The High Cost of Free Parking Chapters 10-14

This post follows on the earlier discussion of the The High Cost of Free Parking.

I realized that I left a couple of important points out of the last post. First, Shoup applies the Hippocratic Oath of “first, do no harm,” to parking requirements. What a great way to think about city planning. If this standard was applied to all policies, we’d be living in libertarian utopia already. Secondly, he gives great treatment to the issue of why politicians sometimes choose regulations over taxation. Regulation imposes costs on everyone, but because these costs are hard to see, their costs are not easily traced to government. It is a less transparent way of manipulating behavior.

Chapter 10 – Reduce Demand Rather Than Increase Supply

This chapter explores some of the policy alternatives available to cities that could reduce the number of parking spaces needed to satisfy demand. Shoup supports programs that allow employers to provide their employees with unlimited transit passes. In cities where transit operates below capacity, transit agencies may be willing to sell this type of pass to employers at a low cost, knowing that many pass employees won’t use their passes regularly. As of 2002, Dallas, Denver, Salt Lake, and San Jose had adopted this type of program.

In two studies, providing these eco passes reduced employees’ demand for parking by 19%, offering employers an opportunity for significant cost savings if they can provide 19% fewer parking spaces as a result. Shoup points out that in some cases this policy can be a win for everyone involved because employees receive an additional benefit, employers can save money, traffic is reduced for the cities’ other commuters, and transit agencies earn some additional revenue at near zero marginal cost, assuming they are operating below capacity. Unfortunately, Shoup finds that in some California cities that have eco pass programs, municipalities did not reduce the parking requirements for employers that provide eco passes, eliminating the incentive to participate in the program.

In addition to their potential as workplace benefits, eco passes could make even more sense for other land uses such as stadiums or theaters, which could include the passes in ticket prices to reduce the amount of required parking. These might be destinations that customers would be likely to take public transportation to, and required parking that is used only for infrequent events is a particularly bad use of land.

Aside from eco passes, Shoup suggests two other policies that could lower parking requirements. He suggests employees could cash out their parking spaces, taking the value of their parking spot in cash while giving up their parking permit. The other option is car sharing, which he suggests could work well for apartment buildings which could provide some shared cars in lieu of all of the required parking spaces. All of these policies have the advantage of increasing flexibility and reduce the subsidy to driving.

Chapter 11 – Cruising

This is the beginning of Section II which switches to a focus of street parking instead of off-street parking. Because no one has property rights over street parking, we all face an incentive to overuse it. Street parking is often underpriced in monetary terms, so drivers pay for parking with the time they have to spend looking for a space. Several studies of cruising in various cities demonstrate that drivers who park on the street spend between 3.5 and 13.9 minutes looking for parking on average. While they are doing so, they contribute to the traffic problem for all other drivers, in particular because cruisers are likely to drive slowly and may block traffic while they wait for a car to pull out. This chapter includes some great anecdotes of parking in pop culture as well as stories of the lengths people go to to avoid paying for parking.

Chapter 12 – The Right Price for Curb Parking

Shoup explains that free or underpriced curb parking leads to the NIMBY demands for off-street parking:

If curb parking is free, and developers do not supply enough off-street spaces to satisfy the demand for free parking, neighbors will complain about parking spillover (real, anticipated, or only imagined). These complaints lead urban planners and elected officials to increase the off-street parking requirements until the spillover problems are resolved.

If cities charged higher prices for street parking this would cease to be a concern, but in many cases they have sought to satisfy demand for free parking instead. Shoup proposes that cities could alleviate this spillover problem and eliminate cruising by charging higher prices for parking. He suggests that the market price is when street parking is 85% occupied, meaning that each block typically has one open space. Prices would vary by block and by time of day to achieve this occupancy rate. Unlike a private parking lot, cities will not charge the profit-maximizing price but rather what he calls the “socially optimal price” that achieves these parking availability goals. He cites the success of raising the price of parking in London to eliminate cruising even in very high-rent neighborhoods where we might think residents wouldn’t be sensitive to higher prices.

