Key Takeaways
- California’s new legislation reforming the California Environmental Quality Act aims to expedite housing and infrastructure projects.
- Developers face less risk in starting new projects, enhancing financing opportunities and leading to greater investment in California.
- Cityview is expanding nationally to capitalize on growth opportunities in markets like Dallas, Boston, and Atlanta due to challenges in California.
Legislative Changes in California
In late June, California Governor Gavin Newsom signed significant reforms to the California Environmental Quality Act (CEQA), a law established in 1971 intended to inform the public and government about potential environmental impacts of development. Developers, however, argue that CEQA has often been misused by neighborhood groups to halt housing projects. Sean Burton, CEO of Cityview, noted that many deals were abandoned due to the threat of litigation and delays often associated with CEQA.
The new legislation, part of California’s 2025-2026 state budget termed the Abundance Agenda, seeks to streamline CEQA reviews. It aims to speed up the approval process for a range of projects including housing, high-speed rail, utilities, and wildfire prevention facilities. Burton emphasized that previous regulations were major hurdles to housing development, stating, “It was probably the major impediment to getting new housing built in the state.” With reforms now in place, there is optimism among developers that investment in California’s housing market will increase.
Burton noted a shift in development dynamics over the past few years. Previously, the focus was primarily on acquiring existing properties rather than building new ones, due to the cost differentials. However, he observes that competition for acquisitions has intensified, significantly lowering yields. He claims that developing new housing increasingly appears more financially attractive as capitalized rates fall, promising yields of 6.5% to 7%, while current sales cap rates hover around 4.5% to 5%.
Burton acknowledged a more favorable development landscape moving forward, despite recent challenges posed by high interest rates and the introduction of a mansion tax in Los Angeles. Cityview currently has 2,500 units in its pipeline across various stages of entitlement and plans to proceed once conditions stabilize.
Labor market challenges—exacerbated by immigration enforcement—concern residential builders, particularly smaller developers. Although Cityview has a solid position as a larger developer working with major contractors, smaller firms report struggles to find adequate construction labor. Furthermore, the demand for rebuilding in areas affected by wildfires has compounded these labor shortages.
To mitigate challenges in California, Cityview has decided to expand nationally, establishing offices in Dallas and New York City. As a response to market difficulties in California, the company seeks to explore opportunities across the country. Markets like Boston, Atlanta, and Orlando, which exhibit strong demand and growth potential, have been prioritized through detailed analyses after collaborating with market research firms.
This strategic shift illustrates the company’s desire to diversify its portfolio and not solely rely on California’s fluctuating market. Burton and his team evaluated 40 major U.S. markets on multiple criteria, narrowing their focus to the most promising locations for future development.
Cityview’s expansion highlights a proactive approach in adapting to changing market conditions in California while also capitalizing on favorable investment opportunities in emerging markets across the country.
The content above is a summary. For more details, see the source article.
