Will the removal of car parking minimums improve housing affordability?

08 Nov 2020


In August 2020, new government policy came into effect stating that property developers will no longer have to provide car parking in new projects. Prior to this, local council planning regulations determined the number of car parking spaces a development must provide.

Under the rules of the National Policy Statement on Urban Development (NPS-UD), administered by the Ministry for the Environment (MfE), with support from the Ministry of Housing and Urban Development (HUD), developers will now determine how many parking spaces, if any, are required based on market demand. As Phil Twyford (the previous Minister for Urban Development) put it, “the blame will now be with the market and not planners”.

‘Binning the mins’ has been met with praise and consternation in equal measures. But what are the benefits, and will these benefits be realised?

The benefits

The policy change has two stated benefits. The first, and most publicised, is that it enables the development of lower cost housing options. This is because:

  • Building parking clearly has a direct cost. The cost can be substantial for garages, undercroft or basement parking configurations.
  • On-site parking occupies land that could be used for dwellings and reduces design flexibility, which ultimately reduces the density a site can be developed to. Conceptually, increased density reduces the cost of providing dwellings as fixed development costs (for example, the cost of land) are spread between a greater number of units.

I’ve run the numbers and my highly indicative modelling suggests that providing parking can increase the price point at which development becomes feasible by as much as $50k to $100k per unit. A reduction in unit pricing of this magnitude is clearly worth investigation given every urban housing market in New Zealand is regarded as ‘severely unaffordable’.

The second argument in favour of removing parking minimums is that this will encourage people to forego the use of a car in favour of alternative forms of transport. The purported benefits are that that this will in turn reduce congestion and carbon emissions.

The Auckland experience

The Auckland Unitary Plan, which became partially operative in 2016, removed minimum parking requirements in many zones. Thus, the nature of recent development in Auckland may provide clues as to the impact removing parking minimums will have in the remaining Auckland zones and in other cities.

CBRE Research has a comprehensive database with detailed information on all significant Auckland apartment projects that have been recently completed or are in the current pipeline. I have chosen to focus on the apartment market given the depth of information available.

‘Parking-lite development’ is not the new normal

The Auckland experience suggests that there is clearly a proportion of the market that has appetite for ‘car lite development’ with a growing number of successful developments having occurred with limited, or even no, parking provision. Two well publicised examples that spring to mind are Ockham Residential’s Modal House and Daisy apartment projects.

However, car-lite development is the exception and not the rule. Of the 68 apartment projects in the Auckland pipeline that are located in zones where parking is not required, 84% still include reasonably generous parking provisions (over one parking space for every two units).[1]

Some will argue that 0.5 parks per unit is not overly generous, particularly relative to historic development. It is therefore worth noting that two thirds of developments in the pipeline include at least one parking space per unit.

‘Parking-lite development’ will not solve housing affordability issues.

There is support for the argument that removing parking minimums enables the development of lower cost housing options. The chart below presents the listing prices for 18 projects that are in the Auckland suburban apartment pipeline within zones that do not compel developers to provide parking.

Parking lite development is defined as fewer than 0.5 parks per unit. A moderate parking ratio is defined as between 0.5 and 0.75 parks per unit.

The salient observation is that the “more affordable” end of the market is dominated by projects with parking ratios well below one park per unit. While interesting, the chart should be viewed as indicative only given it does not contemplate the numerous other factors that influence pricing (for example, location).

It is also worth noting that it is generally accepted that dwelling prices below a 3.0x the median income is the threshold where housing is classified as ‘affordable’. The average listing prices of ‘parking lite’ projects in the pipeline all comfortably sit above $550k, broadly around 5.5x Auckland’s median household income.

While it is true that ‘binning the mins’ could support the development of lower cost housing options, the Auckland experience clearly suggests that in and of itself, it is not a solution to housing affordability. Indeed, REINZ data indicates that the median price of an apartment in Auckland is   ̴$110k greater than when the Auckland Unitary Plan became operative.

Public transport and private transport are not perfect substitutes

The second purported result benefit of the policy is that it will encourage people to use public transport. This assertion appears logical enough but let’s explore it further.

The image above presents the 21 apartment developments in the Auckland pipeline where parking is not required and with the best public transport links. That is to say, they are within 800m of a rapid transport station (i.e. a train or northern busway station).[2] Of these 21 projects with good public transport links, 18 still included reasonably generous parking provision.

Like any supplier of goods and services, developers have to respond to the wants and needs of their customers, be they purchasers or occupiers. The fact that most projects include parking even when they are located close to public transport stations suggests that many customers are currently unwilling to forego the use of a car altogether.

The second relevant consideration is based on anecdotal observations and my own personal experience while flatting in Kingsland (an inner-city Auckland suburb with superb public transport links). It appears that there is a significant market segment that is more than happy to use kerbside parking if off-street parking is unavailable. This appears true in numerous locations and is not limited to residential occupiers (just ask the residents of Takapuna who frequently complain about commuters hogging all the on-street parking).

In my view, there is a risk that car-lite development may be more effective at pushing people toward kerbside parking than it is at pushing them toward public transport. If this is the case, the policy may actually just encourage developers to effectively push the cost of providing adequate parking on to the public.

Is the policy likely to be effective?

My investigation has been relatively high-level and is clearly subject to several limitations. For example, I have largely only focused on the Auckland apartment market and the policy will impact all asset classes differently. Notwithstanding, the Auckland experience suggests that removing parking minimums, by and large, has not fundamentally altered the nature of apartment development. Indeed, the pipeline continues to be dominated by ‘well parked’ projects, even when proximate to rapid transit. Auckland is one of the least affordable housing markets in the world and I would have expected more developers to be motivated to reduce the price points of dwellings by minimising parking. But this does not appear to be the case.

Many commentators and developers have trumpeted the removal of parking minimums as a significant and positive step that will help to reduce the cost of development and encourage people to use public transport. Personally, I’m not holding my breath. The jury is still out on whether the policy change will actually have any meaningful impact, particularly in the short term. One thing that is certain is should the policy indeed turn out to be a flop, the blame should not sit with the developers or the planners as Phil Twyford suggests, but with the Minister who implemented it.

[1] The 68 projects considered do not include any social housing or serviced apartment projects. It also doesn’t include one further project where the number of parking spaces provided is not known.

[2] There are varying definitions of what a ‘walkable’ distance is here and abroad, but these typically fall within an 800m to 1,500m range. The 800m adopted is at the shorter end of this range and these projects are therefore considered highly walkable.