Book Review: Perverse Cities by Pamela Blais

In her new book Perverse Cities: Hidden Subsidies, Wonky Policy, and Urban SprawlPamela Blais explores the impact of flat-rate fees for development charges and network services like sewer, water, and cable. She explains in detail how these little-discussed policies play an important role in shaping development and redevelopment and how the current funding of these network goods incentivizes large lot, greenfield development over infill development on smaller lots.

Blais focuses her analysis on Canada and the United States. Development charges provide an easy inroad into her critique of average cost over marginal cost pricing for infrastructure. Many North American municipalities charge developers a flat-rate fee for each lot they develop. They often set this fee at the rate for lots of varying sizes, even though larger lots require more asphalt, sewer and water pipes, and cable to service them. While the cost differences may be small between one 25-foot versus one 60-foot lot, infrastructure for a new suburb of 100 houses will cost significantly more if the houses have 60-feet of frontage versus 25, but because these costs aren’t reflected in prices, residents don’t take them into account. Because the same development fee will be capitalized into each house, those who live on smaller lots cross-subsidize the services like road maintenance, garbage collection, and snow clearance of those who live on larger lots when these services are provided by local governments.

Blais provides detailed accounts of how these fees shape development patterns and that the resulting sprawling development is both environmentally detrimental and expensive for cities to maintain. She points to several network services that fit a model similar to development charges: water and sewer, electricity, gas, telephone, cable television, internet connectivity, and postal service. While she cites extensive empirical evidence that the cost of delivering these services is inversely related to population density, local and federal governments tend to charge flat rate fees for these services per lot, creating a situation in those who live on small lots provide substantial subsidies to those living on larger lots.

Blais advocates a model in which user fees are set as closely as possible to the actual costs that each household imposes on its municipality, which would significantly improve incentives compared to the current system. She doesn’t discuss subsidies that run the other way, though, benefiting residents in center cities at the expense of those on the fringe. For example, residents in center cities may live near a subway station and use it frequently. Train systems are typically subsidized by the taxes of suburban residents of the same city who may rarely use the train system, and capital costs of transit systems are often paid for by federal taxpayers who receive little if any benefit from transit systems. Blais sees setting user fees close to actual costs as a tool to encourage more compact development, so she selects only examples in which city-dwellers cross-subsidize those in the suburbs rather than the other way around.

While I think Blais provides a clear and detailed account of the side effects from funding network services with fees set at average costs, my primary critique of her work centers on her use of the word “efficiency.” First, she uses the word in the sense that economists call pricing “efficient” when the price of a good is equal to the marginal cost to suppliers of providing that unit. But she also uses “efficient” to describe dense development. While denser development is more efficient in the sense that it uses less land, Blais doesn’t make clear that sprawling development can be efficient in the economic sense if people are willing to pay the full costs of this type of development. Blais seems to draw much of her support for setting user fees equal to marginal cost from a 2002 paper by economist Donald Dewees. Both Dewees and Blais come from the perspective of increasing allocative efficiency within the model of municipalities or regulated monopolies providing the same services that they do today. However, this static view doesn’t factor in that private sector firms are driven to relentlessly search for ways to reduce their production costs and improve the quality of the services that they offer over time through innovation. Not so for monopolists protected from competition, which is why many people celebrate the arrival of private services like cable killers, VoIP phone providers, and ISPs that don’t bundle their services with cable that will save them from having to deal with the protected monopolists that will never match the prices of competitive markets. While marginal cost pricing would introduce efficiencies over the current system, greater gains are possible by allowing the market to provide these services rather than attempting to set prices as the market would. While competitive provision of water supply and wastewater treatment are unlikely in the near term, existing Business Improvement Districts provide a model for voluntary public space maintenance and improvements that improve upon that provided by municipal services.

While I found a few pieces of  Blais’  analysis frustrating, I learned a lot from her book and highly endorse her approach to looking at prices, rather than regulation as the key to improving development outcomes. She succeeds in bringing attention to an under-discussed and important issue in the tangle of policies that shape urban development. Setting municipal service fees at marginal cost would be a significant step toward market-based development.

Book Review: What Killed Downtown?

