Beyond the Hype: Economic Development Trends Defining 2026
If 2024 was the year of "doom loop" headlines and 2025 was the year of tentative recovery, 2026 is shaping up to be the year of strategic stabilization.
As we settle into the first quarter, I’m seeing a distinct shift in how California municipalities and developers are approaching growth. The "wait and see" era regarding interest rates and return-to-office mandates is over. The leaders winning right now are those who are actively engineering their own economic resilience rather than waiting for macro-trends to save them.
Based on the conversations I’m having in Sacramento and across the state, here are the three "real" trends—beyond the buzzwords—that will define successful economic development in 2026.
1. "Active Design" is No Longer Just a Health Metric—It’s a Fiscal Strategy
For years, planners have advocated for "Active Design"—zoning that promotes walking, biking, and connectivity—largely for public health reasons. In 2026, the argument has shifted: it is now a fiscal imperative.
With traditional sales tax bases fluctuating, cities are realizing that walkable, mixed-use districts generate significantly higher tax revenue per acre than auto-centric developments. The math is undeniable: higher density, experience-driven districts cost less to service (infrastructure-wise) and yield higher returns.
Local Insight: We are seeing this codified right here in our backyard. Sacramento County’s Interim Zoning Code Guidance for 2025 and their Active Design Guidelines are placing a heavier emphasis on these principles. For developers, this isn't just a regulatory hurdle; it's a value-add. Projects that align with these state-mandated density and connectivity goals are moving through the entitlement pipeline faster than those sticking to 2010-era templates.
2. The P3 Evolution: From Toll Roads to Workforce Housing
Public-Private Partnerships (P3s) have historically been the domain of massive infrastructure projects like bridges or toll lanes. But as we face a tightening bond market and shifting federal priorities in 2026, the P3 model is evolving.
We are seeing a surge in "micro-P3s" focused on workforce housing and municipal energy resilience. With new laws like SB 79 requiring transit-oriented upzoning, cities that are land-rich but cash-poor are increasingly partnering with private developers to unlock underutilized parcels (like old corporation yards or parking lots) for "missing middle" housing.
The trend for 2026 is creative deal structuring. It’s not just about the city writing a check; it’s about the city providing the land equity and entitlement streamlining while the private sector brings the capital and construction expertise. If you aren't exploring a P3 model for your stalled projects this year, you are leaving leverage on the table.
3. The "AI Revenue" Reality Check
California’s budget is currently benefiting from a surge in tech-driven wealth, specifically around the AI sector. While this is good news for the state’s general fund, local governments need to exercise caution.
The Governor's 2025-26 Budget Summary indicates a modest surplus driven by these capital gains, but economists warn this revenue is volatile. The mistake I see some agencies making is budgeting this potential windfall as ongoing operating revenue. The smarter play for 2026? Treat it as one-time capital.
Use this year's potential revenue stability to fund feasibility studies, infrastructure upgrades, or one-time grant matches. Do not use a volatile revenue stream to hire permanent staff or create new ongoing programs. The municipalities that will thrive in 2027 are the ones that use 2026 to shore up their foundations, not expand their baseline.
The Bottom Line
2026 isn't about chasing the next shiny object. It's about execution. It's about understanding that a General Plan update isn't just paperwork—it's your city's investment prospectus.
At Rachael Brown Consulting, we help bridge the gap between these high-level policies and the ground-level reality of getting projects built. Whether you are a city manager trying to interpret the new "Active Design" mandates or a developer looking to structure a P3, we know the landscape.
Let’s build something lasting this year.