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Karen Wolcott and Chris McPherson in front of the converted garage that the city says is illegal; the State says the city must change its rules. Photo by Brad Jacobson (CivicCouch.com)

An El Segundo couple is caught between the city’s limits on granny units and the State’s mandate to legalize them

By Ryan McDonald

Check for cars while backing out of Karen Wolcott and Chris McPherson’s El Segundo driveway, and there’s a good chance you’ll see an airplane. Pull far enough in, and you’ll be certain to see the makings of a dispute with widespread implications for California housing policy.

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Wolcott and McPherson purchased their home in the northern reaches of El Segundo in December 2017. The couple lives near the crest of a hill overlooking Los Angeles International Airport. Noise from planes landing and taking off, palpable while standing on the front porch, fades to silence after stepping inside. They’ve made the most of the house’s 1,400 square feet. Traces of do-it-yourself home-improvement projects, such as removing the popcorn ceilings that greeted them when they first saw the place, give the sense of people intending to be here for a while.

Opening the back door reveals a what looks like a detached garage — or would, if weren’t for the windows. Wolcott and McPherson’s backyard contains what is sometimes known as a granny flat or mother-in-law unit. These days, the state of California prefers “accessory dwelling units.” The formality comes as the Golden State finds itself deep in a housing crisis, and legislators in Sacramento are in the midst of an ongoing revision of laws about the units in order to expand the housing supply. These efforts have been met with resentment — and, depending on how one reads the law, defiance — by the cities that have to implement them. There are few places where this clash is clearer than Wolcott and McPherson’s backyard.

The former garage contains two small units. When touring the house, the couple asked the previous owner whether it had the proper permits. The owner was evasive, and they sought confirmation with the city. As the date to remove the contingency approached, Wolcott and McPherson still lacked a clear answer. But, pressed by the same tight housing market that is motivating Sacramento, they went for it.  

In a meeting with city staff after closing escrow, the couple learned that the space was only permitted for a garage and a “bonus room” with a half-bathroom. Planning and building department employees informed them that they would have to convert it back into a garage, a project that would involve uprooting plumbing in their gravel-lined driveway. Consultations with several contractors produced estimates of up to $50,000 for the work.

In the midst of despair over getting hit with a bill of that size, Wolcott learned about the state’s new ADU laws. Last August, the couple submitted an application to the city to turn the two smaller units into a single ADU. They hoped to make extra money from a tenant, and eventually have one of their aging parents move in.

But El Segundo insists that the particular kind of ADU the couple is proposing is not in compliance. The city contends restoring the garage is required, and has sent letters threatening administrative or even criminal penalties.

Wolcott and McPherson’s case has caught the eye of state officials, who have sent letters of their own. It is the city, housing officials in Sacramento say, who is in the wrong, because the local law they are relying on in denying McPherson and Wolcott’s application doesn’t comply with new state laws.

El Segundo’s claims echo those of other cities throughout California. McPherson and Wolcott’s case offers a preview for where the issue might lead.

“The state is saying we can, and the city is saying we can’t. When someone is forcing me to spend $50,000 on construction that the state is saying I don’t have to do … I don’t want to, but basically they are forcing our hand to hire an attorney,” Wolcott said.

The law

State law has long asked cities to plan enough housing to meet the needs of its growing population. This included allowing for accessory dwelling units. But it gave those cities flexibility to limit ADUs.

In El Segundo’s case, until 2016 the City Council cited parking, traffic, and noise as a reason for its limitations. At the time, ADUs were allowed only in R1 zones on lots adjacent to land in other use categories, including variations of commercial and industrial. Fewer than 40 parcels in the city met this definition. Additionally, the city required anyone wishing to create an ADU to provide two additional parking spots.

State law started to change in 2017. Recognizing that “local conditions” such as traffic congestion and parking shortages were used as justification for restricting ADUs just about everywhere, Sacramento limited what cities could do to prevent ADUs, and required cities to update their codes to reflect the new legislative direction.

El Segundo was among the first cities in Southern California to react to these new mandates. The city’s Planning Commission took up the issue in March of 2017, more than a year ahead of commissions in Hermosa Beach and Manhattan Beach. From the beginning, “garage conversions” were a focus of the discussion. At the first of what would eventually be four meetings on the subject, Planning Manager Gregg McClain told the commissioners that, under state law, cities were obligated to approve ADU applications for additional units within an existing house or accessory structure, which would include garages. And, because state law further prevented cities from requiring parking for an ADU when the lot was within a half-mile of public transit, there was nowhere in the city where parking requirements could be imposed.