Michael Tolle’s book, What Killed Downtown? Norristown, Pennsylvania from Main Street to the Malls, details the rise and fall of Main Street in one American small town. His case study relies on interviews with many Norristown residents who lived through the growth and decline of downtown alongside detailed analysis of downtown retail statistics. Tolle paints a picture of Norristown dating back to the time of William Penn through 1975, at which point he pronounces downtown dead. The depth of history in this case study including both economic trends and urban policy dating back to the town’s Colonial origins puts the story of the city’s street grid in a historical context that is not often available in urbanist literature.

Of particular interest, Tolle details the policy debates in Norristown surrounding traffic and parking dating back to the 18th century. This includes a description of Norristown’s location near the intersection on the Native American trails fanning out from Philadelphia, to the transition from turnpikes and toll bridges, to free, public roads. He explains the origins of the town’s original street grid, with 50-feet wide streets and 24-feet wide alleys and covers in detail the Borough Council’s more recent debates on parking meters and the move to making downtown streets one way. Even having never been to Norristown, I was engaged by Tolle’s descriptions of Norristown’s retail, restaurants, hotels, and personalities.

In the first chapters, Tolle explains that downtown Norristown grew increasingly successful with the advent of railroads and streetcars that made it easier to travel to and within Norristown. While the growth of highways in the following decades increased the ease of automobile travel passing by Norristown, frustrations with traffic and parking on Main Street mounted. The Borough Council implemented parking meters as a step toward managing parking supply. Initially their revenue was promised to go toward creating off-street parking in the downtown area, but instead the Borough Council siphoned this revenue stream into the general fund. Because parking meters had a one-hour minimum, they also hurt businesses and customers by discouraging short shopping trips. Some of Donald Shoup’s insights, such as the importance of allowing parkers to pay for only the time they need and allocating meter revenue to parking benefit districts may have reduced downtown Norristown’s troubles.

Tolle explains the town’s original 1934 traffic ordinance which came about as the competition for space for both traffic flow and parking increased:

This struggle would divide Norristown internally, and be a recurring irritant to a borough government and population that increasingly had to struggle to survive in a fundamentally changing world. While the issues of traffic and parking and their many ramifications would become lost in their own complexity, they at all times operated within a physical reality that was hard, simple, and unchangeable. Downtown Norristown between Arch and Markley streets was just under six-tenths of a mile long, a little more than 3,100 feet.

In the midst of Main Street’s rapid decline following World War II, downtown banks got together to finance a pigeon hole garage, designed to provide efficient parking for cars on a small lot. Unfortunately the technology failed, leaving downtown without new off-street parking and leaving the banks stung from financial loss on the garage effort. Tolle explains in detail how downtown Norristown never solves its parking problems. Even though downtown Norristown has fallen far from the shopping destination that it once was, downtown parking meters remain a contentious issue with the need to manage parking supply through prices bumping up against demand for free short-term parking.

He ends with an analysis of the “suspects” that killed downtown, including local and county government, the downtown merchants, and shopping malls. He assigns a share of the blame to each subject, but ultimately concludes that the largest share of blame lies with the people who chose to start shopping at suburban locations rather than historic downtowns as they had the opportunity to do so:

Ultimately, we have to admit the truth. We did it. We killed the downtown. We did it by falling in love with our cars, and with everything they came to represent for us: independence, possibilities, expanded horizons, status.

He concludes that cars and urban street grids are fundamentally incompatible, leading to the slow decline of areas on historic street grids as customers hear the siren song of “free, ample parking.” Further, Tolle connects this decline to the loss of social capital that comes with a downtown where shoppers know the owners of the stores that they frequent. While he is certainly correct in part — the option of free, ample parking outside of central business districts has proved insurmountable competition for some American downtowns — I find this an unsatisfying conclusion.

American downtowns are thriving in spite of cars in cities as small as Burlington and as large as New York with street grids comparable to Norristown’s. Boston’s street network is even less hospitable to cars than a grid but supports plenty of shopping districts. However, even when these historic downtown areas have profitable retail districts, often they are filled with more mall stores rather than the type of independent retailers that Tolle favors. It seems that the trend toward chain stores is driven by factors outside of urban form and even if urban policies allowed downtown entrepreneurs the agility to compete with malls, their profitability might require having chain stores as key downtown tenants.

