How off-street parking requirements make housing more expensive
This is because these requirements are often set at a level that is higher than the actual need for parking.
Did you know each time a new housing unit is built, there’s a mandatory number of parking spaces that have to be built too? And that can impact the cost of rent?
East Tennessee REALTORS dive into this issue in their newest Market Pulse Report. A new section of their report will look into a different issue in housing each month. This month’s issue is off-street parking requirements.
Minimum off-street parking requirements are zoning regulations that mandate a certain number of parking spaces be provided for each new housing unit, and they can have a significant impact on housing affordability and the viability of redevelopment projects. This is because these requirements are often set at a level that is higher than the actual need for parking, which has resulted in the U.S. having between 2.5 to 7 parking spaces for every registered vehicle according to the research of one leading economist.
- Parking is expensive to build: A typical surface parking space costs between $5-10k to construct, the cost of which is capitalized into the value of the property, resulting in less affordable housing units. One study analyzed how much a parking space adds to apartment rents, finding an estimated average of $225 per month.
- Even absent requirements, developers still have an incentive to provide off-street parking – especially in areas where parking is in short supply – largely because residents will not pay top-dollar for properties without any parking at all.
- Parking requirements meaningfully alter site designs because the requirement to provide parking dictates where a building is situated on a lot, how big it is, and where the entrance goes. Such requirements often result in the unnecessary loss of trees and vegetation as well as open space.
- There is an opportunity cost to parking minimums, which often makes the traditional development pattern impossible. Even where the zoning code allows a mix of uses (like an apartment above a store), allows buildings to come right up to the sidewalk, and allows a fine-grained mix of smaller structures, parking minimums make an old-fashioned Main Street all but impossible. The parking simply takes up too much land.
- Parking requirements can price otherwise viable development projects out of existence. It’s not just that rent in a new building must be higher to cover the cost of building parking. Often, that cost drives the necessary rent above what the market will bear, stalling redevelopment before it even gets started.
What’s the solution? Eliminate minimum parking requirements, allowing the free market to dictate where and how much parking is provided
As far as housing inventory, costs, and rent rates, here are more data points to know about the Knoxville area housing market:
- For the first time since early 2022, housing inventory in July was down from the previous year.
- Apartment rents in the Knoxville metro area increased 6.06 percent from the previous year in July, compared to 0.78 percent growth nationally. Rents in the area are forecasted to grow an additional 5 percent over the next 12 months.
- According to a new poll released by East Tennessee REALTORS, 67 percent of Knox County residents believe housing affordability is a very/fairly big problem.
- The Price of Opportunity: New research from Redfin found that, in Knoxville, homes cost 46 percent more in neighborhoods that offer the best shot at upward mobility, highlighting the extent to which housing costs drive economic inequality.
Want the Market Pulse in your inbox each month? Subscribe to the free report here.