To explain the law, McClain created a matrix of different kinds of ADUs. Speaking before any of the commissioners gave input, McClain presented garage conversions as clearly detrimental because of their impact on parking availability.

“Garage conversions are the worst. You have to approve them when they come in. And worst of all, not only do they add cars, but they remove parking from the house that was there already,” McClain said.

Several weeks later, though, city staff changed their tune. New laws moving through Sacramento, McClain said, meant that El Segundo might be “saved from having to do garage conversions, which is a good thing.” Assistant City Attorney David King told the commission that the recently written AB 494, from Assemblymember Richard Bloom (D – Santa Monica), was attempting to clarify the scope of the new ADU rules. While staff had presumed that garage conversions would have to be automatically approved, AB 494 “only references accessory structures, and it gives examples such as pool houses and studios and other similar structures. But it doesn’t say anything about garages.” The next month, in yet another commission meeting on ADUs, Paul Samaras, principal planner for El Segundo, said that interpreting the bill to include garage conversions was not reasonable, because “in effect, it would reduce the parking supply in residential areas.”

AB 494 would go on to be signed by then Gov. Jerry Brown. And by the time the commission was set to make its recommendations to the City Council, the ADU issue had taken on implications beyond parking shortages: the identity of the town itself was at stake.

“There is no way El Segundo will continue to be El Segundo if you allow every R1 lot to have two units on it and two families. Think about what it’s going to be like 40 or 50 years from now. It’s not going to be the same town,” said Commissioner Ryan Baldino.

Legislative history

In December of last year, Paul McDougall, housing policy manager for the California Department of Housing and Community Development, sent a letter to the city of El Segundo. HCD, the letter states, “urges the city to consider revisions” of its ADU ordinance. The first among several “potential items for consideration” was the section of the law dealing with garage conversions.

City Attorney Mark Hensley said that he was not surprised that HCD was taking the position it did, describing the state body as “housing advocates.”

“We just interpret the code differently than they do. The state law is pretty clear about not including garages as being one of the required structures that have to be converted,” Hensley said in an interview.

But though Hensley describes the law as “pretty clear,” his office has previously acknowledged some ambiguity. At the second planning commission hearing, shortly after learning of AB 494, King, the assistant city attorney, said that his office would “definitely look to see what the intent was, and maybe look into some of the legislative history to see if there was any intent that accessory structures were to include garages.” It is unclear what that effort consisted of, but Bloom, the bill’s author, recently said the intent was to include garage conversions.

“AB 494 does not list out every conceivable type of accessory structure and the examples listed in the bill are by no means intended to be all-encompassing. Garages are routinely considered accessory structures so they were intended to be covered by the bill. Furthermore, the Department of Housing and Community Development, in a memorandum on ADUs, explicitly lists garages as a type of accessory structure covered by the bill. After the passage of AB 494, I have introduced a number of bills to further clarify its provisions and close loopholes. I expect to do the same this year, but on this issue that should not be necessary,” Bloom said in an email.

Hensley said he could not comment on McPherson and Wolcott’s specific case. Asked about what a resident should do when hearing diametrically opposed interpretations of a law from state and local governments, he said, “We’re going to enforce our rules the way the council has adopted them.” He allowed that the dispute may be one that ends up in court.

“I don’t think there is any intent to modify at this time. This just may be one of those issues that gets litigated. There is disagreement among different agencies. El Segundo is not a particularly litigious city. But the council took an action, and I got a clear sense that converting garages into dwelling units is not a direction they want to pursue,” Hensley said.

The people who addressed the City Council and the Planning Commission at the half-dozen hearings on the issue were not people like Wolcott and McPherson: they were mostly established homeowners, with spacious lots and enough money to afford construction. There was certainly no outcry against prohibiting garage conversions.

But at least some were concerned at what they perceived as hostility to ADUs. Kathy Wiley, an El Segundo resident, saw them as “a way of maintaining more of a family environment” in a city that has become increasingly unaffordable to new families.

“I think, as the rents are rising so dramatically in El Segundo, I think the community is becoming less attractive, less welcoming to young people. I know my own children who are grown really can’t afford to live here, or even rent here,” Wiley said.

