by Todd Katler
For many, the automobile is as quintessentially American as apple pie. It is deeply interwoven within our nation’s identity, and we’ve built a nation centered around their existence, including the creation of a monumental interstate highway system, the advent of the drive-thru and parking spaces. Lots and lots of parking spaces.
In a bid to assist car owners, city and state officials introduced parking minimums for virtually every structure built, whether it was office, retail or multifamily. Despite their good intentions, these policies inadvertently created an overabundance of spaces in metropolitan areas nationwide where housing is desperately in need. A significant shift is underway, however, reducing the asphalt landscape in a way that benefits both owners and residents alike. While the changes are increasing the housing supply, it’s also forcing the multifamily industry to rethink parking management.
The New Attitude Towards Parking
In a complete turnaround, cities are switching from parking minimums to parking maximums in a bid to reverse the mistakes of the past, as well as address the housing crisis by increasing housing supply in the long term. Since 2015, hundreds of cities have instituted parking reforms with the majority of these limited to specific streets or city centers, while a handful have set minimums conditional on a building’s proximity to public transportation. Nearly two dozen cities have abolished parking requirements city-wide and a majority of those occurred in the last two years. Just this year, Austin eliminated parking requirements throughout the Texas capital. Three states — California, Oregon and Maine — have all examined the elimination of parking restrictions statewide.
Recently, California representatives introduced Assembly Bill 1401, better known as the Homes for People Not Cars Act of 2023, aimed at abolishing parking minimums for buildings situated within one-half mile of public transportation in counties with populations of at least 600,000. While this legislation applies to just 25% of California’s counties, it’s crucial to note that this segment accounts for 75% of the total population. For the remaining counting, minimums would be prohibited for buildings within a quarter of a mile of public transportation. Despite the substantial body of evidence that the removal of minimums would alleviate the state’s housing problems by increasing the number of units built, California’s Senate Appropriations Committee refused to advance the bill, postponing it for reconsideration in 2024.
On January 1, 2023, Oregon’s ban on parking minimums took effect, eliminating the requirements in 61 cities and eight metro regions for buildings near public transportation with additional reforms on the horizon. Meanwhile, in Maine, Bill HP 1071 aimed to eliminate parking minimums statewide but hit a roadblock within committee in 2023. Despite this, numerous cities in the state are ending their minimums. The spirit of change remains strong and the movement to change parking requirements is gaining enough momentum across the nation that change is inevitable. The gradual dismantling of our “asphalt nation” is firmly underway.
The Benefits and Challenges of Parking Changes
The elimination of these restrictions is welcome news for multifamily owners, developers and residents alike. The construction of parking spaces, whether it’s surface lots or parking structures, is a costly endeavor, ranging from $5,000 to $10,000 per space for the former and up to a staggering $30,000 per space for the latter. These substantial expenses understandably drive developers to minimize parking provisions when feasible. For owners, maximizing rental units directly contributes to enhanced net operating income, and parking fees pale in comparison to rental revenue. Additionally, parking necessitates continual maintenance, adding an ongoing financial burden. The housing crisis is a product of inadequate supply, making the prioritization of housing over parking a boon to affordability.
While switching to parking maximums is an excellent move, it’s essential to remember that no system is flawless and there will be challenges for communities. Depending on the prevailing economic conditions, some communities may experience an uptick in situations where renters opt for roommates or co-living arrangements. This can exacerbate the level of scarcity, especially when it coincides with a high level of vehicle ownership. Property managers may find themselves in a predicament where limited availability results in grievances directed at onsite teams, creates friction among neighbors and generates negative reviews that ultimately tarnish the community’s reputation.
The mounting frustration among residents can have a cascading effect on the community. Unhappy residents are less likely to renew their leases, resulting in increased turnover rates and amplified marketing costs to advertise units and prepare them for incoming tenants. If departing residents leave a negative review, it becomes more challenging to attract qualified leads to fill vacancies, placing additional pressure on leasing teams and necessitating additional marketing efforts. The influx of parking complaints diverts onsite teams from more productive tasks to address grievances and diffuse tense situations. When all these factors converge, the overall impact on Net Operating Income (NOI) can be substantial. Effective parking management can serve as a preventative measure and mitigate issues and the associated costs.
Communities that embrace an automated parking solution have experienced a remarkable decline in complaints and negative reviews. The shift culminates in elevated reputation scores and notable reductions in marketing costs. Onsite teams regain the ability to cultivate stronger relationships with residents and attract well-qualified prospects to fill vacancies.
In scenarios where parking is a precious commodity, a forward-looking solution tailored specifically for the future can prove pivotal, augmenting the gains achieved through the elimination of restrictions. Even in communities where parking concerns are relatively minor, the presence of a solution can translate to tangible financial advantages. Given the inevitable evolution of parking dynamics, owners and operators must adapt their parking strategies to align with these changes. Without doing that, the progress achieved by parking reforms risks falling by the wayside.