4. HOUSING CONSTRAINTS

The provision of adequate and affordable housing is affected by both market conditions and governmental programs and regulations. Housing Element law requires a city to examine potential and actual governmental and non-governmental constraints to the development of new housing and the maintenance of existing units for all income levels. Market, governmental, and environmental constraints that contribute to housing development in El Segundo are discussed below.

A. MARKET CONSTRAINTS

1. Construction Costs

A major cost associated with building a new unit is the cost of building materials. In the current Southern California real estate market, the single factor which has the most impact on the cost of building a new house is the cost of building materials. It is estimated that these costs account for approximately 40 to 50 percent of the sales price of a new home. Typical residential construction costs for a single-family home are approximately $78 per square foot.

A reduction in amenities and the quality of building materials (above a minimum acceptability for health, safety, and adequate performance) could result in lower sales prices. In addition, pre-fabricated factory built housing may provide for lower priced housing by reducing construction and labor costs. Another factor related to construction costs is the number of units built at one time. As that number increases, overall costs generally decrease as builders are able to take advantage of the benefits of economies of scale. This type of cost reduction is of particular benefit when density bonuses are used for the provision of affordable housing.

2. Land Costs

The price of raw land and any necessary improvements is a key component of the total cost of housing. The diminishing supply of land available for residential construction combined with a fairly steady demand for such development has served to keep the cost of land fairly high, particularly in South Bay coastal communities. Land holding costs incurred during the development process also add to the ultimate price of a new home. The two factors which most influence land holding costs are the interest rate on acquisition and development loans, and government processing times for plans and permits.

3. Availability of Financing

Interest rates are determined by national policies and economic conditions, and there is little that local governments can do to affect these rates. Jurisdictions can, however, offer interest rate write-downs to extend home purchasing opportunities to a broader economic segment of the population. In addition, government insured loan programs may be available to reduce mortgage downpayment requirements.

Under the Home Mortgage Disclosure Act (HMDA), lending institutions are required to disclose information on the disposition of loan applications and the income, gender, and race of loan applicants. As shown in Table 22, in 1997, a total of 343 households applied for conventional mortgage loans to purchase homes in El Segundo. About 70 percent of the applications were originated (approved by lenders and accepted by applicants) and 11 percent were denied, with the remaining 19 percent of the applications withdrawn, closed for incompleteness, or not accepted by the applicants.

The overall denial rates for conventional home purchase loans by income of applicant shown in Table 22 are logical, with low income applicants exhibiting the highest denial rate (30 percent), and moderate and upper income households a much lower denial rate (10 percent). While the earlier analysis of housing sales prices indicates low income households are effectively priced out of the market in El Segundo, a greater number of moderate income renter households may be able to move into homeownership in the City’s condominiums with limited public assistance.

The small number of applications received from low income households (7 percent), indicates there may also be a need to provide informational and loan counseling services to lower income groups in the City.

Table 22

Disposition of Conventional Loans

Applicant Income	Home Purchase Loans				Home Improvement Loans
	Total Appl’ns	% Originated	% Denied	% Other	Total Appl’ns	% Originated	% Denied	% Other
Low Income (< 80% MFI)	23	43%	30%	26%	3	0%	67%	33%
Moderate Income (80 -119 % MFI)	38	79%	10%	10%	2	50%	50%	0%
Upper Income >= 120% MFI)	269	69%	10%	20%	22	41%	32%	27%
Not Available	13	85%	0%	15%	1	0%	100%	0%
Total	343	70%	11%	19%	28	36%	39%	25%
Source: Home Mortgage Disclosure Act (HMDA) data for 1997. Tabulated with the Centrax software.

Overall, home improvement loans have lower approval rates. In 1997, 28 households in El Segundo applied for home improvement loans and only 36 percent were approved, indicating the continued need for City assistance in providing rehabilitation loans. Again, the percentage of loans denied is highest in the low income category. This supports the need for a government-assisted rehabilitation assistance program for low income households.

