To discourage building empty garages, unbundle parking

The DC Office of Planning (OP) wisely proposes eliminating most minimum parking requirements as part of the zoning update, but this does not affect developers who voluntarily build more parking than required and “bundle” it into condo sales or office leases.

This bundling leaves residents and workers with no option to save money by forgoing parking. Rules to “unbundle” parking in new residential and commercial buildings would ensure that genuine market forces govern development.

Excessive parking, whether by government mandate or developer choice, has tremendous costs to society. In The High Cost of Free Parking, UCLA Professor Donald Shoup called parking a “fertility drug for cars.”

OP originally proposed setting parking maximums along with eliminating many minimums in the zoning update, but has now shelved the idea. OP still argues maximums have merit, but says that it’s too difficult to set the right numbers without more work, which it still might undertake after the current zoning update is complete.

Setting maximums right is not simple. If proposed maximums are too low, developer pushback may jeopardize their survival. If they’re too high, the standards are essentially useless, and developers will continue to build all the parking that they want regardless of whether the District’s roads can handle the traffic resulting from this “fertility drug.”

Minimum parking requirements distort the marketplace. Nixing them would remove this distortion, but other market distortions and subsidies remain. For example, parking is a tax-exempt fringe benefit the government allows—and even encourages—employers to provide. If rules required users to pay for their own parking without passing its cost off to others, developers would have a strong incentive to “right size” parking instead of oversupply it.

OP has taken the first key step in discouraging parking oversupply by forbidding developers in Planned Unit Development (PUD) projects from building excess parking and then just leasing it to outside parties. An additional, even more effective strategy would be to forbid bundling parking costs with unrelated charges, such as including parking in the cost of a housing unit or an office lease. In those cases, the parking costs are masked from the user, or paid for entirely by someone other than the one making the choice to drive and park. When users pay directly for parking, they demand significantly less of it.

Legislation would ideally apply these policy changes to all parking throughout the District. However, the politics may be more manageable to start with the zoning code rewrite, whose rules will only apply to new development. There is also a good policy reason to take this approach. Parking is often oversupplied because there are very few limitations on its use. By constraining the use of new parking spaces, developers would build fewer of them.

How could this work? Rules could require unbundling parking. The details would vary between office, retail, or housing use. All parkers would pay directly for parking, or get money back for not parking, but the nature of the charges would differ by building type.

• In multi-unit housing structures, except where parking is physically connected to only one unit, the developer would make parking available at market rate separate from the cost of the housing.
• For office buildings, employers could provide a parking benefit, but then must also give employees the option to instead receive a transportation allowance (or “cash-out”) of equivalent value. This could take the form of tax-free transit, vanpool, or bicycling benefits, for employees whose commutes make them legally eligible for such benefits, plus taxable cash. The total would equal or exceed the market value of the parking.
• In buildings with retail tenants and parking, tenants would have to adopt and enforce a policy to charge market rates for parking for their customers. Retailers could give customers small discounts from market parking rates, but not more than 25% of the hourly market value of the parking.

A building’s certificate of occupancy would require the owner to adhere to the standards (which would also need to be publicly displayed), and the Zoning Administrator could strip the certificate for noncompliance.

There is precedent for regulating on-site transportation accommodations through zoning: DC enforces bicycle parking standards this way. By eliminating the benefits to developers of oversupplying parking, developers would become much more judicious about building in parking that may not be used and whose costs would only drag down the project’s bottom line.