Car owners or not, people who rent pay to park

Parking is expensive. It costs thousands of dollars per stall to build. It occupies valuable real estate. It is ubiquitous, accompanying nearly every building built across the United States. Yet at nearly every destination, drivers don’t directly pay for the parking they use. Instead the cost is hidden, bundled into the grocery bill, benefits package, and rent of every shopper, employee, and tenant.

Everyone pays the same amount for parking whether she or he walked, rode transit, carpooled, or drove alone, but rarely does anyone see that price itemized on a receipt. As a result, most people are unaware of the heavy financial burden they bear for the sake of parking. The above graphic takes a look at one area where parking adds significantly to a household’s expenses: Rent.

So how much does one parking spot add to an apartment’s rent? There is no single answer to that question. Construction costs are affected by local soil conditions, zoning requirements, site constraints, regional differences in construction costs, and the type of parking to be built. On the other hand, the rent needed to justify an initial capital investment varies according to local property taxes, financing costs, resident turnover and delinquency rates, et cetera.

The graphic attempts to present the range covered by these variables while providing numbers that might be considered typical for structured parking in the United States.

The effect of each parking spot on affordability is significantly higher in urban communities than suburban ones both because the land occupied by parking is more expensive in urban areas and because building structured parking is many times more costly than paving surface lots.

This reality affects the ability of lower income households to live in urban areas since parking costs roughly the same to build whether an apartment is luxury grade or modest. An $18,000 spot might not have a noticeable impact on the rent of a $300,000 unit, but it would substantially impact someone renting a $75,000 unit.

Even when minimum off-street parking requirements are eliminated (and on-street parking is properly managed), the practice of bundling parking with rent may persist. It is imperative that cities find a way to separate rent for cars from rent for people either by encouraging or mandating that parking be rented separately.

People should be allowed to make their own transportation choices, especially when all the other choices are more sustainable and equitable. When renters have no choice other than to pay for car storage regardless of whether they possess a car, they are not truly given that freedom. People with the means to own a car OR to live centrally, but not to do both, should be allowed to choose the latter.

Cities have many reasons to encourage their citizens to live with fewer cars. Fewer cars owned and operated in a city reduces pollution and greenhouse gas emissions, eases traffic and infrastructure burdens, and increases households’ disposable income. Hiding parking costs in rent runs in direct opposition to those goals.

Construction costs

There are some who have argued that construction costs, whether higher or lower, have a negligible effect on rents because property owners will charge whatever the market will bear regardless of upfront costs. This might be true if one assumed that construction costs have little effect on local supply.

Furthermore, any one building is unlikely to strongly affect rents in an area. A lone developer who constructs a new apartment building in a market with strong demand will not undercut existing rents simply because the new units cost less to build. Over time however things will change as long as there is available land to be redeveloped at a higher density.

Every dollar invested in creating an apartment translates to a higher minimum rent required just to break even. If a developer does not expect a new unit will command this target rent, that potential project will not be built. If the amount of parking can be reduced or eliminated, the money saved on construction will lower the required rent to break even and make some projects viable that were not viable before.

More viable projects translates to more units getting built resulting in greater competition and thus lower local rents if demand holds constant.

This post originally appeared on Reinventing Parking.