Parking Minimums and Its Impact in Local Development
Carlos Martinez
This week we begin to look at regulatory costs that drive real estate development costs up. In a recent Yardi presentation, regulatory costs were reported to account for up to forty percent (40%) of affordable housing project total development costs. Carlos Martinez, intern, Gorman & Company and Rockford University Economics student focuses his guest article on parking regulations.
In the literature on affordable housing, a common topic of discussion among researchers, policymakers, and local developers is parking minimums. Although the impact of parking lot minimum requirements has a significant effect on construction, often local taxpayers and citizens are not familiar with the reasons for this impact. For this reason, I would like to address in this post why our communities should be more mindful of the state of parking lots in our town, as well as their repercussions.
Parking mandates, or parking requirements, are all synonyms for a specific type of regulation, namely, a land-use regulation that prescribes a specific amount of parking to be provided by the developer of any new development project. These regulations are usually part of the zoning ordinance in cities where they are in place. A city may require a minimum number of parking spots for residential or commercial properties and, in the most extreme cases, set a maximum limit.
Initially, one may think that there is nothing wrong with requiring developers to build more parking to meet the expected demand of the building. However, what many local policymakers fail to grasp is that there are unintended consequences to this policy. These consequences manifest as additional costs for everyone living in a specific city, a change in the design incentives of the city, and even an increase in pollution.
For instance, let's take an economic approach to making parking minimums a requirement for property owners. By doing this, the cost of producing homes and commercial zones is driven up. In fact, requiring one parking space per unit typically increases the cost of moderately-priced housing by approximately 12%, and requiring two parking spaces increases the cost of lower-priced housing by 25%. Moreover, the average cost to build a parking stall in the US is $27,900. For obvious reasons, this prevents many builders and homeowners from starting home projects, as the sunk costs of building affordable housing become more problematic.
Strong Towns provides a concise breakdown explaining why these parking mandates are difficult for different groups to accept:
Source: Strongtowns
One could say that if the effects of this policy are pernicious to the integrity of our town, its popularity would be in question, but the reality appears to be different. There are approximately 2 billion parking spots in the entire country. To provide a clear grasp of how immense that is, one could say that it is enough to pave over the entire state of Connecticut. The justification that this is demand-driven is in question, as there are more than six for every registered car in the nation.
Even if we were to put aside the question of how much the parking minimums degrade the case of affordable housing, there is another concern to raise. In a world where local ordinances require developers to provide a certain amount of parking minimums, the relative benefits of driving a car exceed both the relative costs of getting a car and even walking. This affects not only the design but also the traffic of the city, as more individuals would seek to acquire one.
In other words, it promotes a driving culture that fosters resilience to have roads more congested, hampering people's ability to walk, drive a bike, or take public transit. As a matter of fact, once people get habituated to driving in their city, more dependency is created to provide parking lot space, and more incentives local aldermen would have to respond to this need—a vicious cycle.
This is without considering the pernicious effects it promotes on health and local pollution; once again, those unintended consequences are taking place.
At this point, one should also ask, what are some cases in which banning this minimum has worked? Well, there are a few cities that have done so. By visiting this website and clicking on the "No parking requirements" button, you would be able to find those.
Despite the trend in that direction, we have data from two cities that did, and it improved the state of affordability of their homes as well as the number of new houses built, namely Buffalo and Seattle. In fact, these new studies point out that between 60-70 percent of newly built homes would have previously been illegal to build. To get into the details, Seattle experienced between 2012 and 2017 a surge in 868 new multifamily buildings accounting for over 60,000 new homes, according to Sightline Institute. On the other hand, Buffalo's market ended up building 20 percent fewer parking spaces than the previous code had required, and their city start ed to grow for the first time in 70 years after passing this "green" ordinance.
As such, parking minimums can become a valuable tool for local aldermen and, in general, for regulators to empower communities and boost economic growth in our region. In future posts, we will address how following these examples, in combination with a more directed approach to the Rockford region, could not only provide affordable housing but also improve standards of living