Sunday, November 12, 2006

Finding "Green" Neighbors and Product Bundling

I'm getting ready to move to Los Angeles and I don't drive. Apparently, I'm in the minority here. In a world where people differ with respect to their tastes for "new urban" living, how do greens co-ordinate and find each other? In Portland, new condo developments are being constructed close to rail transit stations and these buildings offer NO parking. Such buildings will self-select Greens to live there.

Developers must recognize that the characteristics of the buildings they design embody not only the physical location of the building in a city and the structural attributes of each housing unit. In addition, there is an "emergent property" --- who lives in the neighboring apartments? Is the typical neighbor a "yuppie"? A "truck driver"? Greens may be willing to pay a price premium for such a new urban unit if they can be guaranteed that their neighbors will have similar values as them. The absence of parking may help to achieve this goal. The interesting economic issue here is the co-ordination problem of how do strangers with similar tastes who want to form a sub-community find each other in a world of weirdos and search costs?

Here is the New York Times

November 12, 2006
National Perspectives
No Parking: Condos Leave Out Cars


ANNEMIEKE CLARK and her boyfriend, Daniel Pasley, do not spend a lot of time driving. Ms. Clark, a 29-year-old nursing student at Oregon Health and Science University, takes the bus to school. Her boyfriend is a “crazy bike rider,” she said.

So when they decided to buy their first home last winter, they chose a one-bedroom unit in the Civic, one of the first new developments in Portland to market condominiums without parking spaces.

Ms. Clark said they bought the $175,000 condo, which will be ready next summer, because “it was absolutely the cheapest one selling.” Mr. Pasley also hoped a unit without parking would inspire Ms. Clark to sell her 1992 Subaru.

“So, part of it was idealism — that we would get rid of the car,” Ms. Clark said.

Although condominiums without parking are common in Manhattan and the downtowns of a few other East Coast cities, they are the exception to the rule in most of the country. In fact, almost all local governments require developers to provide a minimum number of parking spaces for each unit — and to fold the cost of the space into the housing price.

The exact regulations, which are intended to prevent clogged streets and provide sufficient parking, vary by city. Houston’s code requires a minimum of 1.33 parking spaces for a one-bedroom and 2 spaces for a three-bedroom. Downtown Los Angeles mandates 2.25 parking spaces per unit, regardless of size.

Today, city planners around the country are trying to change or eliminate these standards, opting to promote mass transit and find a way to lower housing costs.

Minimum parking requirements became popular in the 1950s with the growth of suburbia, said Donald Shoup, a professor of urban planning at the University of California at Los Angeles and the author of “The High Cost of Free Parking” (American Planning Association, 2005). “They spread like wildfire,” he said.

But in the 21st century, skyrocketing housing prices and the move toward high-density urban development are bringing scrutiny to the ways in which cities and developers manage the relationship between parking and residential real estate. Once a tool of government, parking requirements are increasingly driven by the market.

Last year, for example, Seattle reduced parking requirements for multifamily housing in three of the city’s major commercial corridors. Next month, the City Council will vote on a proposal to eliminate minimum parking requirements in Seattle’s six core urban districts and near light-rail stations. In June, San Francisco replaced minimum requirements downtown with maximum standards allowing no more than 0.75 parking spaces per unit. In Portland, where central city parking minimums were eliminated six years ago, developers are breaking ground on projects with restricted parking.

“In the future,” Dr. Shoup said, “we will look back at minimum parking requirements as a colossal mistake. Change will be slow, but it’s happening now.”

The Civic, a 261-unit project, includes 24 condos without parking. The building is six blocks from downtown and near a major bus and light-rail line, and will offer residents a rental-car-sharing arrangement.

“We’re always looking for ways to promote smart growth,” said Tom Cody, a project manager of the Gerding/Edlen Development Company, which developed the Civic. “We decided to test the water and see if there was a market for units without parking spaces.” The 24 condos sold out, he said.

In San Francisco, more downtown housing has been approved over the last few years than in the last 20 years combined, said Joshua Switzky, a city planner. The booming real estate market there inspired local officials to revoke minimum-parking requirements in the central core, Mr. Switzky said. “The city’s modus operandi is ‘transit first,’ ” he said. “Everyone recognized the existing rules didn’t match the policy.”

Under San Francisco’s new parking maximums, downtown developers are also required to “unbundle” the price of parking from the price of the condo. “Buyers aren’t obligated to buy a parking space, and developers don’t have the incentive to build spaces they can’t sell,” Mr. Switzky said.