Tolle provides a very well done case study that explains how parking and traffic policies combined with a failure to adapt contributed to one small town’s downtown decline and its relevance for other small cities across the country. He provides a thorough history and a portrayal that will be interesting to anyone interested in the lessons learned from a thorough statistical and narrative portrayal of what happened to one American city’s historic core.

Thoughts on The Power Broker and Government Roads

I recently finished The Power Broker by Robert Caro after many months of Metro reading. I loved the book, and can’t recommend it enough. Caro provides an overview of Robert Moses’ policies here. If you don’t want to invest in reading the full 1162 pages, I would particularly recommend the chapters that explain the impacts of Robert Moses’ policies on what were cohesive neighborhoods: “Changing,” “One Mile,” and “Rumors and the Report of Rumors.”

While reading The Power Broker, I was repeatedly reminded of the massive coercion involved in road building despite the commonly held belief among many advocates of limited government that road provision is one of the least offensive government practices. Oftentimes the small government tolerance of road building seems to stem from the relatively small subsidies that roads require. Randal O’Toole has often demonstrated that automobile travel is cheaper per passenger mile than mass transit and that the bulk of these costs are born by drivers. While he advocates moving to a vehicle mile tax that would more closely tie road costs to their users and allow for the devolution of transit funding, he does not challenge that road building is a legitimate state and local government function.

However, as Stephen, Adam and others have previously pointed out, these accounting costs of road building don’t take into consideration the opportunity cost of the land dedicated to roads, which in areas with high real estate prices is considerable. Moses notoriously bulldozed valuable developments for highways and while he made operating profits on tolls, he put land to lower value use in the process.

For example, Moses used eminent domain and government funds to transform what was once a privately operated elevated rail system into an elevated highway on Brooklyn’s Third Avenue, destroying property values and a neighborhood in the process. We have no way of knowing whether privately run mass transit systems would have continued to thrive in United States cities without the onslaught of government road building and transit regulations, but the fact that government roads are today more cost effective than government transit does not demonstrate that supporters of the market process should tolerate government intervention in urban form, even if it’s covered by user fees.

Caro explains how coercive government policies produced suburban development around New York that favored transportation by car:

The building of public works shapes a city perhaps more permanently than any other action of government. Large-scale public works shape a city for generations. Some public work — most notably the great bridges and highways that open new areas to development and insure that these areas will be developed on the low-density pattern fostered by highways as opposed to the high-density patterns fostered by mass transportation facilities — shape it for centuries if not, indeed, forever.

Obviously not all roads are built with Moses’ complete disregard for neighborhoods, and in a free market it’s likely that automobile transportation would still be the favored mode of transportation for many people. That said, comparing per passenger mile costs in a world where the urban form is determined by the state does not provide evidence that mass transit would necessarily be unprofitable in a free market or that government-provided roads are always less distortive than government-provided transit.

A Conversation about the Commonwealth of Belle Isle

Yesterday I learned about a proposed free city in the United States through Arnold Kling. The project, called the Commonwealth of Belle Isle would be located on an island on the Detroit River that is currently a city park. The proposal comes from Detroit real estate developer Rod Lockwood who recently wrote a novel that takes place 29 years in the future when the city-state is developed and prosperous.

When Rod wrote the book, he wasn’t aware of the support for international charter cities from economists like Paul Romer and investors like Michael Strong. He said that he got the idea for the city when he was running a marathon that crossed into Belle Isle. “Necessity is the mother of invention. The current state of Detroit led me to think about possible solutions, and I realized that Belle Isle could be the next Singapore or Hong Kong.”

As Arnold Kling points out, Rod’s background in real estate development gives him advantages over some other charter city boosters without this background. “I do understand the costs involved in greenfield development such as utilities and I have site planning experience,” Rod said.

To move to the city, residents would have to pay $300,000 under the proposal to cover initial infrastructure costs. Rod sees the 982-acre island as home to 35,000 people. The city would be a walking city, with cars stored off of the island, and the initial infrastructure would include a monorail system. Rod said that being a car-free city outside of emergency vehicles and service vehicles is an important quality of life issue. “When I started researching city-states, I looked into Monaco, which does have cars and roads,” he explained. “It would be nice to have more green space than Monaco, and being a walking city will allow for that.”

