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Why is there Free Parking?

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Tyler Cowen's latest column is on the anomaly of free parking.

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price -- or a higher one than it does now -- and people would be more careful about when and where they drove.

Read the whole column. I am not sure that the argument is correct. I worry that there is a lot of confusion between fixed costs and marginal costs. Creating a parking place carries fixed costs. However, the marginal cost of using a parking space is often zero.

The marginal cost of using a cell phone network is often zero, so your cell phone company tries to offer you a plan that makes the marginal cost feel like zero to you. It could be that free parking emerges for the same reason.

If we abolished free parking, would parking spaces be scarcer? Keep in mind that if the price of parking went up, this would cause movement along the supply curve as well as along the demand curve. Maybe the total number of parking places would decline (it depends on elasticities), but the one result you can predict with certainty is that the number of unused parking places would go up. Is that necessarily welfare-improving?

Suppose I have a piece of land that could be used for parking or for other purposes. You might argue that having a price for parking would send me a clearer signal about the best use.

However, the cost of converting that land from one use to another is very high, so I have to choose one purpose or the other and stick with it. One exception to high conversion cost is lanes that change from parking lanes to traffic lanes during rush hour. There, the price of parking during rush hour is very high (you get ticketed and towed), and that seems to work.

Once I have decided to use land as a parking place (say, land in front of a store), then there is no reason for me to want to deter people from parking in empty spaces. That suggests charging a price of zero other than at peak times.

The problem is one of congestion pricing. You need paid lots to charge people to park at peak times, such as concerts or sporting events.

I confess that I have not read Shoup's book, to which Cowen refers. Meanwhile, I am not sold on its main thesis.

Comments and Sharing

COMMENTS (11 to date)
Phil writes:

My impression was that the argument was directed at laws that *force* developers to have a certain amount of free parking available, such as X spots per 100 square feet of store space, or some such.

As you say, once the spot is there, the right price might be zero ... but it might be more efficient for the spot not to be there in the first place.

Chris writes:

Tyler misses another important point - charging for parking is essentially a tax on customers.
Stores - even really crowded stores - don't charge admission.

It may be true that, in the absence of regulation, stores may not provide free parking in dense urban areas. But that is already true in Chicago and new York. But dense urban areas are the exception, stores want to remove barriers to getting customers in their doors, not remove them.

Tyler Cowen writes:

Phil is correct, plus there should often be higher prices for street-based, state-owned parking spots in neighborhoods, especially if those areas are adjacent to commercial districts, as is commonly the case in say WDC.

Opening a new restaurant creates a lot of new traffic yet there often isn't a corresponding mandated parking requirement. What do we get? Valet parking, priced. And often no unique, dedicated restaurant lot. Or consider most of the major shopping malls in Los Angeles: paid parking is the equilibrium, at non-peak hours too. It is easy to imagine this logic being extended to other sites.

Hyena writes:

I actually live in Los Angeles and the major shopping malls have paid parking, sure, but the rates are usually nominal or disappear entirely with validation.

Most of the off-street parking in Los Angeles seems to exist for option purposes. Tearing down a structure immediately and putting in a parking lot is much quicker, lower risk and possibly easier from a later permitting perspective than any other use of the land if you're not yet prepared to develop it.

Yancey Ward writes:

I also thought the same way as Phil, but Cowen completely buries that point in that essay- it takes a regular reader of Cowen to actually interpret his intent, and even I was filled with some doubt, as were some of the commenters over at Marginal Revolution. Why wasn't Cowen more explict? Here is the portion of that essay that came the closest to attacking the zoning mandates for parking, and note that at no point in the essay did Cowen explicitly say that these zoning mandates were for minimal, free parking:

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove.

