Axe car-parking rules to ease the housing crisis

Every night, thousands of car spaces across Australia’s cities sit empty.

This is the result of state and local governments requiring new housing projects to include off-street parking at rates much higher than residents want or need.

In this podcast, Grattan housing expert Matthew Bowes talks to co-author Ashleigh Chang about our report, ‘Wasted space: Axe car-parking rules to ease the housing crisis’, and how can we better manage parking in our cities and get more homes built for less.

Transcript

Matthew Bowes: If you’ve ever driven around Australia’s cities, you might know that finding a car park can be a challenge. Yet every night, thousands of car spaces across our cities sit empty.

Off-street car parking accounts for 13% of the built floor space of apartments in Melbourne and Sydney. Yet as much as 40% of these spaces sit vacant every night. This is not an accident. It’s the result of housing policies by state and local governments that require new housing projects to include off-street parking at rates much higher than residents want or need.

These rules add tens of thousands of dollars to the cost of construction for new apartments and act as a handbrake on housing supply and more livable cities.

How can we better manage parking in our cities and get more homes built for less? That’s the subject of our recent Grattan Institute report, Wasted Space: Axe Car Parking Rules to Ease the Housing Crisis, released in May and which we’ll be digging into today.

Welcome to the Grattan Podcast.

This podcast is being produced on the lands of the Wurundjeri people of the Kulin nation. Grattan acknowledges and celebrates the First Nations peoples on whose traditional lands we meet and work, and whose cultures are among the oldest in human history.

I’m Matthew Bowes, senior associate in Grattan’s Economic Prosperity and Democracy program, and today I’m here with Ashley Chang, who’s an associate in the program and one of the co-authors of the report. Ash, thanks for joining me today.

Ashleigh Chang: Thanks, Matt.

Matthew Bowes: We released Wasted Space in May, and I was surprised about the traction it got in the media. We had a lot of people who, I think, appreciated our recommendations as being one of many solutions to the housing crisis, but we also had some commentators who thought that the recommendation to remove parking requirements for new housing was, in a word, madness.

Did you have any idea how attached people were to their car parks before we released this report?

Ashleigh Chang: We had a fair sense that it would be a touchy topic. Cars are a bit of a sacred cow in Australia, and, if you say “parking,” people assume you’re coming for their space and coming to take it away.

So I think the strength of the reaction there wasn’t a big surprise but I think it was actually a pretty useful way into the report because it’s almost the opposite of what we’re arguing for. I think that if you want a car space and you’re willing to pay for one, you should be able to have one, and, nothing in our recommendations changes that.

The problem is that the current rules are actually taking that choice away. They force a fixed number of spaces onto every new home being built. Whether people are moving in with a car or not, they’re basically forced to pay for this space. And so we’re saying , it’s about giving people the option, , and we’re not taking anything away.

Matthew Bowes: Yeah, I like that framing about this is about choice. It’s about giving people the ability to choose the parking they need and buy that parking. And ultimately if, there’s demand for it, we think there’s pretty good reason why it will be supplied.

So to take a step back for a second to get to the core of the policy problem here, I think it’s likely that a lot of our audience who’ve read the report or heard us speaking about it they probably weren’t aware that there are these rules around parking requirements for new housing projects.

Anyone who’s, dealt with housing rules or rules about planning will be aware that things vary a lot from state to state and from council to council, in fact, and that’s definitely the case here. Mm-hmm. But overall what our report shows is that there are really a large set of mismatches between what parking is mandated by these rules and what’s needed.

So to start with, what exactly are these parking requirements that we’re talking about in this report and how did they come about?

Ashleigh Chang: So when we’re talking about parking requirements, we’re referring to the rules that state and local governments, set, which essentially mandate how much parking builders must build with every new home.

So usually they take the form of minimums. So a planning scheme might say for a one-bedroom apartment you must build one space, for a two-bedder you must build two spaces, and so on. Some councils, like the City of Sydney, Canada Bay, Waverley, have actually switched to maximums instead, and dropped those minimums altogether.

But generally across most of the country, minimums are more common.

So to give you a sense of what those minimums might look like, on average in Sydney we find that a one-bedroom apartment typically comes with 0.6 spaces on average, and that goes up to 0.9 for a two-bedder, and then, uh,, 1.3 for a three-bedroom apartment.

