Mapping the “Parking Tax” on New Housing

Parking requirements are one of the most consequential barriers to new housing. We can see this through analyses of individual projects where parking needs result in higher rents, fewer units, or often both.

We can also observe trends in places where parking mandates have already been lifted, and we can see what profit-minded developers do. The answer, in cities like Minneapolis, Seattle, and Buffalo, has been that they build less parking, and they build a lot of homes that would have been illegal under prior parking rules.

Another way to get at this is to use a modeling approach to more broadly estimate the cost imposed by rules such as parking mandates, in a way that can help policy makers and the public understand the enormous scale of the challenge. PRN recently explored a new tool, built by Dr. Ian Carlton and his team at MapCraft, that does just this.

Click here to explore the model yourself.

Using Maps to Tell a Story

MapCraft is a geospatial analysis firm: its researchers build tools to model the impact of proposed policies on real estate development. Using a big-data approach, they are able to map and estimate these impacts over very large geographic areas. MapCraft’s tools have been used to estimate the potential development unlocked by new housing laws in California (this analysis of 2021’s SB9, conducted in partnership with UC Berkeley’s Terner Center), to get the most out of transit-oriented development sites in Seattle and Salt Lake City, and to estimate which land use reforms would legalize the most new homes in Colorado, among other uses.

The Colorado study, conducted by MapCraft and ECONorthwest for the state Energy Office, found that parking requirements were the most impactful policy by far if the goal is to unlock additional housing potential. “Fully flexible parking resulted in two to three times as many new homes as legalizing granny flats or larger multifamily buildings near transit, even when every new building still included some amount of parking,” according to a Sightline Institute report on the 2024 study. Parking reform alone boosted the number of economically viable homes in the model by 40 to 70 percent, mostly through large apartment complexes having the option to include fewer parking spaces and more apartments.

The Colorado model was based on a massive data set containing 2.2 million individual lots (parcels) over 19 counties. Similarly, in California, MapCraft ran cost feasibility analyses of over 1,000 building prototypes, some of them on up to 10 million parcels.

PRN recently had the opportunity to explore a national model of the effect of parking on the viability of apartments for middle-income renters, in every county in the United States. This national map offers an analysis that is not as granular as the Colorado and California studies. Rather than analyzing real parcels, the tool analyzes prototypical developments on appropriately priced and sized hypothetical sites that have adequate zoning whether or not such sites actually exist. ”It’s a toy version,” Dr. Ian Carlton, co-founder of MapCraft, told me. “But still, with a toy, you can tell a story.”

The Story: A Gaping Chasm Between Affordable Rents and Construction Costs

The most obvious story told by this national data set is a depressing, and familiar, one. In the vast majority of U.S. locations, it is currently not possible to build new housing affordable to the median household without some sort of subsidy. And this is true with or without the specific expense of providing parking. The reasons for this comprise a much bigger story than anything to do with parking reform.

Here is the map of counties (in green) in which the model suggests that a new, unsubsidized 2-bedroom apartment could be feasibly built when affordable to a 3-person household earning 100% of the area median income. Only 62 million people live in these counties, compared to 269 million who do not:

Here is a map of the average monthly rent subsidy that is required to produce an affordable apartment for a median-earning household in each county. This is with 2 parking stalls per apartment:

Let’s unpack what “subsidy” means in this model. This is not referring to literal public subsidy dollars from any particular fund or source. Rather, the “subsidy” is the gap between a rent high enough to make the project profitable, and thus viable, for a private developer—and the rent which an average household can actually afford to pay without being unduly cost-burdened.

The methodology behind this number is straightforward in concept. MapCraft maintains a construction cost database, based on extensive interviews with developers and lenders, repeated over time to track the evolution of costs. These models include breakdowns of the different costs associated with specific design decisions: for example, surface parking versus tuck-under versus fully underground parking. A set of assumptions about relative local costs, financing cost including interest rates, and investor rate of return, are incorporated into the model to yield construction cost estimates for various common housing types for every U.S. county.

These estimates are then compared to affordable rents based on Census data on household incomes for each county. The federal Department of Housing and Urban Development (HUD) and many local affordable housing programs define a home as affordable if housing costs do not exceed 30% of a household’s total income.

In reality, this is not an on-and-off switch: it’s a matter of averages. In any given city or county, there will be a range of apartment price points, and a range of resident incomes. So a high average “subsidy” does not mean that literally no market-rate apartment construction is viable in that county. But it does express how far short we can expect to fall of meeting the housing needs of the broad middle of the population through market-rate construction.

How a “Parking Tax” Increases the Gap Between Development Costs and Housing Needs

Okay, so. This is a parking blog. Let’s talk about parking.

Here’s that map again: the average per-unit subsidy required to produce an affordable apartment for a median-earning household in each county.

The slideshow below shows what happens to that subsidy level as you reduce the parking to 1 space per apartment, 0.5 spaces, and finally zero parking:

Notice that at less than one parking space per unit is where blue finally appears on the map: a handful of counties where the average subsidy is at or less than $0.

