calculator to see where your property stands.
Does Measure ULA apply to mixed-use property refinances?
No. Measure ULA only applies to transfers of ownership (sales). Refinancing an existing mixed-use property does not trigger the transfer tax. This has made refinancing and hold strategies more attractive for LA mixed-use investors who want to access equity without incurring the 4% to 5.5% tax on a sale.
How long does it take to close a mixed-use loan in Los Angeles?
Timelines vary by loan type. Bridge loans can close in as little as 2 to 4 weeks. Conventional commercial mortgages typically take 45 to 90 days. SBA 504 loans require 60 to 120 days due to CDC involvement. Construction loans may take 60 to 90 days to close but require completed entitlements before the lender will commit. Working with an experienced lender who knows the LA market can help accelerate the process. Get in touch with our team to get started.