A new study from the Sightline Institute has shined light on how the price of on-site parking has driven up the cost of rent for apartment dwellers, regardless of if those tenants purchased a parking permit or not. Taking a look at various multi-family residential parking structures, researchers Jesse London and Clark Williams-Derry have made a startling discovery: there is a very ridiculous oversupply of parking in the Seattle area, and the tenants bear the additional costs.

Following up on the research done by UCLA professor Donald Shoup in his 2005 book The High Cost of Free Parking, London and Williams-Derry wanted to answer the question of who bears the final cost of parking in multifamily rental housing. They found that every single one of the 23 housing developments in the study lost money on their parking facilities. The buildings, plain and simple, had more parking than their tenants needed. To test this, the researchers went around to different housing developments (18 in Seattle, the other 5 in other parts of King County) at night (when it was assumed that tenants would be home, asleep) and took a look at how many parking spaces in each development’s lot were filled.

The results, as shown by the following table, indicate anywhere between 8% and 65% (an average of 37%) of of all parking spaces would remain unused by the people who live in the building.

The end result was four strong conclusions:

Much more parking is built than needed – This is the result of a myriad of reasons, including free or low cost parking offsite; zoning codes which have minimum parking requirements; and minimal parking requirements from financial backers who worry that the project’s success may be hindered by a lack of parking options.

This is the result of a myriad of reasons, including free or low cost parking offsite; zoning codes which have minimum parking requirements; and minimal parking requirements from financial backers who worry that the project’s success may be hindered by a lack of parking options. The assumption that all tenants will own cars is false – Buildings studied were largely home to people with moderately high incomes (this is Seattle, after all). Regardless of the income bracket of the tenants, only two housing developments had more parked cars than occupied apartments. That means the number of parking spaces per units in an apartment building should rightly be less than one, as many people are opting for public transit or to commute via walking and biking.

Buildings studied were largely home to people with moderately high incomes (this is Seattle, after all). Regardless of the income bracket of the tenants, only two housing developments had more parked cars than occupied apartments. That means the number of parking spaces per units in an apartment building should rightly be less than one, as many people are opting for public transit or to commute via walking and biking. As a developer, you are going to lose money on parking – When you factor in all different aspects of parking, including the building, maintenance, operating costs, and misc. expenses over time, the costs generated by monthly parking permits was never close to the what is required for construction and upkeep. Even without maintenance costs, parking is expensive to build. Spots can be expected to cost approximately $15,000 per space if they are aboveground and $25,000-$30,000 per space if they are underground.

When you factor in all different aspects of parking, including the building, maintenance, operating costs, and misc. expenses over time, the costs generated by monthly parking permits was never close to the what is required for construction and upkeep. Even without maintenance costs, parking is expensive to build. Spots can be expected to cost approximately $15,000 per space if they are aboveground and $25,000-$30,000 per space if they are underground. The money the developer loses is going to be paid by the tenants, even if they don’t have a car – Someone has to pay for this expense, and that someone is the people living there. Rents were increased to offset the parking lots, to the tune of over $200 per month for each occupied unit in the building. Those who do not own a car (or don’t park their car in the building’s parking facilities) end up subsidizing the facility for those who do use it. The average weighted rent increase was 15%, and could be potentially over 30% for apartments who already had lower rents.

Unfortunately, there is very little that consumers can do to prevent this from happening. Since the overabundance of parking is created based on a number of assumptions that are often untrue, the only way to combat those assumptions is through market forces.

If more people were aware of the fact that their rent subsidizes parking spaces (both used and unused), they might be able to make the conscious decision to not sign a lease in a building that has onsite parking. Without realizing that these parking costs are being included in their monthly rent, consumers are unable to make a cost / benefit analysis to see what situation works out best for them.

If you are an apartment dweller who does not own a car, the cost / benefit analysis is easy to conduct if you know how much your rent is subsidizing empty parking. It is very difficult to imagine a situation where the extra money paid will produce a benefit that can out-weigh the cost. If you get around via walking, biking, or public transit, there would have to be monthly incentives (such as a truly great location) equal to or greater than the increase in rent in order for the cost/ benefit analysis to work in your favor. It would almost certainly be worth it to find an apartment without on-site parking, preferably at a much lower rate.

For those who do own cars it gets a little more complicated, as you still need somewhere to park it. A parking garage under or adjacent to your building also provides a lot of benefits such as safety, shelter from the elements and bring able to bring store-bought goods inside easily. There is certainly more to consider based on individual needs. Regardless, buying parking in your building as opposed to buying 3rd party parking (such as a street parking permit or a nearby lot permit) or finding somewhere nearby to park for free doesn’t sound nearly as appealing when you realize that even if you save money by not buying a monthly pass in your building, you are still paying for onsite parking with your rent money. Car owners may still decide to pass on a building that has on-site parking if there are other nearby parking options available. But without the data, they are unable to make informed choices as tenants.

With consumers being unable to make these decisions, the lenders and developers are able to manipulate the “market rate” for apartments in a given area, potentially driving up costs of other buildings regardless of the parking situation. This is done by setting a standard of what is considered “acceptable” rent based on location.

This situation has turned into a game where nobody wins: the developer loses money on parking and the building tenants lose money on rent to pay for unused parking. Renters are unable to make a decision based on what is best for them since the lenders who secure the loans and bureaucrats who set the minimum parking requirements do not allow the market to work freely. If they did, we could analyze real demand for apartment buildings with on-site parking as opposed to those without. Without that analysis, developers are unable to make a decision on what buildings are best to build in order to meet market demand. The market simply cannot work under these conditions of interference and often false assumptions.

In the end, everyone pays more for something that isn’t being used. It begs a final question: what would you do with an extra $200 per month?

I encourage you all to download the report from the sightline institute here. I hope in the future we will be able to compare with datasets from other cities as well.