Even with zero parking—which is not a viable option in the car-dependent reality of most places in the US—construction costs largely exceed a truly affordable price point. But reducing the necessary amount of parking moves the needle by hundreds of dollars in monthly rent.

Let’s be clear: the primary driver of baseline housing affordability is not any particular development choice or regulation, including parking. The primary driver is local incomes.

This is why the map produces the seemingly backwards appearance that “affordable” housing is most viable in the wealthiest and most expensive metro areas, such as Los Angeles, San Francisco, Seattle, Denver, and Boston. What’s actually happening is that construction costs vary from place to place much less than incomes do. In the regions where median income is highest (in part because poor residents have been priced out) new construction can command higher rents while still qualifying as “affordable” under our regional income-based definition.

That said, the effect of parking on development cost matters quite a bit at the margins. Here are a couple zoomed in examples of how parking affects the “subsidy” level (which, again, is actually the gap between market rents and affordable rents).

Let’s look at affordable studio apartments in Atlanta, Georgia, that would be affordable at 80% of Area Median Income. (In Fulton County, which contains Atlanta, this is an income of $60,000 per year for a 1-person household. The model assumes a studio is inhabited by a single individual.)

Here is a slideshow of what happens as you reduce the amount of parking per unit:

If one parking stall is required per studio apartment, the monthly rental subsidy is $275.

If the parking ratio drops to 0.5 per apartment, the monthly rental subsidy is $125.

At no parking at all, the required subsidy falls to only $25 per month, which implies that studio apartments like this are pretty close to being viable without subsidy in Atlanta. If, that is, the developer does not have to build parking.

You can play with the tool yourself. Look at different cities. A common pattern you will see is that the effect of the parking slider matters most for what you might think of as starter homes: small, studio and 1 bedroom apartments. And that it is precisely in the creation of such homes that we may see the greatest benefit from freeing home builders of onerous parking mandates.

Larger housing formats (2 and 3 bedroom) are across-the-board harder to complete without subsidy, because the costs of development rise out of proportion with median household incomes. (Groups of roommates notwithstanding, larger households tend to be families in which not every member is providing an income.)

But we can still observe for these homes that the requirement to provide parking meaningfully increases the gap between what a typical household can afford to pay for housing, and what a typical developer can afford to build.

Making Subsidy Dollars Go Further

And this gap is important if you are going to bring actual subsidy dollars into the mix. Where do you want those dollars to go? If we can build capital-A Affordable Housing in parking-lite locations, where less parking is required and mandates do not apply, we can get far more housing bang for our subsidy buck.

Take, for example, a new 2-bedroom apartment in Boston, Massachusetts affordable at 80% of area median income. At 2 parking spaces per unit, the rental subsidy per month to make this work is a whopping $1,000. At no parking, it’s down to $425. Any subsidy applied to such a project can in theory now serve twice as many households!

The MapCraft parking tool also allows us to look at ownership costs. And once again, parking plays an obvious role in driving these costs up. In King County, Washington (Seattle and suburbs), a 3 bedroom home with 2 parking spaces is estimated to cost $366,000 more than the median household can afford. The exact same housing unit with no parking at all is still out of reach of that median family, but only by $236,000, as the slider bar comparison below shows:

How would you like to save $130,000 on your home? (And if you’re buying a home without parking in a location that supports such a thing, odds are you’re also saving a lot on family transportation costs by not having a car. Not for everyone, but a massive money hack for those who are up for it!)

Play around with the MapCraft tool and tell us what interesting patterns or data points you observe!

One of the Most Important Effects of Parking is Not Captured in this Model

This model is actually understating the importance of parking policy to the viability of affordable housing. Parking affects new construction in two ways: one, the direct construction cost of the parking. And two, how it alters the project’s land budget and space requirements.

This model predominantly addresses just the former. MapCraft’s model here assumes appropriately sized sites (whether they exist or not) and assigns an across-the-board land cost to projects set at 15% of the construction budget.

“That’s the survivor bias story,” Dr. Carlton told me. “Most projects get built with land cost between 10% and 20%.” (This is for reasons of development economics we will not go into here.) “So we assume there is a parcel. Assume somewhere out in this county, there’s a plot of land that costs 15% of the development cost.” In reality, there are places where this condition may be very difficult to meet, such as in regions of coastal California where land prices are exorbitant.

Additionally, in the real world, parking requirements can be prohibitive for smaller projects on limited pieces of land by making them geometrically, not merely financially, infeasible. This causes a “downgauging of housing,” says Carlton, resulting in, for example, a single-family home on a lot that could support four or more homes, because the parking requirements cannot physically accommodate more units.

The downgauging effect can be profound. A detailed analysis contracted by the city of Portland, Oregon, in 2019, for example, demonstrated that parking needs could “tip” a project site from being developed as 32 modestly-priced condos to 10 far more expensive townhomes with garages.

This effect is significant when it comes to housing in the majority of urban neighborhoods where next to nothing is being built. But it is not a direct factor in the model at hand.

The last question here for policymakers and advocates to keep in mind is that the actual gains in housing affordability come not from having less parking required, but from actually building less parking. Enabling car-lite and car-free development may start with abolishing costly parking mandates. But it doesn’t end there.