Chapter 19: The Ideal Source of Local Public Revenue
In this chapter, Donald Shoup makes the case that passing up the potential revenue source of curb parking doesn’t make fiscal sense for cities. He bases his case heavily on Henry George’s theory of land taxation. George argued that land is the fairest and least distortive good to tax because its value comes not from individuals, but from the community. Milton Friedman agreed saying, “the least bad tax is the property tax on the unimproved value of land.” One obstacle to relying on a land tax as a sole revenue is that accurately appraising unimproved land is difficult. But Shoup points out that charging for parking avoids this problem because cities can use prices as demand management.
Shoup further explains the political potential for parking benefit districts and includes a section discussing the potential to create similar benefit districts for freeway tolls. He points out that dedicating toll revenues to the neighborhoods that they pass through would create an interest group for congestion pricing and that this would benefit the often low-income neighborhoods where freeways are located.
I think a key part of this chapter is that Shoup explains how charging for parking to prevent shortages illuminates the opportunity cost of dedicating land to curb parking. As this price becomes visible, it may open up opportunities to lease current parking spaces for other uses, such as outdoor dining or outdoor retail. While he is optimistic about the potential for parking reform, he includes this great line: “Staunch conservatives often become ardent communists when it comes to parking, and rational people quickly turn emotional.”
Chapter 20: Unbundled Parking
This chapter is based on the likelihood that if cities stopped setting parking minimums, developers would no longer build so much parking that the marginal cost of additional spaces exceeds the marginal benefits. In this case, parking costs could be unbundled from other goods, like apartments, offices, and retail goods. This will allow resources to be dedicated to higher valued uses and will create better decision-making among consumers by causing the cost of car ownership including parking to reflect the true cost.
Unbundling also requires that street parking is priced to eliminate shortages, or else those who do not want to pay for unbundled off-street parking will spill out to curb parking leading to cruising and wait times to find parking spaces. He points out that unbundling could lead to benefits to consumers who choose to reduce their car ownership or not own a car at all through cheaper rent or a parking cash-out from their employer:
Unbundling will thus convert parking from hidden, fixed cost of living into an explicit, marginal cost of owning used cars.
In a world without parking minimums and with appropriately priced street parking, we can expect parking to be unbundled from other goods when the transaction costs of doing so are lower than the value of the space, leading to improved use of land over time.
Chapter 21: Time for a Paradigm Shift
This chapter brings home the points made in the first section of the book; planners have fallen into the trap of requiring as much parking as people want to use at a zero price. This practice encourages driving and thus leads to even higher parking requirements. As Shoup says, it’s time for a new paradigm that requires drivers to internalize the costs of their own parking. In this new paradigm, those who don’t drive or who already economize on driving and parking will not be forced to subsidize those who do not. He points out that a new paradigm requires messaging and an interest group to support it and says that parking benefit districts can take care of this challenge.
Chapter 22: Changing the Future
In the final chapter, Shoup points out that our current parking problem stems from free or underpriced curb parking and the resulting commons problem. The economical and efficient way to solve this commons problem is with prices, not with requiring enough off-street parking to bring the price of all of a city’s parking to zero. He concludes:
These three reforms — charge fair market prices for curb parking, return the resulting revenue to the neighborhood to pay for public improvements, and remove the requirements for off-street parking — will align our individual incentives with our common interests, so that private choices will produce common benefits.
Thoughts so Far:
The next and final post on this book will cover two chapters that are not included in the first edition. I’ve been reading the older version, but Shoup has added two new chapters discussing how parking policies have changed in the years since that he was kind enough to share.
I have one potential alternative to his policy prescriptions introduced in earlier sections and expanded here. While Shoup focuses on the potential for parking benefit districts to create a constituency that supports appropriate prices for curb prices, I would suggest that a property tax abatement district could create even more support for parking prices. While voters may like a parking benefit district and visitors to the neighborhood would get to enjoy its work as well, I think more people would more enthusiastically support a lower property tax burden. Additionally, one asset of Business Improvement Districts is that they are voluntary and rely on the support of participating businesses for their existence. Parking benefit districts would have a guaranteed source of income and thus would not face the same good incentives.
I would highly recommend the full book to any readers who haven’t already read it. The book includes much more empirical support than I’ve covered, and while it is long, it is not a difficult read. Shoup is frank in acknowledging that people like free parking and that instituting prices will be unpopular, but he provides examples of tested reforms that have overcome the initial political hurdles to charging appropriate prices for parking.