But the rates do vary a lot, depending on state and council, like you said, and so most of the time this depends on factors like the number of bedrooms, and also where you are, so particularly how close you are to public transport.

So in Western Australia, the state basically sets a baseline that flexes depending on how well serviced the transport is to the home.

And in Victoria late last year, they’ve reformed their parking requirements so that in the best connected areas, where you have frequent train, tram or bus, routes, the minimum is now removed, so minimum amount is of zero. While in poorly serviced areas it’s still, 1.2 spaces per dwelling.

So it’s a pretty layered system, changes by state, changes by council.

Matthew Bowes: Yeah. It sounds like there’s a lot of complexity, but I think that point that we’re making is that in a lot of places in our cities still, you do have to build a minimum number of parking spaces for each new home built and that really changes the cost of construction for those homes as well, right?

Ashleigh Chang: Yeah, that’s correct.

Matthew Bowes: So we’ve got these parking rules, but why do they exist in the first place?

What’s the rationale for them that, governments say when they put these in place?

Ashleigh Chang: It might be worth looking back historically. The first minimum parking requirements were brought in, in the 1950s in Melbourne. And the logic at the time was quite intuitive.

Car ownership was taking off, on-street parking was getting tight, and so there was this worry that new homes mean a flood of cars coming into the streets, right? So the fix was make every new home come with a car park and we won’t see this congestion on the streets. And honestly, at the time, it did make sense. We were in low-density cities, car-dependent cities.

But the trouble is that this fix was made in the 1950s and we’re still running it in a very different environment. We’re now building denser apartments near transport hubs, and we’re still making every home come with this car park.

Matthew Bowes: Right, these are policies that were set for kind of a different era- and perhaps don’t respond to the data we have today and the cities we have today. They don’t allow for our cities to grow and change in the way that we might want.

So we’ve got these rules that new homes have to have a certain number of parking spaces, and I guess the obvious question that comes to mind is, is this such a bad thing? You know, Australia tends to have quite a strong attachment to our cars. Don’t most people want parking in their home?

Ashleigh Chang: I think that’s a pretty natural reaction to have, and that’s what we saw, a lot of the public reaction being. Plenty of people do want a space, right? We’re not disputing that. If you’re willing to pay for one, you should be able to have one.

But what we’ve found is that there’s actually quite a big mismatch in terms of how much parking the rules force and how much people actually want or use, which means there are also plenty of people out there who don’t want a space, and they’re currently being forced to pay for one, because it’s bundled into the price of their home.

Some of the stats we had in our report was that about 40% of studio and one-bedroom apartments don’t actually own a car at all across all of our capital cities, and for two-bedders, that’s about 19% who don’t own a car.

And even in family-sized homes, so we’re looking at three bedrooms or more, 58% have one car or none. So these rules don’t really allow for those varying preferences. A studio apartment is often mandated one space, three bedroom often mandated at least two. So these requirements are basically forcing a fixed number of spaces.

Matthew Bowes: If you’ve got a lot of people who are living in three-bedroom homes but actually only use one car parking space, that just creates that mismatch over time, right?

Ashleigh Chang: Exactly.

Matthew Bowes: One thing that really stands out in this report is the detailed analysis that shows just how wide this gap is between the parking requirements we have and what people want and are willing to pay for.

So to cite the numbers we have for Melbourne, we find that people value the first parking space in an apartment at somewhere between fifty-eight thousand dollars and eighty-eight thousand dollars, depending upon the location. But that basement parking typically costs more than ninety thousand dollars to build.

So people are actually valuing these spaces at less than the cost of construction. Now, that might be unintuitive to people, but conveniently you’re the person who ran this analysis, so you’re all over these details.

So can you talk us through how we come to these results?

Ashleigh Chang: Like you said, the cost side of things we pulled from industry cost indicators, but the really novel analysis that we did was on the demand side. So estimating what buyers are actually willing to pay for this car space.

So we used apartment sales data for this, and that was from Cotality, one of our Grattan affiliates, and it covered essentially tens of thousands of apartments across Sydney and Melbourne. And what we did was we used that data set to tease out how much of a home’s price, is actually explained by a parking space.

So what I mean by that is how much an off-street parking space is adding to the price of an apartment. What we found there is that in most areas in Sydney and Melbourne, the value buyers place on a parking space is well below what it costs to build.