Chapter 13 – Choosing to Cruise

This chapter explains the seemingly irrational behavior of drivers who choose to drive around looking for parking rather than save time to park off-street. He points out a couple of complicating variables, including that drivers place different values on their time, so some may be bothered by cruising more than others, and unlike other types of lines, drivers “waiting in line” to park don’t know how long they will have to cruise to find a spot. The factors that go into this decision for an individual are:

  • the price of curb parking
  • price of off-street parking
  • parking duration
  • time spent searching for curb parking
  • fuel cost of cruising
  • number of people in the car
  • value of time spent cruising

In a study of parking in Los Angeles at several different locations, Shoup finds that on average, drivers who are parking for one hour can save $4.89. Looking at parking near the city halls of several different cities, drivers could save on average $4.71 per hour. In both cases drivers face significant monetary incentives to cruise so long as cities price curb parking low enough that there are shortages.

Chapter 14 – California Cruising:

Shoup studies parking in L.A.’s Westwood Village more in-depth to get a more precise idea of the realities of cruising. Street parking there is free after 6 p.m. (or was as of the study at least), leading drivers to cruise for an average of 9.7 minutes in the evenings. Westwood Village includes 15 blocks, and Shoup discovered that on a typical day, drivers travel a total of 3,633 miles (!) while looking for parking in this small neighborhood, contributing to traffic and wasting fuel as a result.

He also points out that while it may appear that underpriced parking benefits a neighborhood’s retailers, this may not be the case. The benefits of underpriced parking go mainly to people who have a low time value, are solo drivers, and who want to stay parked for a longer time. All of these factors indicate that eliminating parking shortages could improve the situation for a neighborhood’s retailers.

Thoughts on this Section:

I think it’s important to focus on the different problems that parking policies create in varied environments. Section 1 of the book focuses primarily on places where developers are required to provide enough parking to satisfy demand at zero-price. This often results in sprawling surface lots, creates incentives to drive more, and makes walking and transit less appealing. On the other hand, cruising is a problem only in places where off-street parking is not free. Parking shortages are a disincentive to driving. While both issues go back to underpriced parking, it seems worth noting explicitly that they are rarely simultaneous problems.

My only real criticism of this section is the use of the term “market price” to describe the prices that cities should charge to achieve target curb parking availability. As Sandy Ikeda has pointed out previously, cities cannot set market prices, and we can never have a market in government-owned land that is unavailable for any uses other than parking. Pricing parking for occupancy is a second-best alternative.

  • Brandon Smith

    I’m not sure I follow the argument that this wouldn’t be considered a “market price” for parking. The government built the product (parking spots) and wants to ensure that there is a certain amount of the product in the market place. While you might consider that some arbitrary mandate, it’s not uncommon for a private enterprise to want to maintain a certain amount of their product in the market place. Especially when working with a finite amount of the product. Private enterprise can of course compete with the government supplied parking spots.

    Or is the argument that no product the government produces can be priced at market value because crowding out of private enterprise. So just the very nature of being produced by the government prevents it from being set at a “market” price.

  • Emily Washington

    Because governments don’t have profit and loss incentives, they don’t have the information necessary to set a market price. There isn’t a profit and loss incentive in place to let them know over time if the 85% standard is the correct one.

  • Brandon Smith

    But if the municipality is relying on revenue from parking to fund some project, wouldn’t that lead to the profit loss incentive? Shoup discusses using the funds for BIDs. Doesn’t that create the incentive to maximize profits and efficiency?

  • Emily Washington

    No, because there isn’t a residual claimant; no one stands to profit. Is the discussion of BIDs in the book or somewhere else? I haven’t gotten to that yet. If street parking management was turned over to BIDs, ideally with the freedom to use the land for something other than parking, the incentive structure would be much better.

  • Brandon Smith

    Yeah, that might be ahead of where you are in the book. It’s been awhile since I read it, but Shoup discusses how BIDs are the best recipient of parking revenue. I don’t remember if he discusses how much control over the land use BIDs should have, but he discusses how that creates a better incentive structure to make better use of parking and improve the surrounding area because they benefit directly from increasing revenue instead of just going into government coffers.

  • awp

    I would argue that the 85% occupancy rule is not a market price, because the quantity of parking spaces is not affected by the price. Show me a city that is selling the land for parking lanes at the net present value or buying extra R.O.W. for a parking lane at the same price and I might disagree with you about whether city governments can approach a market price for parking.

    Govt.s do have an approximation of the profit loss incentive, see tiebout.

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