The issue is that in areas with sufficient parking, on-street parking has few restrictions; maybe you have to move your car every few days and might have a scheduled street cleaning that you need to move for, but you don't need to obtain a permit or feed a meter or worry about where guests might park.

If you put a building with insufficient parking near there, users of that building are likely to park on the nearby streets and that reduces the utility of the street parking for the existing residents; either they may no longer be able to find parking readily, or they need to manage permits, etc.

It's different if you build in an area that already has tightly restricted parking. If you move into a downtown LA building without enough parking for your vehicles, you're not going to be able to find a free spot nearby and you won't reduce the utility of your neighbors.