A few days ago I wrote that “bundling” the cost of parking with whatever else you’re buying makes everything more expensive. The problem is that you end up paying for the maximum potential parking you could use, not for the actual parking you do use.
But this idea isn’t just limited to everyday goods and services; it also has a major impact on housing costs.
The idea is that when you buy a house or rent an apartment, you’re paying for parking space as well as living space. A 2,000 square foot home with a three car garage, for example, costs more than a similarly sized home (in the same neighborhood) with no garage.
One big problem with that arrangement, however, is that parking bundled with housing isn’t responsive to a family’s needs. Maybe the family doesn’t have three cars. Or maybe they have four. And no matter how many cars they have, that number is likely to change over time.
To refresh, this is what I’m calling “bundling.” Like excess cable channels that you don’t want or need, the developer has decided to “bundle” a certain amount of parking with actual living space. If you want ESPN or that nice house by the good school, you’ll to have to pay for MTV 2 or several cars worth of parking, respectively. This ends up costing people tens of thousands of dollars more than they might otherwise need to spend.
As was the case with retail, a la carte or “de-bundled” parking would be cheaper. Imagine, for example, that residential neighborhoods had communal parking lots where you could pay a month fee to store your car. If you choose to not have a car, you avoid the parking costs altogether. Or, if you choose to have four cars, you pay to store them for however long you need them. In either case, when your needs change, so do your parking costs.
Paying for parking by the month wouldn’t be fun, of course, but if homes were $20,000 cheaper it might suddenly seem like a pretty awesome deal.
This point seems particularly apropos right now, as the huge baby boom generation enters retirement. Ten or 20 years ago, that cohort had kids at home and probably “needed” lots of cars. My family, for example, had three cars for most of my teenage years.
In just a few years, however, my parents will be empty nesters and not long after that they’ll be retired. They won’t need three cars. They may not even need one. Their house, however, will continue to include an expensive three car garage.
A la carte parking is already common in some bigger cities, especially where older housing doesn’t have on-site parking. In those cases, residents are required pay for off-site parking by the month. But guess what: that housing is also cheaper than it otherwise would be if it included parking. I saw this firsthand when I was shopping for housing earlier this year in Salt Lake City.
So why don’t more places — especially suburban neighborhoods where parking needs are often greater — offer a la carte parking options?
It’d be easy to blame the housing market. Developers know that by adding a lot of parking to houses they can charge more. And by adding the maximum potential parking that buyers might need, they cast a wide net and appeal to the broadest consumer base.
But I don’t think that’s the biggest problem. After all, garages may add value to homes but developers could make even more money from their land if they forwent the garages and instead built more dwellings. The homes would sell for less money individually, but there would be more of them so the overall profit would be higher.
The real culprit, then, isn’t the market. Instead, it’s laws and ordinances that distort the market. So, things like density restrictions and parking minimums — which are extremely common in Utah and elsewhere.
Density restrictions prevent developers from building more homes on their land, leaving them with few options other than to add costly amenities like big garages. And parking minimums effectively legislate bundling. To return to the cable TV analogy, it’d be like passing a law that required people to pay for extra, unneeded channels.
It makes no sense for laws to interfere with the market this way. If people demand big houses with lots of parking in low density neighborhoods, developers will oblige and create supply. The market will take care of itself and there’s no reason to force developers to build that way irrespective of demand.
These laws also mostly eliminate the possibility of a more efficient and dynamic a la carte parking market. The solution, then, is just to let the market respond to diverse range of parking needs and desires.