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Donald Shoup Takes San Francisco

  Every so often during his tenure as mayor of New York, Michael Bloomberg tried to push through congestion pricing, in which drivers would have to pay to use city streets in Midtown and Lower Manhattan. That’s a popular solution to chronic overcrowding but, like drinking coffee to try to cure a hang over, it doesn’t really get to the heart of the matter. More intervention usually doesn’t solve the problems that were themselves the result of a prior intervention. Let me explain. In 2011, I had the opportunity to participate in an online discussion over at Cato Unbound. It focused on Donald Shoup’s book The High Cost of Free Parking, which looks at the consequences of not charging for curbside parking. If you’ve ever tried to find a parking spot on the street in a big city, especially on weekdays, you know how irritating and time-consuming it can be. It may not top your list of major social problems, except perhaps when you’re actually trying to do it. In fact, according to Shoup about 30 percent of all cars in congested traffic are just looking for a place to park. The problem though is not so much that there are too many cars, but that street parking is “free.” Except, of course, it isn’t free. What people mean when they say that some scarce commodity is free is that it’s priced at zero. Some cities, such as London, Mayor Bloomberg’s inspiration, charge for entering certain zones during business hours — with some success. (As well as unintended consequences: People living in priced zones pay much less for parking and higher demand has driven central London’s real-estate prices, already sky high, even higher). But this doesn’t really address what may be the main source of the problem: the price doesn’t […]

Parking Requirements Increase Traffic And Rents. Let’s Abolish Them.

Everybody in LA can agree on one thing – traffic blows hard. Harder, even, than these guys:               Hate traffic? Blame parking. But here’s a secret: people don’t cause traffic. Cars do. And you know what makes people use cars? Parking. If you’ve got nowhere to put your car when you arrive, you aren’t going to drive, and you aren’t going to contribute to traffic. Research has shown that for every 10% increase in parking, 7.7% more people commute with a car. Hate high rent? Blame parking. That’s a bad start. But it gets worse. Parking is also driving up your rent. Building parking spaces is incredibly expensive – each underground parking spot in LA costs about $35,000. Even if your unit includes “free” parking, you’re paying for the cost of that parking in your rent every month, whether you want to or not. Parking is cheaper to build above ground (if you can call $27,000 cheap), but then it takes up valuable space for apartments. All those dollar signs have an impact–UCLA professor Donald Shoup has calculated that requiring parking reduces the number of units in new apartment buildings by 13%. But parking is even more insidious than that. Often, when a new housing project is proposed, one of the first things that angry people (NIMBYs) yell about is traffic. Sometimes, those NIMBYs successfully stop housing from being built, and we desperately need all the housing we can get to contain our skyrocketing rents. Then why the hell do we require all new buildings to include so much parking? You’d think, then, that developers might stop providing parking. But they can’t, because we did something really, really dumb. We’ve created a system that requires parking to be provided with all new projects. For an apartment […]

Why No Micro-Apartments in Chicago?

  Several cities have jumped on the bandwagon of building Micro-apartments, a hot trend in apartment development.  San Francisco and Seattle already have them. New York outlawed them, but is testing them on one project, and may legalize them again. Even developers in smaller cities like Denver and Grand Rapids are taking a shot at micro-apartments. At the same time, Chicago is building lots of apartments, and is known for having low barriers to entry for downtown development.  Yet we aren’t hearing of much new construction of micro-apartments here.  Premier studios are fetching as much as $2,000 a month.  Certainly there must be demand for something more approachable to young professionals.  In theory, we should expect to see Chicago leading the way in innovative small spaces. Chicago doesn’t have an outright ban on small apartments like New York, but there are four regulatory obstacles in the Chicago zoning code.  These are outdated remnants from eras where excluding undesirable people were main objectives of zoning, and combined to effectively prohibit small apartments: 1. Minimum Average Size:  Interestingly, there is no explicit prohibition of small units.  This is unlike New York City’s zoning, which prohibits units smaller than 400sf. There is, however, a stipulation that the average gross size of apartments constructed within a development be greater that 500sf.  Assuming 15% of your floor-plate is taken by hallways, lobbies, stairs, etc; this means for every 300sf unit, you need one 550sf unit to balance it out. Source:  17-2-0312 for residential; 17-4-0408 for downtown 2. Limits on “Efficiency Units”: Zoning stipulates a minimum percentage of “efficiency units” within a development. The highest density areas downtown allow as much as 50%, but these are the most expensive areas where land is most expensive. In areas traditionally more affordable, the ratio is as low as 20% to discourage studios, and encourage […]

