Fees-in-Lieu of Parking Spaces

When Private Off-Street Parking Isn’t the Best Solution

In areas of more intense activity or where the community wants to promote density, requiring each use to provide separate parking facilities can degrade the pedestrian environment, limit density, and encourage drivers to drive from one site to the next rather than parking once and walking between nearby destinations. One solution to this is to allow developers to pay fees into a municipal parking or traffic mitigation fund in lieu of providing the required parking on site. The fees can then be used to provide centralized public parking. In some cases, the community may wish to establish the fund in such a way that it can also be used for for transit, bicycle, and pedestrian improvements that can reduce parking demand. By consolidating parking in centralized public lots or structures and allowing developers an alternative to providing parking on-site, a fee-in-lieu system can encourage in-fill development and redevelopment in existing downtowns or historic buildings. It can also improve the overall efficiency of parking provision by addressing the needs of the area as a whole, rather than the needs of each individual site.

In lieu fees can be established as a flat rate per parking space not provided or per square foot of floor area, or through a case-by-case determination for the development as a whole. Uniform fees are much easier for the community to administer and developers to use. Fees may be imposed as a property tax surcharge or charged when a development is permitted [1]. In order to make paying a fee more attractive to developers than providing parking on site, it must save them money. On the other hand, the fee must be high enough to allow for development of centralized parking facilities or to make enough transit or non-motorized mode improvements to put a dent in parking demand. In-lieu fees of any kind should be linked to an index of construction costs, or should be reviewed and updated regularly, so that inflation and changing conditions will not distort them. If they are allowed in a large geographic area, it may be wise to set graduated fees that are higher in areas where land values are greater or to reflect where a public surface lot would be built rather than a garage.

If the fee is assessed per space, it may make sense to factor in differences between the number of parking spaces that would be required if they were built for the sole use of the development and provided free to users and the number required in a shared public facility where there is some cost to park. Factoring in reductions in the number of spaces that the developer must pay for, in essence, can mean that the fees are both cheaper than what it would cost for the developer to provide parking on site and sufficient to cover the full cost of the parking that will need to be built. The reductions from the minimum parking requirements should ideally be standardized rather than determined case-by-case, but could be calculated based on the extent to which the anticipated peak parking hours of the new use overlap with the current peak parking hours for municipal lots in the area. For example, predominately weekend and evening uses such as movie theaters would be given a greater reduction in places where weekday demand is highest and little or no shared parking reduction if evening and weekend hours are already busy. Another consideration might be the anticipated duration of parking for the use, e.g. less reduction for employee (all-day) parking than for shopper (short-term) parking. The community may grant an additional reduction in the number of spaces the developer must pay for if motorists will have to pay to park, as this may reduce parking demand somewhat by encouraging carpooling or use of alternative modes.

Developers may be concerned that the lack of on-site parking will make their development less attractive, especially if there is not much public parking available, or it is not convenient to the site. If developers are allowed to choose between providing parking on-site and paying the fee, those who most value on-site parking will build it, and those who don’t will not be forced to. Another concern is that the parking may not be built where or when the developer would like it. Fees-in-lieu are more effective when there is sufficient concurrent development in a defined area to generate the funding to develop municipal parking structures or when there is sufficient excess parking capacity in public lots already to absorb the demand from new developments until additional spaces can be built or non-auto improvements made. The community may also allow developers to defer payment until the parking spaces are built.

Local examples:
  • New uses or changed uses on constrained sites in the Town of Braintree Village Zoning District that are unable to meet their minimum off-street parking requirements may be required as part of a Special Permit to pay an annual fee per space (to be set by the Planning Board at a public hearing) to allow the Town to provide the off-street parking (see regulation).
  • The City of Northampton makes special provisions for the Central Business District for meeting off-street parking requirements: payment of a fee in lieu of providing required off-street parking is allowed by right. The one-time fee of $2,000 per space is used to add parking spaces, improve the utilization of existing spaces, or reduce the need for new parking in the CBD (see regulation).
  • The Town of Oak Bluffs allows uses proposed for the B-1 business District that are unable to meet the off-street parking requirements to make a payment in lieu of providing the spaces. The payments are annual per space and depend on the number of required spaces, but range from $50 to $100 per space each year (see regulation).
  • In the Town of Ashburnham’s Village Center District, the Zoning Board may allow non-residential uses to pay a fee in lieu of providing required parking spaces. The fee is based on the fair market value of the parking spaces waived plus the cost of building that number of spaces, as estimated by the Planning Board with the advice of the Highway Superintendent (see regulation).
National examples:
  • Developers in the Coconut Grove neighborhood in Miami can satisfy minimum parking requirements by providing off-street parking, contracting spaces elsewhere, or paying in-lieu fees. The city uses the fees to provide structured public parking, to improve transit service, and to maintain sidewalks and pedestrian facilities, helping to maintain the district’s walkable character [1].
  • The City of Orlando, Florida, requires developers to pay fees in lieu of the first required space per 1,000 square feet of floor area, and allows them to choose whether to pay fees or supply the parking for the rest [2, p. 236].
  • Vancouver, British Columbia, calculates its in-lieu fee as the expected cost per space to construct a public parking structure, minus the expected revenue from the parking charges for each space. The fee represents the portion of the structure’s cost that is not covered by the parkers [2, p. 236].
  • Santa Monica, California allows developers in the Third Street Promenade commercial district to pay an in-lieu fee of $1.50 a year per square foot of floor area, regardless of use. The money is used to build public garages behind the stores. This favors uses with high parking requirements, and has resulted in many movie theaters and restaurants locating in the area, creating a dense, pedestrian-friendly district. [2, p. 235]

Additional Resources:

  • U.S. Environmental Protection Agency, Parking Spaces / Community Places: Finding the Balance Through Smart Growth Solutions, January 2006; p. 20-21. Available as a free download at, or download the full PDF below
  • Donald Shoup, The High Cost of Free Parking (2005), Planners Press, American Planning Association; Chapter 9. Available for purchase from
  • Donald Shoup, “In Lieu of Required Parking”, Journal of Planning Education and Research (1999) 18: 307-320. Available as a free download from
  • Maryland Governor’s Office of Smart Growth, Driving Urban Environments: Smart Growth Parking Best Practices, March 2006; p. 4-5. Available as a free download.
  • Fitzgerald & Halliday, Inc., Northwest Connecticut Parking Study – Phase II: Model Zoning Regulations for Parking for Northwestern Connecticut, Northwestern Connecticut Council of Governments and Litchfield Hills Council of Elected Officials, September 2003; p. 20. Available as a free download from… or by clicking here.
  • Christopher V. Forinash, et al., “Smart Growth Alternatives to Minimum Parking Requirements“, Proceedings from the 2nd Urban Street Symposium, July 28-30, 2003. Available as a free download from or click here for the PDF.