He if were willing, I would love to see the initial draft of this essay that was submitted to The New York Times.

hhoran writes:

The core Shoup argument is that urban parking represents an extreme "command-and-control" economic system, and he estimates the total 2002 cost of off street parking in America to be between $127-374 billion (number would be higher if you included the cost of urban streets used for parking). He argues that market prices would massively reduce the total cost, and shift resources to much more productive uses. Zoning rules are the biggest problem, but not the only one (i.e. lower tax rates for parking lots). Dozens of impacts--land use suboptimization obviously, but the implicit parking tax increases the cost of urban housing and urban businesses. The issue isn't whether you or I would prefer the alternate patterns that would develop without the zoning rules and explicit subsidies, it is that the market ought to choose the patterns.

I am shocked that Arnold has stood up in favor of command-and-control systems instead of market/pricing based systems. If a dictator produced today's pattern by decreeing that all cities had to designed to strict low-density rules, with massive direct and indirect subsidies for marginal auto use would Arnold be happy? Why is creating that pattern through bureaucratic zoning and tax rules any better?

The "tax on customers" claim is ridiculous. Companies should be free to build as much (or as little) customer parking as they see fit, and should be free to charge the subset of customers that use that parking or to bundle the cost in the prices that everyone pays as they see fit.

Dorian Taylor writes:

The architect Christopher Alexander prescribes an approximate nine percent to parking, but his is an ecological argument. It's interesting to entertain the idea of buttressing it with an economic argument, to say that the land has greater value when committed to something other than parking. But of course that would hinge on data.

It's also interesting to consider how parking got so profuse in the first place, especially in areas where the real estate is of high value. Parking lots and garages are effectively inert storage units, with absolutely nothing going on in them save for the occasional driver entering and leaving (crime notwithstanding). From a perspective of social and economic interaction, they are hostile deserts. From that angle it's interesting that the space dedicated to parking ever got as big as it did.

I see Cowen mentions San Francisco. Interesting project. His inspiration, possibly?

Bob McGrew writes:

The San Francisco project is a great example of where the marginal price is frequently not zero. (I hate circling around to find parking in the city.) Also, since they are using smart meters and demand-driven pricing to target a 20% availability, they should end up pricing reasonably close to marginal cost. It would be interesting to see where that ends up at zero.

Rachel writes:

I don't think the current rules are necessarily inefficient. Suburbs compete vigorously to get new malls, restaurants and other business. If a suburb chooses, it can allow a zoning variation and require less parking.
In practice, it doesn't happen because neighbors really really object to customers using their houses for parking. Even the threat of occasional use gets people furious.
I personally don't understand the preference for keeping shoppers away from a residential neighborhood. But it's a real preference and it deserves government protection.

Patrick Glenn writes:

It's been my impression (and experience) that, for a relatively high percentage of parking-intensive developments, the developer(s) will choose to provide more parking than is required by the zoning code. Usually, the bigger, more sophisticated developers in a given town/city will play an instrumental role in devising and enforcing the developemt rules, to begin with.

Certainly, in some cases developers would prefer to bypass the parking requirements, for example when dealing with an awkward site and/or those who are trying to cannibalize off bigger adjacent projects, but the great majority of commercial/office developments would fail if they provided fewer parking spaces than the minimums required.

See Hyena's comment above, as he's on the right track. Yes, local planning and development involve many interventions that distort market forces, but consumers driving around in their cars tend to have a clear picture of what they want.

Peter writes:

Maybe it is different in the US, but here in the land of Oz:
1 My car park at home is on land I bought and pay taxes on, these are calculated by value and thus correlated with land size.
2 Land developers would do what their customers want. In the cities here parking is now more restricted than required. Many city apartment buildings have more apartments than car parks and new offices and shopping centres tend to be resticted in their car parking allowances. Out of the bigger cities it is looser, but there is more land and less public transport in those places.
3 Land used for parking still has to be paid for and is subject to taxes.
I think that a lot of Tyler's claims would be more accurate if the requirement was to dedicate land to the local government to provide public parking. It's really only kerbside parking where that occurs and it is a very limited percentage of the total parking stock.

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