Free Markets and Free Parking

The Antiplanner is disappointed that my distinguished colleague and fellow supporter of free markets, Tyler Cowen, has fallen for the “high-cost-of-free-parking” arguments of Donald Shoup. Shoup is an excellent scholar, but like many scholars, he has the parochial view that the city that he lives in is a representative example of what is happening everywhere else.

Should free parking be a thing of the past?

Shoup’s work is biased by his residency in Los Angeles, the nation’s densest urban area. One way L.A. copes with that density is by requiring builders of offices, shopping malls, and multi-family residences to provide parking. Shoup assumes that every municipality in the country has such parking requirements, when in fact many do not, and that without such requirements there would be less free parking. This last assumption is extremely unlikely, as entrepreneurs everywhere know that, outside of New York City, 90 percent of all urban travel is by car, and businesses that don’t offer parking are going to lose customers to ones that do.

Shoup portrays such free parking as a “subsidy” because not all people drive and so the ones who don’t drive end up subsidizing the ones who do. But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service. How often do you actually swim in the swimming pools or work out in the exercise rooms of the hotels you stay at?

Shoup also supposes (and Cowen accepts) that universal parking fees would greatly reduce the amount of driving people do. “Minimum parking requirements act like a fertility drug for cars,” Cowen quotes Shoup as saying. Portland’s Metro submitted this question to its transportation model of the region and concluded that requiring all offices, shopping malls, and multi-family residences to charge for parking would reduce driving by about 2 percent. The model showed that charging for parking has a greater effect on driving than spending billions on light rail, building scores of transit-oriented developments, or increasing the urban area’s population density by 20 percent. But 2 percent still isn’t going to do much to relieve congestion or solve any of the other problems Cowen associates with driving. Plus he never really explains why he thinks reducing mobility is a good idea in the first place.

Shoup claims that a single parking space costs, on average, 17 percent more than the cost of an average car, and as a result, the cost of parking greatly exceeds the value of all automobiles in the country. This is ridiculous. Most free parking is surface parking, which costs about $2,000 a space plus the cost of land. In areas that have not used urban-growth boundaries and similar tools to create artificial land shortages, vacant suburban land with urban services typically costs about $20,000 an acre. Since each acre can hold about 100 parking spaces, the total cost is about $2,200 per space. From the point of view of a business owner, this cost can be amortized over 30 years at 6 percent, for an annual cost of about $160. If that parking space is used by just two customers a day, the cost is about 22 cents per customer. That’s pretty trivial, and the costs of collecting fees for such parking would probably be greater than the parking itself. Even structured parking typically costs only about $10,000 a space (or, using the above assumptions, $1 per customer), but structured parking is rarely provided for free.

Strangely, one of the examples Cowen uses in his article is Manhattan, where (he claims) “streets are full of cars cruising around, looking for cheaper on-street parking, rather than pulling into a lot.” Give me a break! There is no free parking anywhere in Manhattan; in fact, ownership of a single parking space can cost more than a median home in other parts of the country.

Cowen’s complaint about Manhattan is not about free parking but that the government is pricing on-street parking below the market. If that were the extent of Shoup’s argument, I would have no problem, as I noted last week. But Shoup’s goal isn’t market pricing of public parking; it is to create artificial shortages of private parking. He doesn’t want to simply eliminate the minimum-parking requirements that are found in many zoning codes; he wants to replace them with maximum-parking limits so that places like WalMart will not be allowed to provide their customers with as much parking as they like.

The real empirical question is: do companies like WalMart provide parking for their customers because of zoning mandates, as Shoup claims? Or would they and do they provide free parking just because it is good for their businesses to do so? Texas counties are not allowed to zone, yet shopping centers in unincorporated Texas still provide plenty of parking. Much to planners’ annoyance, many developers elsewhere routinely provide more parking than zoning codes demand. This suggests that free parking is a free-market choice, and Cowen, who generally supports free markets, should have no objection to it.

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31 thoughts on “Free Markets and Free Parking

  1. the highwayman

    Well free markets exist just as much as free lunches.

    It’s not free parking, it’s complimentary parking.

