How to price parking at your apartment building
June 23, 2023
TABLE OF CONTENTS
Pricing your parking is a tough decision. At Parkade, we work with buildings across the globe to help them better manage their parking, and we’d love to share what we’ve learned:
When it comes to pricing parking in private buildings, the first decision you’ll want to make is whether you want to:
Some buildings opt for a hybrid approach. In these scenarios, buildings give away a certain amount of parking to each unit or tenant, but charge for any extra parking.
For example, you could:
In all of these scenarios, the community could at least charge for extra parking, to better ensure parking doesn’t go to waste.
The choice is yours. So how do you decide how to handle it? Keep reading!
The majority of private buildings in the United States do not charge for parking. Though it may feel like everyone is doing it these days, that’s still a new phenomenon.
Even in the Boston region, one of the oldest and densest in the US, less than one third of properties sampled in the city and its surrounding suburbs charge for parking, according to a study by the Boston Regional Planning Commission. While there are a ton of reasons you should charge (see next section), there are some reasons to consider not charging:
In all of these cases though, it’s likely that giving away only some parking for free will be a better approach than giving your tenants and guests an unlimited amount of free parking, unless you have so much parking you never run out and don’t mind non-residents leaving their cars on the property.
While the majority of communities aren’t charging for parking yet, that’s changing, and changing quickly.
A couple decades ago, it was almost unheard of to charge separately for parking — it was something only the most urban, luxury buildings did. These days, most new developments nationwide, even suburban and exurban ones, are charging for parking from the get-go. And many existing developments have made the switch or are considering doing so.
“Decoupled parking is becoming a lot more popular, and we’re doing it at most of our new properties, and many of our existing properties,” said Lety, a regional manager in San Diego. “It helps drive more revenue, and reduce the amount of parking we need.”
Here’s a rundown of the top six reasons you should charge for parking.
While most buildings have the freedom to decide their parking prices, a number of cities and regions have successfully passed local ordinances and implemented parking policy changes that require or favor unbundled parking.
For instance, in 2018, the city of Seattle passed a law requiring landlords to unbundle the costs of parking from the costs of housing in buildings of 10 or more units. Similar requirements exist in cities throughout California, including Berkeley, San Francisco and Santa Monica, as well as a smattering of other cities around the country.
California’s legislature is considering a bill that would require parking to be unbundled in all apartments located in 10 counties, or about ⅙ of the state, and all new construction starting in 2025.
With policymakers pushing apartments and even offices toward charging for parking, property managers — especially those with properties in more progressive cities or states — should consider getting ahead of any upcoming requirements.
One of the trickiest parts of a property manager’s job can be figuring out how to distribute limited amounts of things your residents crave most, like the best parking spots. Charging for parking, especially for premium parking, can make that much, much easier.
If your community has any of the follow types of parking, at minimum, you should strongly consider charging for these spots:
If all spots are free and unassigned, or even if they’re free and assigned, residents will fight over these spots — and some spots won’t get used, or won’t get used much. Waitlists will develop. And residents with good spots will constantly try to bequeath coveted spots to friends when they leave.
Instead, charging the right price for these spots makes life easier, and it can better match residents’ budgets with their needs. This way, someone who’s price conscious but willing to walk or willing to park in the sun can do so, while someone who wants shade and a short walk for their car can opt to pay more for the best spot.
If you don’t charge separately for parking, people will inevitably use more parking than they need.
Think about it. Sure, bundled parking ensures that every household in the building has a reliable spot to park. But what happens to those parking spots when residents go to work each day? Or on vacation? Or a they don’t even own a car? They sit empty.
Not charging separately for parking maximizes reliability of parking, but minimizes utilization. Not charging for parking is also a sure way to guarantee you have car-free people with parking spots…which, of course, they have no use for.
Is your community far from a city center and you’re convinced everyone has a car? Think again! 9 percent of entire US households don’t own a single car, and 43% of households have one or fewer cars, meaning they don’t need multiple parking spots.
One of our partner properties, Alta off the Avenue, is a suburban apartment community in Burlingame, Calif., and their property manager had been convinced all residents owned a car and needed a parking spot. After rolling out Parkade, they discovered more than 10% of residents didn’t even own a car!