Sustainable development is not the only factor driving changes to parking standards. “We talk about affordable housing as the most critical thing facing cities and the nation,” Mr. Cody said. “But we never talk about the costs of the automobile.” Since individual parking spaces cost about $40,000, reducing or eliminating parking is an effective way to lower housing prices, he said.

At the Moda condominiums, a development under construction in Seattle, only 43 out of 251 units have assigned parking. Eighty-three units have no parking and the remainder have access to a permit parking system. The building is in the downtown Belltown neighborhood, where the average condo has one and a half parking spaces.

“I wanted the least expensive unit,” said Mary Stonecypher-Howell, a computer database specialist who bought a Moda studio without parking for $170,000. Ms. Stonecypher-Howell said it was the only downtown condo she could find for less than $200,000. “In the city, it’s simpler not to have a car,” she said. Moda units with parking cost about $30,000 more than units without.

Lenders traditionally balk at financing projects without parking, said David Hoy, who developed the Moda condos. The concern is that they would be difficult to resell. “But in a high-density urban environment, there’s a strong demand and a shortage of supply,” Mr. Hoy said. Moda, which is financed by United Commercial Bank, sold out in less than a week, he said.

Other cities are also reconsidering parking standards. In Houston, for example, a committee is reviewing parking minimums along the light-rail line, according to Suzy Hartgrove, a spokeswoman for the city’s planning and development department.

But not everybody is enthusiastic about the piecemeal changes taking place around the country, especially because often-arcane parking codes vary from district to district and city to suburb.

In the Rincon Hill neighborhood of San Francisco, where the new luxury tower One Rincon Hill is selling for $1,000 a square foot, parking standards allow a maximum of one space per unit. Just a few blocks away, downtown requirements undercut that figure by a quarter, making One Rincon Hill more attractive to buyers with cars.

“It gives them a marketing advantage,” said Victor Gonzalez, director of development for Monahan Pacific, a local company that has built condo properties downtown. “You’d be killed if you tried to do a project in the suburbs without parking,” he added.

Others point to the free-market parking situation in Manhattan, where monthly rates now exceed $500 a month.

Planners are undeterred. In the United States, “housing is expensive and parking is cheap,” Dr. Shoup said. “We’ve got it the wrong way around.”


celia said...

my fiance lives in downtown los angeles and hasn't had a car in three years. our building doesn't provide parking, my garage is on the next block but we almost never use my car. we walk or take public transport. there are three farmer's markets within walking distance and we're surrounded by neighbors who value these same things. hopefully your experience in los angeles will be similar.

Rob Dawg said...

I'm getting ready to move to Los Angeles and I don't drive. Apparently, I'm in the minority here.

Not really. A greater proportion of people in LA use transit than in most urban areas. Car ownership is generally lower and in certain census blocks very much lower.

As to Dr. Shoup. I'm not even sure where to begin. He remains obstinately unwilling to reply to his critics. His seminal paper is at: for anyone interested. The problem is that despite using examples of unbundled pricing he denies that when parking is provided it is a bundled cost. Instead he insists it is a subsidy. Thus whenever "costing" out the price of free parking he double counts any gains and double subtracts any loses. It is really bad science and I don't know why it persists.

Welcome to Southern California. There's something for everyone here and I'm sure you'll find exatcly the built environment that suits you. Don't be surprised by the equal possibilty that the environment changes some of your practices in the process.

randall crane said...

Shoup and Kahn can look out for themselves but just the same,

1. I have to admit I don't follow Mr. Coté on Shoup's math or NY Times comments. "Excessive" parking requirements increase project costs. Say we agree that an extra space required for a new restaurant costs an extra $X (in foregone interior space, construction costs, and so on). If no one eats there, that is the full cost of the regulation

But ignore the regulatory cost for the moment. If restaurant parking is free, customers will park more than if parking were costly. If cars have social costs (e.g., pollution, congestion), this distortion is an additional $Y, determined by the price sensitivity of parking.

So if the regulation were relaxed, costs would fall by $X + $Y. Of course, if the parking requirement isn't binding then $X=0, or if cars don't have social costs then $Y=0. But I may misunderstand Mr. Coté.

2. Kahn will certainly be in the minority in LA if he doesn't drive to work. Still, UCLA has a subsidized transit program (which Shoup is largely responsible for) that is especially handy in areas served by the Santa Monica bus system.

Anonymous said...

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