Construction and demolition (C&D) waste poses a major challenge for urban sustainability in rapidly developing cities. In Riyadh, Saudi Arabia, annual C&D waste generation is estimated at approximately 10 million tons, with landfilling remaining the predominant management option despite national landfill diversion targets. This study formulates a linear programming (LP) model to optimize the allocation of C&D waste from five operational districts to available waste management facilities, namely a centralized recycling facility and the city’s sole active landfill. The model minimizes total system cost while assessing the feasibility and impacts of alternative policy and infrastructure scenarios, including landfill diversion mandates, recycling capacity expansion, landfill surcharges, and their combined implementation. Results show that under current cost and capacity conditions, landfilling is economically dominant, resulting in low diversion rates. Enforcing diversion targets without infrastructure expansion is infeasible, while capacity expansion alone does not alter allocation outcomes. Meaningful improvements in landfill diversion are achieved only through coordinated policy and infrastructure interventions.