Rod identifies himself as a libertarian, but doesn’t hold the view that a banning cars limits liberty. “It’s not a matter of liberty, it’s practicality. In a dense community, the automobile is not practical. Plus we’re not forcing anyone to live here, so if they want a car they can live elsewhere.” Aesthetics are an important selling point for the proposal, and Rod says that a visionary master planner is a key piece of the development. “It will be a high-density situation, and many details need to be worked out. A free market with no zoning wouldn’t work turn out well when you’re talking about developing an island.”

Aside from the car-free lifestyle which would put the Commonwealth in a very small handful of American cities, the primary policy difference lies in taxation and government services. Rod proposes that residents would pay a federal head tax of about $2,000 per year to cover their per capita share of  national defense. Residents would not pay any other federal taxes or receive any other federal services. For municipal services, the only tax would be a Georgist land tax, and government expenditures would be capped at 10% of GDP. “We’re not taxing income or capital gains because we want to encourage people to work and invest in tools, equipment, and technology. Likewise, we’re not taxing improvements on land because we want to encourage development.”

While the project would have many hurdles to cross at every level of government, Rod points out that the commonwealths of Puerto Rico and the Northern Mariana Islands provide precedent for jurisdictions that have different tax structures from residents living in the states. He says that the reason Detroit, Michigan and the United States should want to see this project go forward is because the new city would have a  ”tremendous positive effect on Detroit. This is precedent setting. The U.S. government would consent because Detroit is a problem city. I wish it weren’t but it is, and this would be a game changer.”

 

 

Frank Lloyd Wright’s Centrally Planned City

On my last post about Ayn Rand’s views on cities, I received feedback in the comments that obviously she loved cities and on Twitter that obviously she did not. I think I come down on the side that she likely saw cities, and particularly skyscrapers, as embodiment of human achievement. However Frank Lloyd Wright — the likely inspiration for her character Howard Roark in The Fountainhead – strongly opposed population density both for his architectural preference and from a public policy angle.

Wright called his urban development vision Broadacres because he thought that population density should be less than one person per acre. In part this may have stemmed from Wright’s practice of organic architecture. Many of the tenets of organic architecture, such as designing buildings with their users’ needs as the foremost priority, can be practiced as well in dense development as in houses like his most famous Fallingwater. However, Wright seemed to draw particular inspiration from designing buildings in greenfield locations, inspired by the natural landscape.

This is all well and good for those who want to live far from cities. However, Wright went on to argue that density of people and buildings is not merely an issue of preference, but one of democracy. He argued that city life restricted individuals’ freedom of movement, and that skyscrapers limited individualism by increasing congestion and “keeping concentration where it is,” as if working or living in a skyscraper was like being in prison rather than a voluntary activity. Like many who have argued against building density because it increases congestion, Wright downplayed the necessary traffic congestion that occurs when land use restrictions require people to live far from their workplaces.

Wright saw Broadacres as the anthithesis of Corbusian design, but both share a focus on green space and both would rely on heavy-handed planning, making them unlikely to turn out as well in practice as their originators imagined. At the time he promoted it, Broadacres received criticism from liberals who saw his design as anti-communal. While this may be a fair critique of the lifestyle that would result in Broadacres, it’s important to note that it’s also very anti-libertarian. The design relies on a central plan which Wright envisioned repeated over and over in cities across the country. He saw room for individualism in house design, but the land use plan would rely entirely on county-level planners.

In Archiectural Record (1935) he writes that Broadacres represents “a new freedom for America,” but then he goes on:

In the hands of the state, but by way of the county, is all redistribution of land — a minimum of one acre going to the childless family and more to the larger family as effected by the state. The agent of the state in all matters of land allotment or improvement, or in matters affecting the harmony of the whole, is the architect. All building is subject to his sense of the whole as organic architecture.

[...]

In the buildings for Broadacres no distinction exists between much and little, more and less. Quality is in all, for all, alike. The though entering into the first or last estate is of the best. What differs is only individuality and extent.

