Imagine, just for a moment, that you live in an apartment building that offers a special lunch deal. Every morning, the landlords put out a tray of 100 sandwiches for their tenants. They’re darn good sandwiches — each one costs $10 to make. Yet the landlords offer a discount, so that hungry tenants can buy a sandwich for just $3. If you don’t want a sandwich, you don’t pay anything. But if you do want a sandwich, you get a bargain!
Neat, right?
Well, not if you remember one of the key rules of economics: There is no free lunch. There isn’t even a below-cost lunch. The building owners are going to have to pay for the sandwiches somehow. And since their only source of income (besides the sandwich fees) is rent, that means that they’ll do their best to make up the money they lose on sandwiches by charging higher rent.
Now, imagine that the situation is even wackier: The building makes 100 sandwiches every day, but has only 80 tenants — 20 of whom don’t even like sandwiches! That means that 40 sandwiches go to waste every day, and at least 20 tenants never eat a single sandwich.
The economics of this crazy system quickly spiral out of control. The landlords lose $7 per day on each of the 60 sandwiches they sell. And they also lose $10 on each of the 40 sandwiches that go to waste. That adds up to $820 in losses on sandwiches each day. Spreading those losses across 80 tenants, the building will need to recoup $300 per month from each tenant just to break even on its below-cost sandwich giveaway.
Now, let’s imagine that one tenant — perhaps one who doesn’t eat sandwiches — figures out that she’s paying $300 a month for food that she doesn’t eat. But when she looks around at other apartments, she discovers that there simply isn’t any way to opt out of the sandwich subsidies. Every apartment building in the area offers below-cost sandwiches to their tenants.
In fact, she finds, most local governments require building owners to prepare expensive sandwiches for their tenants. Some local rules only call for two sandwiches for every three tenants, others require one sandwich per tenant, and some actually require two sandwiches for every tenant. Moving to a different building could mean paying a little more than $10 a day for unwanted sandwiches, or maybe a little less. But no matter where you live, you’ll still pay for sandwiches you don’t eat.
A world full of subsidized sandwiches may sound unrealistic. But go through the example above, and substitute the word “parking” every time you see the word “sandwich.” Suddenly, the situation goes from completely crazy to completely typical.
As researcher Jesse London and I found in our brand new report, Who Pays for Parking?, the Seattle-area residential housing market treats parking almost exactly the same way that the bizzarro world I describe above treats sandwiches. Building owners pay handsome sums to build, maintain, and operate parking facilities. Yet the parking fees they charge their tenants amount to only a fraction of the full costs of parking. Meanwhile, government rules (along with many other factors) spur developers to build far more parking than their tenants use. Ultimately, the costs of this parking insanity fall hardest on renters — particularly those who don’t own cars.
Here’s what our analysis found:
- Apartment buildings subsidize parking. Although most of the apartment developments in our sample charge their tenants to park, the comprehensive costs of building, maintaining, and managing parking facilities exceeds the fees that buildings charge their tenants. (Think of the $10 sandwich for which tenants pay just $3.)
- Apartments typically offer far more parking than their tenants use. For every 100 spots in our sample, about 37 remain empty at night, when demand peaks. (Think of all those uneaten sandwiches going to waste.)
- Many tenants don’t park on-site. Across our sample, the number of occupied apartments exceeded the peak number of parked cars by 20 percent — suggesting that in about 20 percent of apartment units, nobody parks a car on-site. (Think of all those tenants who either don’t eat sandwiches, or buy their sandwiches elsewhere.)
- Buildings lose money on parking. We found that losses on parking add up to about $246 per apartment per month — or losses that building owners cover through higher rents. (Think of all the money that buildings lose on their sandwich giveaways, burying the costs in rent.)
- Car-free tenants don’t have many other choices. If you’re in the market for a new apartment in greater Seattle, it’s almost impossible to find a building that doesn’t lose money on parking. In many places, zoning codes require developers to provide more parking than their tenants need or want. (Think of those wacky sandwich regulations.)
Although a world of subsidized sandwiches seems silly, a world of subsidized parking is all too real. The overabundance of parking distorts the housing market, raising the cost of housing — particularly for folks who don’t own cars, or who live in bare-bones apartments where the cost of parking is a significant share of the overall cost of the development.
So from now on, when you hear that housing is unaffordable, you should always ask yourself: Is it really housing that’s the problem? Or can much of the “affordability” problem be pinned on the high cost providing a place for our cars to sleep at night?
