Parking Costs Continue to Hold Back Housing Development in San Jose
Too many San Jose residents feel the crunch of high rents while seeing downtown sites sit empty. The City of San Jose’s Housing Department is working on a Cost of Development study (not yet released) and has begun to share some findings to shed light on why it remains so expensive to build homes in the city, especially the walkable, transit-oriented, and affordable housing our climate and communities urgently need.
Parking is a major contributor to high costs, which the draft study should give more weight to.
Parking spaces take up land, money, and construction capacity needed for living space
The study notes that podium and wrap apartment buildings (see photo above), which are the backbone of infill housing across the Bay Area, rely on structured or podium parking. Podium parking is a multilevel parking structure, usually on the lower levels of a residential building.
While these types of parking conserve space in dense urban settings, they add millions in costs before a single home becomes available. For a hypothetical podium building, parking accounts for roughly 3% to as much as 20% of hard construction costs, adding significant cost before a single home becomes available. For high-rise towers, structured and subterranean parking can represent a substantial share of total project costs, often tens of millions of dollars, making these projects especially sensitive to even small cost increases.
That cost has a ripple effect across the whole project. Developers must charge higher rents, build fewer affordable units, or not build at all.
The most climate-friendly housing types are not currently feasible to build
The study concludes that podium, wrap, and tower apartment buildings are not financially feasible in San Jose today, even before factoring in land costs. Townhomes and stacked flats pencil out, but these lower-density units cannot meet our housing or climate goals, and often create more car dependence.
SPOT SJ data shows there are already roughly two parking spaces per resident in San Jose. We are not short on space to store cars—we are short on homes.
Parking requirements increase housing costs and reduce affordability
Parking structure costs are especially harmful for affordable housing. The more funding that gets absorbed by parking, the fewer homes that can be built for people.
The cost study confirms that fees and taxes can add as much as $72,000 per unit in some parts of San Jose. Parking is a major driver of these costs because it increases the size, complexity, and footprint of a project.
When land is scarce, smarter parking means more homes
Reducing parking frees up space on the ground: more street trees, safer sidewalks, protected bike lanes, and outdoor dining instead of more asphalt. This is how SPOT SJ imagines streets that serve people first.
The study finds that modest changes in development costs or rent levels could make midrise construction feasible again. Reducing the amount of costly structured parking is one of the most effective ways to achieve that. Even a 5-15% shift could unlock thousands of units in walkable neighborhoods.
Parking reform is a powerful lever that’s within the city’s control at a time when interest rates, materials, and financing remain stubbornly expensive.
What comes next
There is no single solution to solve California’s housing crisis. But we do know one thing with certainty: we cannot afford to keep devoting so much space and money to storing cars instead of housing people.
San Jose has the chance to lead California in building for our communities and our climate. Reducing the amount of parking in new developments and modernizing our streets to prioritize equitable, accessible, active transportation choices are crucial steps toward more affordable, sustainable housing.