If all residents get a parking spot for free, parking will go to waste. A UCLA study found that car-free renters in the US paid $440m (in increased apartment rents, not in parking fees) for parking they didn’t use in 2015! Charging — even a nominal fee — can drastically reduce demand for parking at your property, and better allocate spots to those who want them.
That’s borne out in the data, like that collected by California’s MTC:
See what we mean? The buildings that charged residents separately for parking, unbundled from their rent, were able to provide 0.21 fewer spaces per household and overall occupancy of parking spaces was 4% less than buildings that bundled the price of parking with rent.
In summary, if your parking is limited, the single-best best thing to combat that problem is charging for parking.
The second-best thing you can do is use a parking management system, but more on that later.
A major advantage of charging for parking is being able to advertise lower apartment rents.
With the price of housing spiking across the country, that’s a massive draw for prospective residents. Base price is the number one factor — by a wide margin — people care about when searching for an apartment, and the number one factor that determines the number of leads a building gets. So the lower the base price, the more leads.
Just ask property manager Eunice Lee at Fedora Apartments in Los Angeles. By charging for parking, she was able to bring advertised apartment rents down below $2,000/month, which led to an impressive 36% increase in leads from prospective residents.
When people arrived for tours, she’d explain that parking was an additional $250/month, but they were often already hooked on an apartment, and could then decide if they wanted on-site parking.
It may seem obvious to say buildings should make more overall revenue when they charge for parking. But what if we said buildings should still make more overall revenue by charging for parking, even if apartment rents decrease?
Imagine a building earning $100,000/month in rent for 50 units — $2,000/unit on average — and charging $0/month in parking for 100 parking spots. If they start charging $100/month for parking, they’ll earn close to $10,000/month in parking. And, if needed to bring in more leads, they could drop apartment rents by $150/unit, meaning they can advertise average apartment prices of $1,850/unit.
They’ll now pull in $102,500/month in apartment and parking rents combined, instead of $100,000! And, they’ll get significantly more rental applications (as discussed above), making their leasing team’s job easier.
There’s other ways charging for parking can increase revenue too, because buildings will attract renters who never would have signed a lease previously.
Imagine a household with 4 people who really need parking, and they want to pay for four spots. Before charging for parking, the building only had two spots available per unit, for free, so this group would have gone elsewhere. Additionally, a car-free, single renter might have refused to sign a lease because they felt $2,000/month was too much to pay and they’d be throwing money away on two empty parking spots.
By charging for parking, everyone gets their needs met. The group of four drivers signs a lease and pays for four spots, while the singleton skips the parking and pays $1,850/month in apartment rent.
Maybe one of the lesser-known benefits of charging for parking is that it decreases the use of your parking as “long-term car storage.” That’s what storage lots are for, folks!
True story: at Artistry Cincy, an urban apartment community in downtown Cincinnati, a resident was storing her boyfriend’s car — broken down, and undrivable — for 6 months until Parkade launched and they started charging for parking. At which point, she found a proper storage location, removing an eyesore from the property.
To charge for parking, first, you’ll need to make sure your current leases, parking leases and/or parking addendums allow it. If they don’t, you should likely consider just charging for parking for new applications or lease renewals, once you’ve updated your lease language to remove references to free parking.
In our experience, it’s generally a good practice to avoid promising specific prices in your parking leases if possible. Instead, try using more general terminology — something like “parking available at an additional fee, and prices may change with 60 days notice.”
[It’s important to note that what works for some here, may not work for others. We may be parking experts, but we aren’t lawyers, and this isn’t legal advice. So make sure to vet this with your legal team beforehand.]
Well, if you ask us, there are two approaches. The first is to handle everything yourself, like so:
Decide which spots you want to charge for, and how much you want to charge. Most buildings pick 1-3 different price points, like $50/month for surface parking, $100/month for the gated garage and $150/month for an EV spot in the garage. To get a feel for how much you should charge, you may want to do some “comp shopping” and compare your pricing to other buildings in the area.
If you’re already running a waitlist for long-term parking spots at your building, that’s a great sign that you should start charging more for parking, or at least increase your prices. Or, if you’re in an area with paid street or paid off-street parking, that’s a sign the market will definitely bear unbundled parking.
