The High Cost of Free Parking Chapters 5-9

This post follows on the earlier discussion of the first four chapters of The High Cost of Free Parking. Sorry for the delay on this next section. Work has been getting in the way of reading this parking tome. I will plan to post on chapters 10 – 14 next week on Wednesday.

Chapter 5- A Great Planning Disaster

Shoup sets up parking requirements as a great planning disaster. If an individual developer chose to dedicate more of his land to parking than his customers demanded, he would lose money on the margin. If he is a major property owner and somehow made this mistake repeatedly at many properties, we might consider it a disaster. But a planning disaster occurs when no individual loses a lot of money in this type of error, but rather we all lose some. Shoup explains that parking requirements breed demand for more parking. By subsidizing driving, these rules lead more people to become drivers and encourages sprawling development. This in turn creates an increased demand for free parking and leads to higher parking requirements, since many cities base these requirements on the peak number of people who would like to park at a building for free, leading to the parking disaster we have today.

Shoup explains that oftentimes parking requirements are so onerous that they dictate development both in use and in architecture. For example, Los Angeles’ “dingbat” apartments which are apartments built on stilts over driveways were created to fulfill requirements for covered parking. This chapter includes the empirical evidence that I find most persuasive so far, a study of changes in development after Oakland implemented a parking requirement in 1961. For new developments in the two years after the regulation went into effect, residential construction costs increased 18% per unit, housing density decreased by 30%, housing investment decreased by 18%, and land values fell by 33% compared to the four years before the requirement. This is strong evidence that in Oakland, at least, parking requirements, rather than demand for parking, drive parking supply.

Parking requirements also make existing development less flexible. As he explains, the specificity of requirements for each land use mean that buildings can rarely be used for something with higher requirements than current uses. Shoup points out that this obstacle toward reusing existing buildings creates incentives to pursue greenfield development where it’s cheap to build required parking, leaving properties vacant in center cities.

Shoup points out that the costs of parking requirements do not fall evenly on everyone. They act like a regressive tax because low-income people who are less likely to be car-owners and make fewer car trips receive fewer benefits but all of the costs. Additionally, they encourage people to become drivers who, in a world without parking requirements, might prefer to use other transportation modes. Parking redistributes wealth from those with preferences for making frequent, short car trips to those who drive less or don’t drive at all.

Chapter 6 – The Cost of Required Parking Spaces

The title of this chapter is somewhat misleading because it focuses on the cost of parking generally without distinguishing whether or not these spaces would have been built absent parking requirements. Shoup details the cost of constructing parking structures, using data for garages on UCLA campuses, finding that the average cost of each space built from 1961-2002 is $22,500 in 2002 dollars. Unsurprisingly, underground parking is significantly more expensive that above-ground parking. Since parking is usually built underground when land is more valuable, we can see that parking requirements are more expensive in more expensive areas. Using the assumptions of a 4% interest rate and a 40 year amortization period, Shoup calculates that the average parking spot at UCLA costs $127 per month.

Because free parking induces people to drive more than they otherwise would, Shoup also discusses some of the externalities of parking. As more roads induce more driving, so do more parking spaces. He estimates that each parking spot at UCLA has monthly external costs of $73 in traffic congestion and $44 in pollution, for a total of $117 per month. He points out that while in 2002 the average debt-financed parking spot costs UCLA $201 per month and has $117 in externalities, students paid $54 for parking passes.

Chapter 7 – Putting the Cost of Free Parking in Perspective

Because we pay for free parking in the costs of all other goods, we often don’t have a good idea of what it really costs. Shoup cites a study from Mark Delucchi who estimates that the total cost of off-street parking in the United States from 1990-1991 was between $79 billion and $226 billion per year. Drivers during that time paid about $3 billion of that cost  in lots that charge for parking. He also compares parking costs to the cost of roads and vehicles, finding that using conservative estimates of the cost of parking spaces, our stock of parking is worth more than both our stock of vehicles and our stock of roads. He argues that charging for parking would be a more effective way to reduce traffic congestion than congestion tolls.

Chapter 8 – An Allegory: Minimum Telephone Requirements

Shoup proposes a thought experiment about what would happen if we treated phone service the way that we treat parking, requiring those who receive calls to pay for all of the calls they receive free to callers. This policy would increase the demand for telephone service, leading to minimum telephone requirements and even more calling. It’s funny how this chapter feels very dated even though the book was published only seven years ago.

Chapter 9 – Public Parking in Lieu of Private Parking

Shoup suggests that cities can improve their parking policies by allowing developers to pay for spaces in public parking garages rather than requiring parking on site. This policy introduces design flexibility, reduces waste in parking spots for proximate businesses that experience peak parking demand at different times, allows existing buildings to be reused more easily, and allows people to park in one place and leave their car there while they visit multiple businesses.

Cities that offer the option of in-lieu fees for parking offer interesting insight into the costs of parking for developers because when  developers choose to pay the fee rather than build parking, they forgo the value that parking adds to their property. Thus when developers choose to pay in-lieu fees, they are less than [cost of building parking space - capital value of the space].

This chapter includes interesting data on the parking requirements and in-lieu fees charged across cities. Shoup demonstrates that there is essentially no relationship between these two variables. This suggests that city planners do not take into account the opportunity cost of parking when they set requirements, ignoring that demand slopes down.

Thoughts so far:

This section provides some convincing empirical evidence, but I think at times Shoup stretches this evidence to undermine his own case. The Oakland case gets exactly to what I see as the relevant question: How do parking requirements influence development? In a free market, it’s quite possible that some business and residential developments would provide free parking for their patrons, and we need to know how parking requirements increase the supply of free parking.

Shoup relies heavily on data on the cost of parking at UCLA because of its availability. However, I think it would strengthen his case to acknowledge that the UC system might not embody efficiency in development. He points out that students pay less for parking passes than a conservative estimate of the cost of the spaces. However, UCLA students don’t pay market price for many university services.  It’s not clear that parking should be singled out as the one part of the university that taxpayers shouldn’t subsidize.

In chapters 6 and 7, Shoup doesn’t make an attempt to distinguish between the free parking that would be provided absent parking requirements and the total free parking that we have today. He verges on suggesting that it’s wrong for retailers, universities, or housing developers to provide free or below-market-price parking because parking is expensive and suggests parking maximums should be in place rather than parking minimums. I think his case is stronger when he sticks to the problems with parking requirements rather than free parking in general, and I hope the rest of the book includes further studies like the evidence from Oakland.