Friday, March 14, 2014

Affordability, Part 1: Parking

The Office of Planning (OP) has used housing affordability as a rationale for a number of proposals in recent years;  the reduction or elimination of parking minimums, matter-of-right conversions of garages to rental apartments, and the relaxation or abandonment of Height Act limits are a few examples. Yet OP is not trying to reform or replace the part of the zoning code that is expressly designed to produce more affordable housing – the inclusionary zoning (IZ) provisions. This leads me to question whether affordability is a problem that OP actually wants to solve – or whether it serves too useful a function as an always-available justification for upzoning and other pet projects.

This post is the first in a series that will explain why various proposals in the ZRR will not make housing in the District more affordable – and how some are actually likely to make housing even less affordable. 

Today’s topic: Parking requirements and housing affordability

The first thing to remember here is that car-free housing is easy to find in DC, and has been for decades.  (My own household has been carless in DC for 25 of the past 26 years, so I know whereof I speak.) This is true for two reasons:

·       On-site parking requirements weren't imposed in DC until after 1958.  Thousands of apartments, as well as single family homes of various types (detached, duplex, rowhouses, and flats), still in use today were built before that time.  In fact, such housing exists in sufficient quantity to account for on-street parking problems in areas like Capitol Hill, Logan Circle, Dupont Circle, and Georgetown where historic housing stock is common.  It is not at all clear that, empirically, car-free housing in DC is cheaper than housing with on-site parking, but, at any rate, it is certainly already available in this market.

·       Our fractional parking minimums (generally one space for every 2 to 4 apartments) mean that parking in multifamily buildings is typically sold separately (or “unbundled”). So even in buildings that do have on-site parking, people who don’t need or want parking don’t have to pay for it.  Long story short, we already know what the price of housing without parking is in various neighborhoods.  And it’s not going to change.  There’s no reason to believe that housing in new construction with no on-site parking will be offered at lower rents (or sales prices) than units in existing buildings that are sold/rented without parking.

Arguments that parking requirements increase housing prices assume that housing prices are, essentially, a function of how much it costs to build housing. But cost-plus is not how housing is typically priced; rents are market-driven. And, in DC neighborhoods, there's one market for housing and a separate one for parking. Each commands what people are willing to pay, regardless of how much a particular unit cost to produce (e.g. surface parking spaces aren't necessarily cheaper than spaces in an underground garage in the same vicinity). This also means that, to the extent that parking costs have been smuggled into rent, even buildings without parking costs can/will claim that rent because they know that’s what the market will bear.  

In fact, at least one local developer seems quite aware that car-lessness makes higher rents possible.  “Matt Klein, president of Akridge, a commercial real estate company, and chairman of the Urban Land Institute’s Washington Chapter, said that 50 percent of all new residents moving into apartments in the District do not have cars.  ‘That’s part of the way people afford units, by shedding other costs,’ he said.”

It’s also important to remember that the reduction or removal of parking minimums would primarily affect new construction. Yet the most affordable housing in an area is typically found in older residential buildings. Even the cheapest market-driven new construction is likely to be priced higher than older units in the same area, and this is especially true in hot housing markets and in gentrifying areas. 

Experience in Portland bears out the claim that eliminating parking requirements does not increase housing affordability.  Residents say the new car-free buildings are expensive. This graphic indicates that new construction in many areas of Portland rents for nearly twice what pre-1997 buildings do.  Perusal of marketing info corroborates that car-free buildings are being marketed as luxury buildings at high-end prices. Basically, buildings without parking tend to be clustered in neighborhoods where there is a seller’s market.  An article in Willamette Week (Portland’s City Paper-equivalent) offered this explanation:

Randy Rapaport, a longtime developer of condominiums and apartments on the east side, including the Belmont Dairy Apartments and Lofts, disagrees with the parking exemption. He says it simply allows developers to cut costs while creating gridlock for the neighborhood.

“These are sophisticated developers,” Rapaport says. “They know they can fill their units because this area is so hot. They know better.  But they’re not required to know better.”

A NYC residential parking study affirms that when housing is scarce, developers know that it will command high prices with or without parking. In fact, a few developers have discovered that, in that market, fewer parking spaces can be more profitable than sufficient parking – on-site parking will command astronomical rates (with lower excavation costs) if most people in the building can’t have parking but a select few (who are willing to pay whatever it costs) can.

Ultimately, if developers are not compelled to internalize at least some of the costs of providing parking for their tenants, then the public will pick up the tab for the parking scarcity that results – see, for example, calls in Cleveland Park and Logan Circle for municipal garages.  In the shorter-term, expect to see substantial increases in the cost of Residential Parking Permits (and increasing restrictions on on-street parking).  Housing costs won't decrease, but parking costs will increase.  That's not a way to make living in DC more affordable.