So when you get to areas like Western Sydney in Liverpool and Fairfield, we find that where buyers value a space, it’s actually quite low, so at thirty-seven thousand and it’s about ninety thousand, so tens of thousands of dollars higher is what it costs to build.

And really the only places that it does stack up is in the wealthier inner city areas like Woollahra and Waverley where we find buyers are actually willing to pay for that space at more than what it costs to build.

Matthew Bowes: These are areas that are really congested already. There’s a lot of density and in those places that parking space is really valuable.

Whereas in places like Western Sydney where there’s probably a lot more on-street parking available even though people are still using their cars they value that space less.

Ashleigh Chang: Exactly, it’s especially important to look at in the middle and outer suburbs where you do have more available on-street parking, land’s a bit cheaper, but you are in a situation where parking facilities are underground.

I think that’s where it’s really important because you end up in a situation where these projects would’ve been viable had there not been a car parking requirement. And then now because there’s a car parking requirement They just don’t get built at all.

Matthew Bowes: Right, because builders aren’t gonna build it if that, that cost of construction isn’t lower than the price people are willing to pay for it, right?

They wanna build a place and make a profit on it, and that’s how most of our housing market works. So if there’s this mismatch, that actually means some projects won’t go ahead.

Ashleigh Chang: Exactly.

Matthew Bowes: I think we’ve established parking requirements aren’t meeting at least some people’s needs. For these people they don’t want the parking they’re getting and they’re not willing to pay as much for it as it costs to construct. So what does our report recommend that governments should be doing instead?

Ashleigh Chang: So the core recommendation in our report is that state and local governments should scrap these parking requirements and essentially let home builders provide the parking buyers actually want, rather than forcing a fixed amount.

The one carve out there is accessible parking. So the building code requirements for disabled spaces we’re saying should stay. That doesn’t change. But in terms of everything else, we’re saying the parking requirements should be scrapped.

And I think it’s important to note that this isn’t really a new idea or an untested idea.

There’s a lot of precedence for it. So other countries like New Zealand, for instance, they scrapped their minimums back in 2020, London even earlier, and then a whole string of North American cities as well, so San Francisco, Buffalo, Edmonton, to name a few. And in all those examples, they found that developers don’t stop building parking, they just build a lot less of it. It’s often around half of what was previously provided and that’s just because that’s what the buyers actually want in those areas.

It’s also happening in a few places in Australia already. So like I mentioned before in Victoria, late 2025, they axed, minimums in areas well located to public transport.

And then in Brisbane, they relaxed the rules in some inner-city areas, and then a handful of councils in Sydney’s inner city as well. So I think the momentum is really there but we still have a long way to go.

The reform so far has really been concentrated in those inner city areas or near transit hubs. But what we find is that it’s actually those middle and outer suburbs where these rules do the most damage to housing supply because that’s where the land is cheaper. There’s often plenty of on-street parking Already available for people to use instead. And the cost of that mandated parking is really what’s tipping these projects into becoming an unviable commercially.

So we think that minimums should be scrapped everywhere, not just near the good train lines.

Matthew Bowes: We also have done some analysis indicating what impact this might have in terms of freeing up construction capacity for all those parking spaces that won’t need to be built, and also what that means for housing supply.

So can you talk to some of those benefits?

Ashleigh Chang: The benefits of this reform are quite big. The most obvious one being cheaper homes. So that operates in two ways, right?

So first, directly, right now the cost of your mandated parking space is bundled into the new home. So when you no longer have that space, you’re no longer paying for one. And so the cost comes right off the price of the home.

The second, and I think the more substantial one, is on the supply side. So more homes get built. We find that 140,000 extra homes tip into commercial viability in Sydney and Melbourne alone.

And so more supply in that sense takes pressure off prices across the board not just for those new homes being built .

Separately on the construction productivity or construction sector side at the moment we find that our construction sector is stretched pretty thin. So freeing up any extra resources really matters at the moment. We find that over the next five years, if these unwanted spaces weren’t built at all, that frees up $5.2 billion in resources.

Matthew Bowes: Wow.

Ashleigh Chang: So all that concrete, steel, labor currently going into empty bays can now instead be redirected into building new homes. And that’s enough for 9,000 extra new homes nationwide across those five years.