The top mortgage lenders for El Segundo applicants in 1997 are summarized below in Table 23. The remaining lenders not shown processed ten or fewer applications each.

Table 23

Primary Mortgage Lenders in El Segundo: 1997

Institution	Number of Applications
Platinum Capital Group	34
Countrywide Home Loans	31
Bank of America, NT&SA	27
First Nationwide Mortgage	24
Washington Mutual Bank, FA	20
Glendale Federal Bank	14

Source: Home Mortgage Disclosure Act (HMDA) data for 1997.

Tabulated with the Centrax software.

B. GOVERNMENTAL CONSTRAINTS

Housing affordability is affected by factors in both the private and public sectors. Actions by the City can have an impact on the price and availability of housing. Land use controls, site improvement requirements, building codes, fees, and other local programs intended to improve the overall quality of housing may serve as a constraint to housing development.

1. Land Use Controls

The Land Use Element of the City of El Segundo's General Plan sets forth the City's policies for guiding local development. These policies, together with existing zoning regulations, establish the amount and distribution of land to be allocated for different uses within the City. The City of El Segundo General Plan and Zoning Ordinance provide for a range of different intensities of residential land use, including the following:

a) Single-Family Residential (R-1) - up to 8.7 dwelling units per acre.

b) Two-Family Residential (R-2) - up to 12.4 dwelling units per acre.

c) Multi-Family Residential (R-3) - up to 18 - 27 dwelling units per acre.

d) Neighborhood Commercial (C-2) - up to 10 dwelling units per acre (above ground floor commercial use).

e) Downtown Commercial (C-RS) – up to 10 dwelling units per acre (above ground floor commercial use).

In addition to the residential categories described above, the Medium Density Residential (MDR) zone is used as a type of “holding zone” which can be activated within certain areas of the Smoky Hollow Specific Plan and used in place of the base zone regulations. This zone allows densities from 18 to 27 units per acre to allow sufficient buffering and open space areas

while sustaining residential and supporting commercial uses in the Specific Plan area.

An additional residential designation, the Planned Residential Zone (PRD), is to be used specifically for the former Imperial Elementary School Site. This zone permits up to 29 single-family detached units and 36 multi-family units. The purpose of this zone is to encourage the long-range development of residential property under an overall development plan for the site.

Housing supply and cost are greatly affected by the amount of land designated for residential use and the density at which development is permitted. In El Segundo, 15 percent of the City's land area (533 acres) is designated for residential use. Multi-Family neighborhoods are by far the most common residential use in El Segundo, accounting for over one-half of the residential units in the City. This designation includes apartment complexes, “stacked flat” -style condominiums, and “townhome” -style condominiums.

The City’s Land Use Element as amended in 1992 documents a residential “build out” of 7,674 units, or 334 above the City’s existing (1998) housing stock of 7,340 units. This figure includes vacant residential land and underdeveloped land. The lack of available vacant land, therefore, is a major constraint to the development of housing within the City. The majority of the vacant land available is currently in non-residential zoning categories, therefore, the principal options available to expand the housing supply consist of infill/recycling of lower density development or underutilized land to higher densities.

2. Residential Development Standards

The City's residential development standards, both on and off-site, are not considered overly restrictive. The density, setback, and other standards regulating residential development within the City are in concert with those being used by other surrounding communities. The zoning ordinance limits all residential building heights to 26 feet and two stories. The City does not offer a height bonus for affordable units, which could potentially inhibit the development of affordable housing. Residential development standards for the City of El Segundo are summarized in Table 24.

Table 24

Residential Development Standards

Zoning	Min. Lot Area	Front	Rear	Setbacks Side	Max. Height	Parking Requirements	Max. Lot Coverage
R-1	5,000 sf	22 ft./ 30 ft. Combined	5 ft.	3 - 5 ft. 10 %	26 ft./ 2 Story