Engineering in the dark

The similarities of urban design across American neighborhoods is no coincidence, but neither is it the result of city planners’ uniform adherence to best practices. Infrastructure is often built based on shockingly little information about the demands of its users. And while poorly reasoned infrastructure policy in one city is bad enough, the United States’ broad adherence to poorly reasoned policies has resulted in a nation in which swaths of neighborhoods are built on poor design foundations. Parking Requirements In The High Cost of Free Parking, Donald Shoup explains the origin of municipal parking requirements. Municipal planning offices do not have the resources to study the amount of parking that businesses should provide. Even with more staff, it’s not clear that planners would be able to determine optimal parking requirements unless they allowed business owners themselves to experiment and choose the amount of parking on their own in a learning process of how to best serve their customers. The Institute of Transportation Engineers is one of the only organizations that provides estimates of the number car trips that businesses generate. Given the lack of information planners have to determine parking requirements, they often rely on ITE’s information to set their parking requirements. However, ITE studies are often conducted at businesses that already provide ample free parking, ignoring the potential for businesses to manage demand for parking on their property through prices. Furthermore, ITE estimates of trip generation are typically based on a very small sample of locations, which are unlikely to be representative of businesses and cities in general. In the example below, the ITE provides a recommendation for fast food parking requirements based on their floor area. Even though the chart includes a line of best fit for the plot of peak parking spot occupation and floor area, the ITE hasn’t demonstrated a correlation between these two variables. Shoup points out: We cannot say much about how […]

Free parking isn’t free

Last week I wrote a piece for City Journal on how smart parking could allow New York City to implement variable pricing. Street parking sensors allow prices to change to maintain an empty spot on each block, as parking expert Donald Shoup recommends. By eliminating the incentive to drive around looking for parking, this policy could drastically reduce traffic congestion and save drivers significant amounts of time. All of the comments on my post argue that charging for parking according to demand would increase the cost of living in already expensive cities and hurt low-income people. While this argument is very common among supporters of underpriced street parking, it’s false. In actuality, today’s standard policies of underpriced street parking and off-street parking requirements increase costs of living, and low-income people bear a disproportionate share of the costs of these policies. Properly implemented variable pricing systems may not even increase the total price that drivers pay to park their cars. San Francisco has gone farther than any other city to implement variable parking. Its SFPark system updates the prices on the city’s meters periodically with the goal of keeping the occupancy on each block below 80%. While this objective has led to significant price increases for the most in-demand blocks, it has actually reduced the city’s total parking meter revenues because prices were allowed to fall on many blocks to reach the 80% target. Whether they cause total parking meter revenue to increase or decrease, variable parking prices are key to reducing off-street parking requirements, which is a huge cost of development. The political pressure for off-street parking often stems from homeowners who live near commercial destinations. Because people who drive to businesses prefer free parking to paid parking, they may park in a zero-price curb spot in a residential neighborhood near their destination rather than at a […]