He sounds not unlike a Randian villain. While Wright professed support of limited government, he advocated authoritarianism in land use. Individual liberty requires the freedom for consumers to choose to live in a setting like Broadacres or in a skyscraper like one of Howard Roark’s, but Wright’s plan would not offer this choice.

(Both video links via The Atlantic Cities.)

Ayn Rand on Urbanism

Ayn Rand’s recent appearances in the news made me think about her position on urban issues. Some of her novels suggest that she is anti-city, believing that individualism can only be achieved by living in remote areas. In Anthemfor example, her protagonist lives in a type of dorm where people are never allowed to be alone. He achieves the freedom that he couldn’t realize in this totalitarian society by escaping to an isolated home in the woods. Likewise, her description of Galt’s Gulch, the mountain utopia in Atlas Shrugged for productive capitalists, is based on Ouray, Colorado. Ouray is a beautiful town in a beautiful part of the country, but its built landscape notably shares little in common with the urban areas where her villains live.

While her Galt’s Gulch description is clearly fanciful, I think it is important to note that the characters would not have been able to support themselves in a small market with the specialties they chose before dropping out of society. Galt himself is an electrical engineer, and other residents of the Gulch include a railroad manager, a metallurgist, and a famous actress. Since the Gulch does not engage in trade with the outside world, those living in the Gulch would not be trading in a market nearly large enough to be specializing in their chosen professions.

In The Gated City, Ryan Avent provides an excellent description of the specialization that is only possible within large cities. Going  back to the Ouray example, this small mountain town provides opportunities for a certain type of specialization, such as spa manager or ice climbing guide, but this is only because tourists visiting the area have the requisite standard of living to visit resort towns. Since the division of labor is limited by the size of the market, the division of labor within Galt’s Gulch would be extremely limited, reducing these capitalist heros to a near-subsistence standard of living.

Perhaps Rand relies on these different types of developments merely as symbolism; since few people meet her standards of individualism, they must escape to sparsely-populated areas of the country to achieve independence from government. Rand herself lived in a New York apartment in Murray Hill, a far cry from Galt’s Gulch. She lived in New York for 30 years, indicating she probably wasn’t a city-hater. She expressed admiration for the New York skyline, and Howard Roark, the protagonist of The Fountainhead (which I’ve not read), is an architect. He says, “I would give the greatest sunset in the world for one sight of New York’s skyline. Particularly when one can’t see the details. Just the shapes. The shapes and the thought that made them. The sky over New York and the will of man made visible.” Clearly Rand appreciated the type of architecture and large-scale infrastructure projects made possible by urbanization at the same time her protagonists seek to drop out of cities.

While it’s difficult to say what stance Rand herself took on urbanism, we do know that Frank Lloyd Wright is rumored to have been the inspiration for Howard RoarkWright’s views on cities are very clear. He thought that living “communally” such as in apartment buildings was anti-individualist and that densely built cities were anti-democratic. A follow-up post will explore Wright’s urban theories as they relate to individual liberty.

The High Cost of Free Parking Preface and Afterword

This is the last post in the series on Donald Shoup’s The High Cost of Free Parking. Previous can be found here:

Chapters 1 – 4

Chapters 5 – 9

Chapters 10 – 14

Chapters 16 – 18

Chapters 19 – 22

Preface

In these two chapters, which Donald Shoup added for the paperback edition of the book, he discusses some of the changes in parking policy since the original edition in 2004. He also reiterates his three prescriptions for saner parking policy:

1) Set the right price for curb parking;

2) Return parking revenue to pay for local public services;

3) Remove parking minimum requirements.

He points out that cities that have tried “performance parking” have had successful results. San Francisco’s SFpark is perhaps the country’s most advanced system for performance parking. Curb sspaces include sensors that can tell whether or not the space is occupied. Then parking amnagers can adjust prices remotely to approach the 85% occupancy goal as closely as possible.

Shoup argues that performance parking should not be a politicized change. Setting an 85% occupancy target is not designed to raise revenue or to benefit any group at the expense of another. Rather, prices can eliminate parking shortages, so that people pay for parking with money rather than with time spent cruising. These prices also incentivise greater turnover. Nonetheless, he points out that performance parking has opponents:

Thinking about parking seems to take place in the reptilian cortex, the most primitive part of the brain responsible for making snap decisions about urgent fight-or-flight choices such as how to avoid being eaten.

