Too many cars; too little housing

By Michael Dean Hitchcock

Requiring off-street parking in new housing creates a subsidy from the housing industry to the automobile industry. (Published in California Planner, Nov/Dec 1999)

Parking requirements in the Redwood City Zoning Ordinance are typical of Bay Area communities. Nominally the ordinance requires two off-street parking spaces for each new single-family home. These two spaces must be enclosed in a 420 sq. ft. (20 x 21) garage. If we look more closely, however, we find that an additional 360 sq. ft. must be provided for access to the garage (both garage spaces must be directly accessible, and set back 20 feet, from the adjoining street). Adding together the parking area and access requirements, every new single-family home must provide a total parking area of 780 sq. ft., an area large enough for four cars.

In an area of high demand for housing, and hence high land costs, parking requirements substantially increase the cost of housing. Recent appraisals in my neighborhood show the value of residential lots to be about $30 per sq. ft. At that price, the amount of land set aside for parking is worth about $23,400. Add to that a construction cost of $10,500 for the 420 sq. ft. garage, and the total cost of parking is just under $34,000. Paying the costs of these parking requirements would add $250 a month, or $3,000 annually, to the mortgage payment required to purchase a new home. To qualify for this increased mortgage burden, a household would need an additional $10,000 annual income. Many households could thus be priced out of the housing market by the cost of providing parking spaces for cars. The economic effects of parking requirements, however, extend beyond the housing market to the transportation market. The $3,000 annual cost of parking can be as much as one-half the total cost of driving. In highly desirable neighborhoods, where land costs are even higher than $30 per sq. ft., the cost of paying for residential parking can exceed all the other costs of driving combined. When half the cost of driving is included in the monthly mortgage payment for housing, the apparent costs of housing and auto transportation are both distorted. The apparent cost of housing is increased by 10 percent (or more) over the real cost, while the apparent cost of driving is reduced by 50 percent (or more) over the real cost.

This difference between apparent costs and real costs can change the decision making of individual consumers, home builders, and city planners. For the individual consumer, there is a substantial incentive to own and use a car. Half the cost of driving is a fixed cost that must be paid regardless of how many miles are driven or even if the household does not own a car at all. Buying and using a car becomes more attractive because so much of the cost has already been paid. For home builders, the cost of providing parking will be an incentive to build on the urban fringe where land is cheaper. In some desirable urban locations with very high land costs, providing the required parking may be prohibitively expensive. For the home builder, urban sprawl may be the only economic possibility. Urban planners must then make decisions in this context where home buyers are choosing more cars and builders are developing land farther and farther from the urban core. Under these conditions, "rational" planning would require increases in highway capacity and the design of neighborhoods suitable for high traffic volumes. All these public and private decisions lead to more traffic.

We suffer the effects of this increased traffic because we require the housing sector of our economy to subsidize the auto sector. Consider what would happen if, instead of requiring parking costs to be paid with the purchase of a new home, we required the cost to be paid with the purchase of a new car. Each new house sold in the Bay Area would cost $34,000 less, while each new car would cost $17,000 more (assuming that the car buyer would be required to pay for one-half of the garage and the 20-foot setback for each car). Without residential parking requirements, the home buyer would have $34,000 more available to spend on a larger house or a more desirable neighborhood. The imposition of parking requirements takes money that would otherwise be available to the housing market and requires that that money be spent in the transportation market. Home buyers are required to subsidize their autos through their housing payments. The 21,000 new homes built in the Bay Area in 1996 provided a subsidy to the auto sector of nearly $750 million.

Given the magnitude of this subsidy, it is surprising that home builders have not objected more strenuously to parking requirements. Certainly, if the subsidies went the other way, i.e., if the auto industry was required to pay for housing, the outcry would be massive and immediate. (The auto industry would probably object even to being required to provide housing for cars.) Despite the concern developers have expressed over the imposition of fees and exactions on new housing, parking requirements remain a ubiquitous and usually unquestioned feature of municipal zoning ordinances. Is it any wonder then that the Bay Area, like so many other urban areas, has a problem of too much traffic and too little housing? Requiring one economic sector to subsidize another changes the relative output of the two sectors, increasing production and consumption of the subsidized goods while reducing production and consumption of the goods providing the subsidy. In some case we may choose subsidies precisely for that purpose but, by requiring housing to subsidize automobiles, we get more cars and fewer houses, precisely what we don't want.