    Though even with places in TX, others have brought up the shadow zoning with parking regulations before.

  2. Borealis

    It seems to me that a zoning requirement for excessive parking is a penalty on auto customers, not a subsidy.

    It requires auto users to pay the cost of excessive parking at auto-friendly stores, while pedestrian-friendly stores save that cost. A downtown store with on-street parking and parking meters doesn’t carry the cost of parking. It makes the customer “rent” the parking space and thus can charge less for its goods.

    Nonetheless, the Walmart model of free-to-customer parking has overwhelmingly devastated the downtown model of free-to-store parking.

    Like it or hate it, that is what works.

  3. Frank

    “…but structured parking is rarely provided for free.”

    I can think of several examples where it is, but it probably is the minority. However, structured parking is possibly more heavily subsidized. Many businesses offer parking validation for a minimum purchase. Not to assume that my former city is every city, but take the City of Portland’s SmartPark (again):

    To help you pay nothing to park downtown, SmartPark partners with over 700 businesses to offer you two hours of free parking with qualifying purchases of $25 or more.

    “Partners with 700 businesses”? “To help you pay nothing to park downtown”?

    This seems to be the City of Portland’s (subsidized) response to the Walmart parking model.

  4. The Antiplanner Post author

    Update: It has been pointed out to me that Manhattan does have free parking on some of its streets. But this is still a problem of public underpricing of parking, not of private businesses providing complimentary parking.

  5. bennett

    “But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service.”

    Antiplanner Blasphemy! ;)

    “Texas counties are not allowed to zone, yet shopping centers in unincorporated Texas still provide plenty of parking.”

    That’s how the big box spec book is written (i.e there’s a reason all Wal-Marts look the same). It’s written that way for 2 reasons. 1, because the overwhelming majority of places that these developments are built at, have “parking maximum” regulations. 2, it’s for black Friday. That’s right, and ocean of surface parking for 1 day a year.

  6. bennett

    Frank Said: “However, structured parking is possibly more heavily subsidized.”

    Here’s how it often works in ATX. We have an “overlay zone” which allows for higher density developments than is allowed in the underlying zone if the developers meet certain conditions. Providing structured parking is one such condition.

  7. Adam

    But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service.

    Let’s recast this slightly and see if it reads the same: “But any government offers a variety of services to its constituents and residents, and no one frets about subsidies just because they don’t take advantage of every single service.”

    Why does the first version provoke an “oh, nevermind” response, and the second requires this entire website?

  8. bennett

    Freudian slip in #5. Should be “parking minimum.”

    Adam,

    I think that the answer you seek goes something like, “you can choose not to give your business to the private entity, while the government is jacking you.” Still laughable IMHO.

  9. msetty

    As usual, The Antiplanner leaves out pertinent, very important information in this post about “free” parking.

    I’d like to hear where one could buy land at a commercially viable location for only $10,000 per acre! Even Walmart typical pays an order of magnitude or more per acre for land on the outskirts of small towns, located––of course––on gummit’ provided major roadways. Thus the “free” parking provided by businesses even in low density areas costs a lot more than $2,200 per space!

    Then there are the minimum floor area ratio requirements in most places, e.g., typically no more than 30% to 35% of retail properties can be used for buildings in most places, mainly because of local regulations requiring that “enough” parking be provided…

  10. MJ

    What this all boils down to is a question of how a policy of charging for parking would affect behavior, that is, what happens at the margin. Both Shoup and Cowen repeat claims that by raising the cost of driving, pricing parking will reduce incentives to drive. In principle it should, but I think Shoup overstates the case, especially by claiming that it will be more important than other types of policies (congestion and carbon pricing) some of which Cowen mentions. What is more, we don’t really know what the relevant counterfactual looks like. Most of the studies of the relationship between parking prices and mode choice focus on downtown locations, since this often where parking is most scarce and most consistently priced. I don’t think this should necessarily prevent us from experimenting with forms of pricing in other locations, but we should probably moderate our expectations.