The same could be said about many land use decisions which do not seem to be made on the basis of rationality. He points out that performance pricing is very unlikely to reduce customers in any district, as the prices are set to maintain high occupancy rates. Those customers unwilling to pay for parking are unlikely to be businesses best customers at any rate. Despite this opposition, cities that have tried parking performance prices seem to be keeping them in place. Shoup speculates that people tend to oppose performance pricing more strongly before they see its benefits upon implementation.

As far parking revenues going back to the neighborhoods where they are raised, Shoup cites the continued economic growth of Old Pasadena as a success for this policy. Redwood City, outside of San Francisco, has adopted a similar model, where parking revenues stay within the Downtown Core Meter Zone.

Toward his final recommendation, Shoup has found at least 129 cities that have removed some of their downtown parking minimums. Additionally, cities including Los Angeles have introduced some flexibility into their remaining parking requirements allowing, for example, apartment buildings to meet some of their parking requirements off site. This has made some historic office buildings viable renovation projects that otherwise would have been vacant or demolished. While Shoup posits that a slow revolution is underway in planning for parking, but he laments that these changes have not yet reached the suburbs, where parking requirements largely remain intact.

Afterword

Shoup details some of the cities that have raised parking prices to reduce shortages. Washington, DC, New York City, Ventura, and Seattle have all implemented higher parking prices, though not all of them have set specific occupancy targets. He also explains Chicago’s failure in privatizing its parking meters while capping meter rates. The city missed an opportunity to let bidders set higher meter prices to both reduce cruising for parking and to make more money in selling off meter rights.

He discusses the importance of enforcement in making these policies work. Shoup suggests that cities should set graduated parking tickets, perhaps giving warnings on drivers’ first offenses. Tickets obviously irritate drivers and may foster ill-will against higher meter rates. However, drivers cannot be allowed to serially skip paying, or the prices will not be effective.

Shoup also discusses the problem of disability placard abuse. Many cities have set up incentives for this abuse by allowing cars with placards to park free. While this may sound like a good idea, Shoup points out that the current situation may lead to so much abuse that people with disabilities will have difficulty finding spaces close to their destinations. With higher meter prices, the incentive to abuse placards will be even greater. He advocates Arlington County’s policy  of requiring all drivers to pay for parking but reserving some conveniently located spots for those with disabilities, reducing the incentive for abuse.

In this chapter, Shoup cites some recent studies of parking requirements, which find that parking requirements do in fact lead developers to build significantly more parking than they would in a free market. He also explains that some cities, including New York and San Francisco have taken parking pricing to the next step, permitting restaurants to use parking spaces for seasonal outdoor cafes.

Final Thoughts

To reiterate, I highly recommend the entire book. I am in complete agreement with Shoup on his first and third recommendations for parking policy, and he clearly and persuasively makes the case for these two arguments. However, the more I think about it, the more I think that his recommendation of parking revenue benefit districts might not be the best solution, even though it would be much better than the status quo. Yes, this policy has successfully built support for performance pricing in some neighborhoods. However, I think that tax abatement districts would build even more support.

People might like to see more business improvement districts, but I think that they would prefer cash. There would be various ways to provide the tax rebates, and cities could decide whether to provide them to the neighborhoods where revenues are raised or to provide them equally to everyone in the city. For existing business or residential improvement districts, or for neighborhoods that want to start them, residents could agree to dedicate their rebates to the district for if they want to. This would keep improvement districts voluntary and maintain existing incentives for privately funded districts to spend their revenues well.

Property taxes are particularly unpopular, and I think abatement would be sufficient to build support for parking prices that eliminate cruising. As Shoup says, charging higher meter rates is not about increasing cities’ revenue, but rather about eliminating curb parking shortages. By giving the increases in revenue back to the residents who are paying these higher rates, additional cities can build the political support necessary to charge appropriate prices for parking.

The High Cost of Free Parking Chapters 19-22

This post from the series on The High Cost of Free Parking is reposted from last week because the site’s database caused recent posts to be deleted.

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.