I think given all those benefits, there’s a clear role for the federal government here too. Housing is clearly a national problem. We find that more supply in one state isn’t isolated to that state. It means it takes pressure off prices everywhere. So the Commonwealth really has a reason to want to do this.

The simplest approach is to incentivise states, right? Incentivize them to remove these requirements. And there’s a ready-made vehicle for that already. So national competition policy is the one we recommend. And it’s a similar mechanism to what drove regulatory reform back in the ’90s. So that tool’s already sitting there, it’s just a matter of pointing it to housing reform and parking requirement reform.

Matthew Bowes: Exactly. As you say, the government has talked a lot about challenges with construction and housing supply at the moment. High construction costs, low construction productivity.

We’ve seen a recent productivity commission report into this, and I guess what this work is showing is that, if you could avoid having to build spaces that people don’t want, that increases construction productivity. We’re not putting resources into kind of wasteful things, that aren’t required.

We’re putting them where people want them, and that makes things more productive when it comes to construction.

I think another point to pick up on there is this point around bundling. So this idea that there are parking spaces that at the moment are bundled with the home. When you buy the home, there’s a parking space attached to it, and we also have some recommendations around encouraging states to create the kind of mechanisms that allow for unbundling. So that means selling those parking spaces separately to homes.

That’s challenging for a number of reasons because normally you have this common ownership of apartments, and apartment complexes. So trying to figure out a way of enabling kind of separate sale of parking spaces is tricky, but I think that also is another way that we could better allow parking in new developments to go where it’s most needed, rather just to those people who are forced to buy it ’cause it’s bundled in with the home.

Ashleigh Chang: I also think that we’re seeing it in like informal channels, so people are listing within their buildings their parking spaces if they’re not using it. So it’s clear that there is a mismatch going on and people are open to unbundling.

Matthew Bowes: There’s some big benefits we’ve talked about in terms of these reforms enabling us to build homes more effectively to increase housing supply. But as we talked about at the start, when we went on radio and other kinds of media to talk about these recommendations, one of the biggest concerns people raised was obviously that if we remove parking from apartments and new housing, people won’t stop driving they’ll just start parking on the street instead, and that will clog up our streets.

So what does our research show in terms of those kinds of impacts and how we can best manage that kind of challenge when it comes to on-street parking?

Ashleigh Chang: It’s worth defining what off-street versus on-street parking is. So in our report, the recommendations we’re making are referring to off-street parking, and so what we’re looking at there is the parking attached to the home itself. So your basement parking bays in an apartment or your garages attached to a townhouse, that kind of thing.

And so on-street parking, we’re instead referring to the parking on the street and so they’re, two separate ideas which are important to distinguish between.

In terms of the concern of on-street parking flowing onto the streets, it’s a fair concern to have. I think naturally your mind goes to that. And it’s exactly the kind of problem the parking requirements were designed to address back in the 1950s. But the evidence in our report shows that it’s not achieving that goal of reduced congestion with these off-street parking requirements.

So in most suburbs we find that there’s actually plenty of on-street parking available. Across most post codes in all five capital cities, there are actually more on-street spaces than registered cars particularly in the middle ring suburbs.

And in Brisbane alone we found that within 10 kilometers of the CBD, , there’s about 3,000 streets where you could add six townhouses without garages and still leave more than three-quarters of the street empty.

Matthew Bowes: Wow.

Ashleigh Chang: Yeah. So- That’s a lot

of

Matthew Bowes: parking.

Ashleigh Chang: That’s a lot of parking. So in those areas we find basically these parking requirements are solving a problem that doesn’t exist.

Then in terms of the denser areas where streets do actually get quite tight, This rule of mandating a minimum number of car parks still doesn’t work because on-street parking is often free and unrestricted in most places. People end up parking on the street anyway and you end up in a situation where even if you have a garage they’re not using it to park in. Often, it’s used for storage.

And so I think there’s a study in the Netherlands and the UK, they found that garages actually get used for cars only about half of the time. So you’ve basically forced in every new home an expensive basement parking space or garage. The streets are no clearer than before. So it’s really the worst of both worlds.

Matthew Bowes: That sounds like a real challenge, and I think it goes to the point, right, that really what matters is the actual regulations that we put on on-street parking on those spaces on our streets, right?