Parking is not a public good

Writers at Salon, Slate, and Time have criticized new San Francisco-based apps that allow users to purchase access to a parking spot as another driver is leaving it. The apps MonkeyParking, Sweetch, and ParkModo provide a platform for drivers to let others know when they’re leaving a spot, and reserve the spot until the another user bidding on the spot arrives to pull in. As of last week, the future of these apps is unknown since San Francisco issued a cease and desist order based on the city’s rule against auctioning or leasing public parking spots. All three writers express outrage that the apps’ creators and users are profiting off of government-owned parking spots. At Salon, Andrew Leonard writes: Monkey Parking’s solution intended to generate profit off of a public good by rewarding those who are able to pay — and shutting out the less affluent.  One problem with this line of reasoning is that parking is clearly not a public good. It is both perfectly rivalrous and easily excludable. Unlike a public good, the price system provides the right incentives for suppliers to provide the optimal amount of parking based on consumers’ willingness to pay. While Leonard uses the term public good, he may mean simply a good that the government provides, and he argues that entrepreneurs should not be permitted to profit from these public services. While this argument provokes a populist sense of unfairness, Monkey Parking should be evaluated against the current problem of under-priced curb parking rather than against the assumption that city governments are currently pricing curb pricing appropriately. City governments systematically undercharge for street parking, especially in cities like San Francisco where land is very valuable. These apps are able to profit because the city charges prices for parking below the level that drivers are willing to […]

Irrelevant real estate trends

Earlier this week Wendell Cox wrote a piece at New Geography arguing that projections for increasing demand for multifamily housing relative to single family homes are incorrect. He was criticizing a study by Arthur Nelson that predicts increased demand for multifamily housing relative to single-family housing in California between 2010 and 2035. So far, Cox points out that this hypothesis is not being fulfilled; between 2000 and 2008 slightly over half of newly occupied housing units were single-family homes on conventional lots (larger than 1/8 acre), not indicative of a shift in preferences toward multifamily housing. Cox emphasizes that his data is based on revealed preferences rather than forecasts or surveys which may indicate a false preference for denser housing. However, he does not acknowledge that these preferences he cites are not revealed in a free market. The mortgage interest tax deduction biases home buyers toward larger homes, the complex entitlement process for dense infill development restricts supply of denser housing, and the the zoning and parking requirements that regulate development all shape revealed consumer decisions. Both Cox and Nelson seem to base their views of consumer preferences heavily on introspection, assuming that over time more Americans will come to share their preference for suburban or urban living respectively. And they both take the same approach of looking at the real estate trends aggregated across the entire state. This is an interesting question for academics, but not a particularly relevant area for real estate markets. Real estate is local, and state trends are not likely to apply to many cities and neighborhoods. The average home sold in California went for $309,000 at $195 per square foot last month. However this statistic is meaningless for West Hollywood residents where the  average sale price was $378 per square foot. It’s equally meaningless […]

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 spaces include sensors that can tell whether or not the space is occupied. Then parking managers 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 […]

The High Cost of Free Parking Chapters 19-22

This post from the series on Donald Shoup‘s 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.” […]

The High Cost of Free Parking Chapters 16 – 18

This post follows on the earlier discussion of Donald Shoup’s The High Cost of Free Parking. Chapter 16 — Turning Small Change in Big Changes Here Donald Shoup gets to the idea of using Business Improvement Districts to manage street parking as Brandon Smith mentioned in the last post’s comments. When parking revenue goes to municipalities’ general funds, drivers see it as a fee with questionable benefit. Contrarily, when parking revenue stays in the neighborhood, it can provide tangible benefits in the form of neighborhood improvements. This may make drivers more willing to pay for parking. More importantly, it creates an interest group in favor of charging a rate for parking that provides an funding source for neighborhood improvements. Seen from this angle, paid street parking benefits businesses from multiple angles. He uses to Los Angeles neighborhoods to demonstrate the potential benefits of parking revenues. In the 1980’s, Old Pasadena was suffering from a vacant building problem because historic buildings did not include onsite parking. As a result, they could not be repurposed. In 1993 the city introduced parkign emters and gave the revenues to the neighborhood to finance public improvements. Additionally, building owners were given the right to pay a fee for parking in a public garage rather than providing parking onsite, allowing existing buildings to be repurposed. These policy changes have created an environment where drivers can easily find parking and a streetscape that is more inviting for pedestrians. Shoup contrasts Pasadena with Westwood Village which has been in decline since the 1980s. In 1994 a parking study revealed that curb parking was 96 percent occupied, meaning the neighborhood had a significant cruising problem. As a response to the neighborhood’s decline, though, the city decreased hourly parking rates from $1 to 50 cents, worsening the parking shortage. This revenue goes to […]

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