The crunch

McPherson and Wolcott found their airport-adjacent home after a frustrating series of disappointments. Wolcott, who works at Boeing in El Segundo, and McPherson, who works at SpaceX in Hawthorne, looked everywhere for a house within a 40-minute drive of their jobs. But that particular radius happened to place them in the midst of one of the country’s least forgiving housing markets.

“Each time, we would get rejected, even though we were showing decent assets. We were turned away in favor of all-cash buyers. We were offering $20,000 above asking, and we weren’t even getting counter bids. They would just say, ‘Sorry,’” Wolcott said.

After tweaking their search to find homes that had been on the market for longer than 90 days, they found the house in El Segundo. Wolcott, who is from upstate New York, was filling in her father about the process, and realized how much she had normalized real estate prices that the rest of the country finds grotesque.

“I told my dad that we were in negotiations for a property for $1 million, and he was like, ‘How many acres do you get?’” she said.

The median home sale price in El Segundo has gone from $657,000 in 2009, to $1.2 million in 2018. El Segundo is an extreme example of what housing industry watchers say is a surge in home prices driven largely by the failure of home construction to keep up with the state’s population. According to a widely cited analysis from the consulting group McKinsey and Company, the state has a housing shortfall of three million units.

David Kissinger, director of government affairs for South Bay Association of Realtors, said that because El Segundo and the rest of the South Bay are almost entirely built out, any contribution to housing supply from the area would inevitably result in increasing density, something he acknowledges is controversial.

“Growth wise, like the rest of South Bay, there’s nowhere to grow. There’s no raw land, it’s just a question of redevelopment. And none of the Beach Cities are very excited about excessive redevelopment,” Kissinger said.

This upward pressure on prices has made things especially difficult for first-time home buyers, many of whom fall into the population group demographers dub “Millennials.” Wolcott and McPherson lightly wear their generation’s stereotypes. A well-stocked bar cart, of the kind that surged in popularity mid-way through the run of “Mad Men,” is parked against a wall in the entryway; instead of drywall or wallpaper, there is a chalkboard. Wolcott, freshly arrived from a SoulCycle class, tried to calm the couple’s dog Ezra before sitting down for an interview.

The couple’s arrival in El Segundo comes as demographic and economic trends are reshaping the state. The provision in the state law about not requiring parking within a half-mile of public transit, for example, compliments California’s attempts to reduce greenhouse gas emissions, but also encourages denser housing and walkable neighborhoods, which some data suggests Millennials are more likely to seek out. And with the increasing popularity of ride-hailing services such as Uber and Lyft, the cresting generation may also be less stricken with the mania over parking that has driven the city’s action on garage conversions thus far. (McPherson rides a motorcycle.)

Along with old standbys like aerospace, El Segundo is also increasingly attracting creative office space and startups loaded with Millennial workers, particularly in the Smoky Hollow area. But housing may not be keeping up. Last year, the Smoky Hollow Specific Plan, a master planning document for area, forecast significant increases in offices, research and development facilities, and restaurants. Residential would only go from nine units to 15.

For most of the past 50 years, El Segundo’s business-friendly attitude has coexisted alongside a relatively stable housing supply of mostly single-family homes hemmed in by the Chevron Refinery, the airport, and industry east of Sepulveda Boulevard. The idea of opening housing anywhere else in town controversial. Last year, the city faced pressure to abandon a Metro grant worth hundreds of thousands of dollars because it would include studying the possibility of housing east of Pacific Coast Highway. Year-end discussion of higher-density projects west of the highway was almost as grudging.

El Segundo is not blind to the pressures it faces. Mayor Drew Boyles, in voting to approve the local ADU rules, said that he was hearing from businesses about both a housing shortage and an employee shortage, and predicted that in the long-term, autonomous vehicles could ease concerns about parking.

For now, though, cities across California have difficult choices to make. Other South Bay cities concerned about density have passed ADU regulations that HCD has indicated may conflict with state law, and pending bills in the legislature would give Sacramento more enforcement authority. Earlier this year, the state sued Huntington Beach over failing to deliver housing it had promised to build. As the state increasingly asserts its authority on the issue, El Segundo and other cities may have to ask themselves how much change they are willing to embrace.

“Maybe more density is too much density, and they don’t want all that traffic. Those are valid concerns, we can’t just brush them aside. But we still have to address where our kids are going to live. You can’t say, ‘We need new housing, but you can’t have it here.’ Where should the new homes go? What if everyone in Los Angeles says the same thing? Then where are we going to build?” Kissinger said.

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