    Randal also points out the fact that parking facilities are long-lived assets, and that the cost needs to be spread over time and the expected number of users in order to estimate the actual costs a consumer would be likely to face. His estimate of $160 per month might be a bit on the low side, but if it is anywhere close to accurate it is a sobering reminder. Monthly parking in the downtowns of many mid-sized cities costs about this much, and that is usually in the case of a single user, not representative of retail types of settings where the turnover is much higher.

    I will be closely following the San Francisco experiment to see if they can work out most of the bugs with variable pricing of on-street parking. I’m especially interested to see how well the credit card medium for payment works out.

  11. MJ

    Why does the first version provoke an “oh, nevermind” response, and the second requires this entire website?

    Because in the former version, the private owners must bear the consequences of their decisions, while in the latter, those in charge have few incentives to allocate resources efficiently. In fact, the incentives often favor the opposite: narrowly targeting benefits while spreading the costs as widely as possible.

    I think that the answer you seek goes something like, “you can choose not to give your business to the private entity, while the government is jacking you.” Still laughable IMHO.

    It’s not necessarily about “jacking” per se (though one can think of several cases in which the government exploits its status as a monopoly supplier), but more about creating situations in which rationing mechanisms other than price prevail. The last time I visited city hall in the suburb in which I live, the parking lot was available free of charge. In fact, one part of the facility was structured. One would think this would be a natural place to attempt a pricing experiment, but I’m guessing our elected officials looked at the situation and saw more potential for downside than up. At least that’s one possible explanation.

  12. Dan

    I like how the non-economist presumes the economists are wrong without providing evidence or anything other than speculation. That’s how it’s done folks. And I like how Randal flows freely from comparisons of dense core parking to numbers in suburban areas ($20k/ac my *ss).

    Texas counties are not allowed to zone, yet shopping centers in unincorporated Texas still provide plenty of parking.

    But they de facto zone by other means, such as FAR, lot size, parking requirements…eliminating minimum parking standards, BTW, would end this silly talk, as developers would build fewer spaces and leave it up to agents to figger it out.

    DS

  13. Borealis

    It is interesting how most planners seem to not understand development. The business model for a big-box store is to build a very big parking lot. Does anybody notice that even in places with minimum parking lot size, the big-box stores build parking lots even bigger than required?

    Why? Because of the big-box business model is to be a big-box business. The business model is to buy a very large parcel of land and build a large store on it. Anybody notice that a Wal-Mart increases the value of the land around it? Why not pave the rest of the parcel for parking until it is needed?

    The business model also is to grow even larger. Anybody notice Wal-Marts doubling in size into Super Wal-Marts? Would it surprise anyone that the box-stores might even grow bigger in the future?

    Love them or hate them; the big-box business model dominates right now.

  14. Dan

    It is interesting how most planners seem to not understand development.

    Please, lad, no arguing from ignorance on this site. Oh, wait…

    Anybody notice that a Wal-Mart increases the value of the land around it?

    As does any finished lot. As do 99% of non-industrial buildings. As does roads. As does…

    DS

  15. bennett

    Borealis,

    I think that I (a planner) made it pretty clear that “the big-box business model is to be a big-box business,” when I stated “That’s how the big box spec book is written (i.e there’s a reason all Wal-Marts look the same).”

    I don’t deny the domination of the big box model, but I do find it interesting that almost every big box store I’ve ever been to has a parking lot that is approx. 10%-30% utilized. If we apply that proportion of utilization to transit, it’s a total failure (according to antiplanners).

    I suppose that doesn’t mean that “big box” is a failure, just the big box parking model.

  16. Frank

    “I suppose that doesn’t mean that ‘big box’ is a failure, just the big box parking model.”

    I recently visited a multi-level “big box” complex that had an attached parking structure where shoppers park for free. The stores included Target, BestBuy, and Ross Dress for Less. Lack of open land in an urban environment undoubtedly played a role in the decision to build a structure. I wonder if zoning played a role, too?

    A half-hour drive away sprawls the epicenter of retail shopping, with the same aforementioned stores plus dozens of other chains, all surrounded by a sea of parking lots, some of which are never-used leftovers of demolished buildings.