So, when we look at a place like Brisbane, which we’ve raised a couple of times as being a city that’s quite car-centric when we look within the two to five-kilometer range from the CBD, places that are still really close to public transport in a lot of instances, but also just close to jobs and amenities in a lot of instances, most of those places still have unrestricted on-street parking.

So there’s no time limits, there’s no parking permits, there’s no charging for that space. And, obviously when you’re an economist and you’re thinking how do you ration a really limited resource like on-street parking in these areas, the first thing you think about is how can we charge for it? How can we put a price on it?

Or how can we ration it? Yeah. How can we give some people permits for those spaces to make sure that the people who need it most are the ones who get access?

Ashleigh Chang: That’s exactly right. So like you said, there are better tools to manage car parking and congestion on the streets like permit schemes, time limits, user charging, and we’ve actually seen this work in other cities as well.

So in Berkeley, California, they brought in a permit scheme and found that after this was brought in, there was at least one space available on every block 98% of the time. So they do work in terms of rationing on-street car spaces.

Many of Sydney’s denser councils already have permit schemes in place, and they’re often quite cheap as well, so either free or at least under $100. The idea isn’t to have a huge cost on the existing residents. It really is just about rationing that on-street space to those who live in the area and need it.

The nice thing about these tools is not that it just is a way to manage congestion properly but you also see other benefits, like less emissions. And when you stop forcing a car space in every building, you end up changing what our streets look like too, so every car space, you need a driveway. A driveway means cars crossing the footpaths. Instead of these streets lined with roller doors, we end up with more lively neighborhoods. You see more shops, cafes, street life. We end up with, livelier, more livable streets, more walkable cities.

Matthew Bowes: Yeah, definitely. There’s a way of using that on-street space better a lot of the time when we allow new housing projects to be designed with, more active frontages.

So we’re thinking things here like, coffee shops and, bike, , repair shops that you can put on the ground floor of a building. But you can only do that if you’re not using that space for parking for roller door entries to garages and all those things.

So I think one of the more interesting criticisms we received was around this question of parking maximums. So these are regulations in areas that are probably denser, where planners would like people to probably use cars less, and the idea is that by making new developments have less parking, we can reduce the amount of cars in an area.

So why do we recommend that those parking maximums also not be the tool we use?

Ashleigh Chang: Maximums are a ceiling on how much parking we can build. But we think that, like minimums, they’re not the answer to this oversupply of parking either. The whole logic of the report really comes back to the fact that builders respond to demand, right?

Where buyers want parking, they’ll provide that parking. Where they don’t want it, they won’t provide it. A maximum can cut either way, so it can either stop the developer from providing parking that buyers actually want in that area, and it can actually sometimes be more commercial for them to provide that parking because people are actually wanting that parking in that area.

Our view in this report is the cleaner approach is really to let supply match demand directly and manage that externality. So manage that congestion on the street through tools like we mentioned before, so user charging permits, rather than putting a cap on the number of car spaces that should be allowed to be built.

Matthew Bowes: If there were more rules and regulations around where you can drive in our cities and more pricing of that on-street space. So here we’re talking about things like congestion pricing, so charging people for entering parts of our cities that are already really busy and where there’s not a lot of road space either to drive or to park.

Using those tools seems like a better way of ensuring that people who are purchasing new homes actually account for the costs of driving in our cities rather than these sort of second-best tools like parking maximums that are reducing parking spaces, but in doing so are not necessarily getting to the kind of the best result in terms of housing supply in these areas.

So Ash, this was your first report at the Grattan Institute. What would you hope that people take away from this work?

Ashleigh Chang: I think the main takeaway from this report for me is that the existing rules are outdated. Our cities are changing. We should be open to change. We should be open to reforming these rules if they no longer meet our needs. We found a lot of people don’t want parking anymore, and it’s really about giving people the choice and allowing them to opt in or out of a car space if they want one or not.

Matthew Bowes: I think that’s a really good place to end on.

Thanks for listening to The Grattan Podcast. Our research, reports, and analysis are freely available thanks to the donations of listeners like you. Please consider making a regular or one-off donation.

You can follow us on LinkedIn and Instagram, and sign up to our newsletter to stay up to date with Grattan’s news. Thanks again for listening.