California's Housing Push Meets El Segundo's Economics - and Developers Aren't Building
El Segundo - roughly 17,000 residents in a single zip code just south of LAX - has done what Sacramento keeps asking of cities: it adopted mixed-use and residential overlays meant to open the door to new housing. But little has been built under them, and a new KeyCrew interview with Compass agent Scot Nicol, a former El Segundo city council member, explains why the gap between approval and construction is so wide.
The visible example is Pacific Coast Commons, a redevelopment approved along Pacific Coast Highway. Interest rates climbed almost as soon as the city approved it. "The project got approved based upon a lower interest rate and a lower cost of construction," Nicol says. "And so the project is sitting stagnant. It has not put shovels in the ground yet." A second site faces a different hurdle: its residential overlay does not grant residential use by right, so changing the industrial zoning would require planning commission and city council approval. No application has been filed. Nicol is blunt about the city's role: "We're never going to spend tax dollars to build new units." That leaves the next move to private capital, and private capital is waiting for better math.
The state-level tools have fared no better locally. State laws like SB9 lot splits were designed to enable infill housing across California, but in El Segundo exactly one SB9 project has been completed - a four-unit development that initially listed units around $1.45 million. The units did not sell at that price. One eventually traded at $1.225 million, and the smallest unit dropped its asking price to $999,000 the morning of the interview.
Nicol draws a distinction between El Segundo and the city of Los Angeles, where SB9 splits are far more common. "The consumer is more accustomed to living in density" in Los Angeles proper, he says. "Whereas in the South Bay, that consumer doesn't desire the same density. And so the marketability of those projects, it just doesn't land the same." ADUs follow the same pattern: developers will sometimes get ADU permits approved during a remodel but won't actually build them, because the data doesn't show a meaningful price premium. "Until it's established that if you have a one- or two-bedroom ADU on your property, your property is worth $300,000 more - that's not established," Nicol says.
What does still work in El Segundo is single-family, driven by the school system, which carries a far stronger reputation than the sprawling Los Angeles Unified School District serving the surrounding city. Nicol describes a typical buyer path: professionals move to LA for work, start families, then discover their neighborhood's school scores - and compare private-school tuition against relocating to a stronger public district. One recent pair of buyers, two physicians living in Mar Vista, spent six months competing for El Segundo homes and lost four properties before finally landing one they plan to hold for 20-plus years.
The investment math is equally lopsided: multifamily buildings are trading at roughly the same prices they were eight or nine years ago despite a decade of inflation, while single-family has appreciated meaningfully - vacant lots now trade for a minimum of $1.5 million, up from around $1.2 million, and new construction on that land can sell for approximately $4 million. Buy-build-sell still works for single-family; density product, for now, doesn't.
Source: KeyCrew - https://keycrew.co/journal/californias-state-housing-push-meets-local-economics-in-el-segundo-and-developers-arent-building/
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