    As a shopper, I prefer the multi-level complex because it provides shopping density; I hate driving from lot to lot to lot and waiting forever at traffic lights to cross eight lane thoroughfares; walking for miles across Venusian landscape of hot bubbling asphalt with a complete lack of shade-providing vegetation while simultaneously dodging NASCAR wannabes who zoom at breakneck speeds across parking spaces is not a viable option.

    Do big box stores like Walmart shun the density model because sprawl is cheaper? Or do local zoning laws discourage parking structures for sprawling lots?

  17. Borealis

    I don’t understand. I also see big-box store parking lots only 10-30% utilized. Man, if someone would invest in competition without excessive parking, they might make a huge amount of money. Maybe parking once a year for black Friday isn’t worth it. But for some reason the uber-intelligent planners won’t risk their own money.

    I guess planners are just used to spending other people’s money without any accountability. The big-box model has so much utility that it draws huge amounts of customers, employs a lot of people, and turns a huge profit. Transit draws a smaller than projected amount of customers, employs a lot of people, and requires jail-coercion to extract money from non-users to not break even.

    The thing is, when the big-box business model no longer works, and it will some day, they will fail and their owners will lose huge amounts of money. When transit fails…well it will be just be uber subsidized like it is today.

  18. Dan

    I guess planners are just used to spending other people’s money without any accountability…The big-box model has so much utility that it draws huge amounts of customers, employs a lot of people, and turns a huge profit. [emphasis added]

    Continuing to blatantly and confidently argue from ignorance notwithstanding, seas of underutilized parking arise from zoning ordinances that require minimum parking – as determined by the ITE – based on land use classes. Places will waive minimums if you produce your own parking study, on your dime. So the developer overparks.

    DS

  19. Borealis

    Thank you, Dan, for pointing out the relationship between your underutilized parking spaces business model and 2010 2Q profits. I had no idea how much underutilized parking spaces hurt the big box business model over the long run.

    Since I am so ignorant and you are so smart, maybe you can point out the relationship between the following list and your underutilized parking spaces business model.

    Seven Wealthiest People in the United States

    1. William Gates III
    2. Warren Buffett
    3. Lawrence Ellison
    4. Christy Wal-ton
    5. Jim C. Wal-ton
    6. Alice Wal-ton
    7. S. Robson Wal-ton

  20. Dan

    There were exactly zero claims in the original post, the links therein, anything I’ve ever written, or by other commenters in the comment thread that stated overparked binesses had their bottom lines affected by being overparked.

    HTH.

    DS

  21. Andy

    When Dan knows that he got his butt whipped he reverts to the same lie claiming that he never said it. And he is the same Dan who is first every day to take out of context something the Antiplanner wrote.

  22. bennett

    “There were exactly zero claims in the original post, the links therein, anything I’ve ever written, or by other commenters in the comment thread that stated overparked binesses had their bottom lines affected by being overparked.”

    Exactly! Just because something is successful doesn’t mean it’s perfect. Many big box stores could cut their parking by 50% and still be fine, even on black Friday.

    One can’t say that overparking has hurt big box retail, nor can one claim that overparking is responsible for big box prosperity.

    The big box model has been wildly lucrative. Have Dan or I said anything to the contrary? No.

  23. Dan

    Exactly! Just because something is successful doesn’t mean it’s perfect. Many big box stores could cut their parking by 50% and still be fine, even on black Friday.

    Recently I was working on a project with someone who does plan review for a lot of BigBox applications. Her desire to get the developers to cover some of their parking with tree canopy fell on deaf ears, as the time frame to get a % coverage – 15-20 years – is outside of their horizon for viability of the project.

    That is: they don’t expect the use to be viable in 15-20 years, so ameliorating the externalities on a voluntary basis is a non-starter as the revenue stream will be done and their ROI complete. That ocean of asphalt has plenty of externalities, some of them codified in zoning code…

    DS

  24. the highwayman

    Dan said:
    Exactly! Just because something is successful doesn’t mean it’s perfect. Many big box stores could cut their parking by 50% and still be fine, even on black Friday.

