Political Risk and Real Estate Exposure in Urban Markets: How a Potential Caruso Run for Office Could Impact Los Angeles Real Estate and Related Investment Sectors

The intersection of politics and real estate in Los Angeles has never been more dynamic. As Rick Caruso, a billionaire developer and former mayoral candidate, reemerges as a political force, investors and policymakers must grapple with the implications of his potential 2026 mayoral or gubernatorial bid. Caruso’s career as a real estate magnate—owning properties like Palisades Village and The Grove—has long positioned him as a key player in shaping the city’s urban fabric. Now, his advocacy for policy reforms, post-disaster recovery initiatives, and critiques of bureaucratic inefficiencies could redefine Los Angeles’ real estate landscape, particularly in housing, commercial development, and infrastructure.

Caruso’s Policy Priorities and Market Implications

Caruso’s political platform centers on streamlining development processes, reducing regulatory barriers, and fostering private-sector collaboration. A cornerstone of his agenda is reforming California’s California Environmental Quality Act (CEQA), which critics argue has stifled housing and infrastructure projects. Recent CEQA reforms (AB 130 and SB 131) have already exempted qualifying infill housing and wildfire-prevention projects from environmental review, potentially accelerating approvals by 12–18 months [1]. If Caruso secures office, his push for further CEQA modifications—such as waiving plan-check fees or fast-tracking permits—could amplify these effects, incentivizing developers to prioritize high-density, mixed-use projects in urban cores [2].

For the housing sector, this could mean a surge in multifamily developments, particularly in areas like Downtown LA and the San Fernando Valley, where Caruso has existing investments. However, critics warn that such policies might exacerbate affordability challenges by favoring market-rate over affordable housing [3]. The January 2025 wildfires, which destroyed over 16,000 structures and caused $76–$131 billion in losses, have further complicated the equation. Caruso’s nonprofit Steadfast LA has championed fire-resistant materials and streamlined rebuilding protocols, but its reliance on private-sector partnerships raises questions about equitable access to resources [4].

Commercial Development and Infrastructure: A Dual-Track Strategy

Caruso’s influence extends beyond residential markets. His portfolio includes high-end retail hubs like Palisades Village, which he is revitalizing with $50 million in capital to attract luxury tenants like Elyse Walker [5]. If elected, his emphasis on “community-centered” development could drive demand for mixed-use commercial properties, particularly in post-disaster recovery zones. For instance, Steadfast LA’s collaboration with Banc of California to offer $50,000 grants to small businesses underscores a strategy to revive commercial corridors while aligning with Caruso’s broader vision of urban revitalization [6].

Infrastructure investment, however, remains a contentious area. Caruso has criticized the city’s response to the wildfires, arguing that federal funding and infrastructure upgrades are critical for long-term resilience [7]. His advocacy for AI-driven permit approvals and public-private partnerships could attract capital to sectors like transportation and energy, but political opposition from left-leaning factions—represented by Mayor Karen Bass—may limit the scope of such initiatives [8].

Political Risks and Market Volatility

While Caruso’s policies could catalyze growth, they also introduce significant political risks. His 2022 mayoral campaign, which cost $104 million, highlighted the challenges of balancing private interests with public accountability. Critics argue that his blind trust proposal, which would place his real estate empire under his chief development officer, Corinne Verdery, may not fully insulate his business from policy decisions [9]. Additionally, California’s history of wealthy candidates losing high-profile races (e.g., Ron Conway, Ron Burkle) suggests that Caruso’s outsider status could backfire if voters perceive his agenda as favoring elites over working-class communities [10].

The CEQA reforms themselves are another wildcard. While they aim to reduce litigation risks, ambiguities in definitions like “urban use” could lead to prolonged legal battles, delaying projects and increasing costs [1]. Similarly, Caruso’s focus on post-disaster recovery—while laudable—faces headwinds from rising insurance premiums and climate-related uncertainties, which could deter long-term investment in fire-prone areas [11].

Investment Outlook: Navigating Uncertainty

For investors, the key lies in hedging against both opportunities and risks. Sectors likely to benefit from Caruso’s policies include:
- Multifamily and Mixed-Use Developments: Streamlined permitting and CEQA exemptions could boost construction activity, particularly in urban infill areas.
- Resilient Infrastructure: Demand for fire-resistant materials, AI-driven permitting tools, and climate-adaptive infrastructure is expected to rise.
- Commercial Real Estate in Recovery Zones: Steadfast LA’s partnerships with banks and corporations may create short-term liquidity for small businesses and developers.

Conversely, sectors at risk include:
- Affordable Housing: Caruso’s market-driven approach may deprioritize low-income housing, exacerbating existing shortages.
- Public-Private Partnerships: Political pushback could delay or derail infrastructure projects reliant on cross-sector collaboration.

Conclusion

Rick Caruso’s political ambitions represent a pivotal moment for Los Angeles’ real estate markets. While his focus on efficiency, resilience, and private-sector innovation could unlock new investment opportunities, the interplay of political dynamics, regulatory ambiguities, and climate risks demands a cautious, diversified approach. As the city grapples with its post-fire recovery and housing crisis, the real estate sector must navigate a landscape where policy and profit are inextricably linked.

Source:
[1] California's 2025 CEQA Reforms: Impacts and Ambiguities [https://www.procopio.com/resource/ceqa-reform-impact]
[2] Landmark CEQA Reform Unlocks New Era for Multifamily Development in California [https://www.cityview.com/landmark-ceqa-reform-unlocks-new-era-for-multifamily-development-in-california/]
[3] Economic Impact of the Los Angeles Wildfires [https://www.anderson.ucla.edu/about/centers/ucla-anderson-forecast/economic-impact-los-angeles-wildfires]
[4] Rick Caruso: Accelerating LA's Recovery & Restoring Trust [https://www.planningreport.com/2025/07/22/rick-caruso-accelerating-la-s-recovery-restoring-trust]
[5] How Caruso CEO Corinne Verdery is Rebuilding LA's Palisades Village Post-Fires [https://caruso.com/newsroom/in-the-news/2025/how-caruso-ceo-corinne-verdery-is-rebuilding-las-palisades-village-post-fires/]
[6] Steadfast LA Launches Initiative With Banc of California To Rebuild Small Businesses [https://investors.bancofcal.com/news-releases/news-release-details/steadfast-la-launches-initiative-banc-california-help-rebuild]
[7] Rick Caruso Calls for Turnaround of LA [https://therealdeal.com/la/2025/04/19/rick-caruso-calls-for-turnaround-of-la/]
[8] Los Angeles has a chance to become better and smarter about disasters and recovery [https://www.dailynews.com/2025/07/08/los-angeles-has-a-chance-to-become-better-and-smarter-about-disasters-and-recovery/]
[9] Mayoral candidate Rick Caruso's real estate empire poses possible conflicts of interest [https://www.latimes.com/business/story/2022-02-18/mayoral-candidate-rick-carusos-real-estate-empire-poses-possible-conflicts-of-interest-heres-his-plan]
[10] California's history of wealthy candidates failing to win high-profile races [https://www.latimes.com/politics/story/2025-09-03/california-governor-rich-candidates-history-of-losing]
[11] Property Damage From Los Angeles Wildfires Could Top $53B [https://continuityinsights.com/property-damage-from-los-angeles-wildfires-could-top-53b]