Can Ditching the Car Unlock Pent-Up Housing Demand?

Developers looking to move more homes near transit may need a new pitch—one that convinces buyers to ditch their cars.

While it might sound radical, the idea is grounded in hard math.

Car-free living could be a financial game-changer, as car costs now consume a significant portion of many paychecks, and auto expenses are soaring in tandem with home prices.

Financial planner Charlie Bilello recently highlighted in a social media post that an auto’s annual operating costs have climbed to $12,296—a staggering 32% jump in just five years.

Insurance alone has increased by 84% over the same period. 

Eliminating those expenses isn’t just about saving a little here and there. A homebuyer could afford a house priced close to $300,000 more, Aaron Lubeck, a Durham, NC, general contractor and land planner, wrote in response to Bilello’s post.

Parking Price Power

Developers have long complained about the high cost of structured parking, with above-grade space costing nearly $30,000 and underground spots reaching $120,000. To make projects pencil out, many rely on tax increment financing, with cities sometimes getting extra parking in return.

The tide is turning, though. Cities and states are reducing or eliminating parking requirements to encourage dense, transit-friendly development.

The hope is that it lowers costs for homebuilders and, eventually, bends those developers' cost curves in a favorable direction for homebuyers. Critics warn this could trigger parking wars and leave car-dependent residents stranded.

That assumes everyone clings to their car.

Still, imagine a developer offering an incentive or perk that entices a buyer to break free of a car payment.

Of course, there’s an alternative to transit and a car: Walking.

One of the things missing in the conversation is the presumption that transit is necessary in all scenarios,” Lubeck tells The Builder’s Daily. “If you live and work in the same community, you can walk everywhere. This plan worked for the first 99% of human existence.”  

Many communities across the country have rediscovered the benefits of walkability, particularly around transit.

What’s Old Is New Again

Living near transit isn’t theoretical for cities like New York, Chicago, Boston, and Philadelphia, which have the oldest subways and light rail systems in the country. Some residents have thrived without ever owning a car, thanks to a robust transit system serving those cities.

Washington, D.C. revived its streetcar legacy by building an extensive subway and light rail system, with the first line opening 11 years after the city abandoned streetcars.

Dallas, Charlotte, Tucson, Milwaukee, Cincinnati, Atlanta, and Austin have all rebuilt streetcar and light rail systems in the past 15 years.

This transit renaissance goes hand in hand with the return of “missing middle housing”—duplexes, triplexes, and quadplexes—made possible by parking reforms that let the market, rather than mandates, decide.

Consider Texas cities, for example.

In November 2023, Austin became the largest U.S. city to abolish minimum parking requirements for nearly every property type. 

Currently, Austin operates a single light/commuter rail line connecting the northwest suburbs to downtown. The city has attempted to add lines, but high construction costs have hindered further efforts.

In May, Dallas enacted a sweeping overhaul of its parking code—the first major update since 1965. The Dallas City Council has removed nearly all parking mandates, especially in downtown areas and near transit stations on its 93-mile light rail system.

How The Numbers Can Add Up

A condominium selling for $458,000 near a Dallas DART station would mean a roughly $2,400-a-month mortgage payment.

Edmunds' auto buying guide shows that the average new loan monthly payment in the first quarter was $741, a nearly 34% increase over the first quarter of 2019. Used car loans increased 35% to $550 month.

The number of car buyers paying $1,000 or more a month is nearly 18%, according to Edmunds.  

Interest rates on car loans rose in tandem with mortgage rates, making both purchases more expensive.

Dropping a car payment and insurance certainly could add up quickly in a homebuyer's favor. The challenge, however, is convincing potential homebuyers that absolute freedom lies in owning a home, an appreciating asset.

For developers, the path to selling higher-priced housing near transit starts with selling freedom from the car.