    Recently I was working on a project with someone who does plan review for a lot of BigBox applications. Her desire to get the developers to cover some of their parking with tree canopy fell on deaf ears, as the time frame to get a % coverage – 15-20 years – is outside of their horizon for viability of the project.

    That is: they don’t expect the use to be viable in 15-20 years, so ameliorating the externalities on a voluntary basis is a non-starter as the revenue stream will be done and their ROI complete. That ocean of asphalt has plenty of externalities, some of them codified in zoning code…

    THWM: If parking were built under the store, the foot print could reduced by 1/3 to 2/3 compared to a store with surface parking.

  25. Borealis

    I am going to try to avoid getting in the pigpen with Dan, but Bennett and highwayman should be intelligent enough to not get in the mud with Dan.

    In #18, Dan questions my point (with “emphasis”) that box-stores are hugely profitable, calls me all sorts of names, and “proves” his point by linking to just one fiscal quarter profits of Wal-Mart and Target.

    In #19, despite the fact that I am “ignorant,” I provide some evidence that Wal-Mart is hugely profitable. Then Dan denies everything he said.

    By the way, in #23, Dan admits that as a government employee he violated the law by trying to force costs on private citizens that he has no legal right to do.

  26. Dan

    That’s good comedy. I suspect the Borealis character can’t be real, and instead is a character being developed by, say, a comedy writer or someone similar. That can’t be a real person making those conclusions from the evidence presented. Kudos to the author for the good laugh in the morning.

    THWM: If parking were built under the store, the foot print could reduced by 1/3 to 2/3 compared to a store with surface parking.

    Yes but then the stalls will be much more expensive/sf. The BigBox will just move somewhere else where they can get a concession from the politicians to avoid building a structure.

    DS

  27. Planarchy

    Less parking and priced parking by itself are not enough. Land use patterns have to be coordinated to encourage transit use. If you take a suburban area and charge for parking you are not going to have reduced auto usage. You have to coalesce development around transit nodes that provide fast and efficient transportation. The fact that Portland modeled a 2% reduction in driving after instituting market rate parking is not a convincing argument for free parking. Parking management plans and transportation demand management plans are far more comprehensive than just charging for parking.

  28. teb

    Issue 1: fact check
    Article: “Shoup claims that a _single_ parking space costs, on average, 17 percent more than the cost of an _average_ car, and as a result, the cost of parking greatly exceeds the value of all automobiles in the country.”

    Shoup says “the cost of _all_ parking spaces in the U.S. exceeds the value of _all_ cars” based on an estimate that there are _four_ parking spaces for every car, thus that four spaces cost more than the average car (around $5,000). (http://www.vtpi.org/shoup.pdf page 9). (Or alternatively he makes a similar estimate based on 3 spaces per car in “High Cost” page 209).

    I finally tracked down the 17 percent figure and it seems to have been misquoted by a well-meaning blogger (http://www.marginalrevolution.com/marginalrevolution/2006/02/parking_fact_of.html). It is from “High cost of free parking” page 210. The well-meaning blogger mistakenly added “[in the U.S.]“, when in fact the figure only refers to new parking spaces on UCLA campus as compared with the national average price of a new car. It’s an anecdote and is presented in the book as such.

    Issue 2: Intent –

    Article: “Shoup’s goal isn’t market pricing of public parking; it is to create artificial shortages of private parking.”

    This is a sweeping statement but my reading of Shoup’s 700 page tome says the opposite. Here’s just a few quotes:

    Page 121: “Despite their ambivalence about whether to require or restrict parking planners always regulate it. This behavior recalls a Soviet maxim: What is not required must be prohibited.”
    Chapter 18 title: “Let Prices Do the Planning” (Sounds like a guy after O’Toole’s own heart.)
    pg 500: “[cities] should deregulate [parking] quantity and instead charge market prices for curb parking. If cities deregulate off-street parking and charge the right price for curb parking …”

    I have seen a few examples of Shoup suggesting parking maximums but I think the “soviet” quotes suggests that he doesn’t see that as ideal but as a practical measure where planners refuses to let go of the reigns completely.

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