If you’re a property manager, your regional and ownership will almost certainly need to review your plan and sign off on it. And remember to always make sure to check your existing leases, or parking leases, to see if you’re able to make changes to existing residents’ parking agreements.
Next, you’ll need to communicate the changes to your residents — either existing and new residents (or renewals), or maybe just the latter. You’ll also need to track how much you want to charge (probably in a spreadsheet) and add these new rentable items to your property management system.
From there, go ahead and roll it out and evaluate the impact. Do you see any impact to retention? Do all the best spots get gobbled up? Keep a close eye on it, and use that information to decide if any additional changes are needed. You may need to adjust your prices up or down.
Finally, it’s time to decide if you also want to charge for visitor parking and, if so, how you want to manage it. Will you have residents come to the office, hand them a placard and add rentable items to your property management system? Or use a self-serve parking app?
Speaking of parking apps, there’s another approach to unbundling your parking that makes all of this quite easy, including visitor parking: Use Parkade.
All those steps we just mentioned above? We have you covered.
When you use Parkade, we work with you to transform your parking and handle everything from pricing and payment collection to resident communication and ongoing customer service.
"In multifamily management, we often miss the boat with pricing parking correctly," says Kim Crouch, Director of Asset Management at Great Lakes Capital. "With Parkade, it's so much easier for us to price things dynamically."
Here’s a closer look at what that can look like at your building:
With unbundled parking, buildings often opt for 1-3 price points as a way to keep things simple. We see it all the time. Like Artistry Cincy in downtown Cincinnati, who offered only one price point for parking before using Parkade.
Sure, it means adding fewer rentable items to your property management system, but charging for parking this way may not result in the massive improvement you were hoping for. With just one or two price points, parking can easily end up being either too expensive (resulting in too many empty spots) or too cheap (resulting in all spots being sold out, and having to create a waitlist).
Even more likely, the best spots will get gobbled up, and the worst spots will stay empty.
With Parkade, you get dynamic pricing. We’ll come up with a custom pricing matrix that allows you to easily offer more price points, automatically adjust prices in real time to manage demand and offer a mix of short-term and long-term parking options based on factors like:
Just take a look at the pricing matrix we created for Artistry Cincy to get an idea of how this might work:
It would be pretty crazy for a property manager to have a price list 20 long of all the different parking options, and pull a giant map out each time a resident needs to pick a spot.
But if you use Parkade, it’s easy! With Parkade, residents get a mobile app to book and pay for parking, making it simple to offer a slew of different price points.
This also means you don’t have to add more rentable items into Yardi, Entrata, or any other property management system. When you use Parkade, we handle all payment collections so you and your team don’t have to.
With Parkade managing your parking payments, lease concessions and incorrect records are far less likely (almost impossible, really). We spoke to one apartment building in Los Angeles who discovered they had been losing $20,000/month — before using Parkade — because one of their managers forgot to add rentable items to their property management system for about 90 residents.
All we need you to do is make the introduction. Just communicate the launch of Parkade to residents at your building (or buildings) and we’ll take it from there!
When you use Parkade, we’ll handle all ongoing parking-related requests and issues. Whether a resident wants to change spots or report that someone is parked in their spot, our 24/7 customer service team is on it. Parkade’s unique self-service tools allow residents to manage their parking needs and report parking issues right in the app in seconds. And our team is there to provide remote support at every step.
And don’t just take our word for it. “Parkade’s customer service team is insanely fast and helpful!” shared Devin, an employee at 201 Isabella in Pittsburgh, PA.
Parkade makes it easy to offer visitor parking too. Whether you offer visitor parking already or not, with Parkade, any parking spot not rented long-term can become available visitor parking.
So, even if you give away long-term parking for free to residents, spots sitting idle between long-term leases can be put to use as paid visitor parking!
“No guest parking was always an issue,” said Andrew Petit, assistant manager at Mariposa on 3rd in downtown Los Angeles. “Now we have guest parking, and it’s bringing in additional revenue for the building with no work on our side.”
By unbundling your parking, we’ll help you provide a better resident experience, improve parking utilization and boost revenue. Remember, pricing parking is a tough decision. But if you use what you learned in this article, we hope it helps make your decision a little easier.
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