Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

The High Cost of Free Parking Chapters 16 – 18

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This post follows on the earlier discussion of the 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 the city’s general fund even though the neighborhood is in need of streetscape improvements. Shoup explains that Old Pasadena has become as desirable as Westwood Village once was.

Many business districts may believe that free parking is an asset, and in a sense it may be. But turning parking revenue over to the neighborhood will make the change politically palatable and will reallocate parking spaces to those drivers who are willing to pay for it. Additionally, higher prices will increase parking turnover, allowing more customers to visit local businesses.

Chapter 17 — Taxing Foreigners Living Abroad

The title of this chapter plays on the perennial desire of residents of one jurisdiction to receive public services at the expense of those outside the jurisdiction. Shoup suggests this may be possible when it comes to neighborhood parking. At present, property owners and tenants in residential areas often oppose commercial development because of parking spillovers. With good reason, these NIMBYs have concerns that commercial developments will lead to increased parking pressure for the free spots on their streets, making it difficult for them to park near their homes. Shoup suggests this creates an opportunity for residential parking benefit districts. Those with residential permits could park free in these neighborhoods, but drivers visiting the adjacent commercial uses would pay for parking. This parking management could ensure that parking does not become overly congested and also provide the neighborhood with money to finance improvements.

This policy contrasts with some neighborhoods that have created zones where only those with residential permits can park. This policy often leads to excess street parking availability and eliminates potential gains from trade.

In some residential neighborhoods, however, the parking commons problem comes from the residents themselves who pay below market rate for their residential permit prices. In these cases Shoup suggests that all street parking should be allocated with prices high enough to provide some availability. He points out that this could also reduce NIMBYism toward converting carriage houses or garage space to accessory dwellings, permitting new affordable housing. Because parking would be governed by prices, new residents will not lead to a parking shortage.

Shoup writes:

The twentieth century saw a great competition between two economic systems: central planning and market prices. . . . Parking is a perfect example of an economic activity where planners have usurped markets without justification. We have relied almost exclusively on the command-and-control approach to regulate parking, and we have failed spectacularly.

Chapter 18 — Let Prices Do the Planning

In this chapter, Shoup emphasizes that prices are the only way to allocate goods given consumers’ varying preferences. He models parking decision based on the variables of distance to destination, price of the parking spot, parking duration, walking speed, number of people in the car, and value of time. In a world of free parking, drivers varying preferences for time and willingness to pay cannot be served; rather everyone must pay for parking with their time. When parking is priced according to demand on each block, the invisible hand will efficiently lead drivers to park in the spot that meets their preferences for saving money and saving time for each trip.

Additionally, charging appropriate prices for curb parking reduces political pressure for off-street parking. In this scenario, develoeprs will have the incentives to provide the amount of off-street parking their customers demand, and planners can begin rolling back parking requirements. Retailers that choose not to include parking in the price of their goods will be able to compete with lower prices or on other aspects of their service.

Thoughts on this Section:

These chapters provide some solutions to current parking problems that seem both effective and politically possible with BIDs and residential parking benefit districts receiving parking revenues in their neighborhoods. It’s heartening to see some market urbanist solutions that have succeeded in neighborhoods and cities already. However, I’m not convinced that the proposal to charge for all street parking in some neighborhoods would be accepted by many residents, and Shoup acknowledges it could be difficult. At present neighborhoods often oppose new development because of its parking pressures, but it’s not clear to me that residents would prefer paying for street parking than dealing with parking congestion.

Also, I think it’s important to acknowledge that some people benefit from the current situation, predominantly those who place a low value on their time, make frequent car trips, and prefer cruising to paying for parking. This is not to say that charging for street parking and eliminating off-street parking requirements wouldn’t be a step toward fairness and efficiency, but rather that it’s honest to acknowledge this change will make some people worse off.

I enjoyed this section as it focuses on the power of prices to create order and the role of institutions in the parking problem. He ends chapter 18 with an idea picked up in Eran Ben-Joseph’s Rethinking a Lot, a book I recently reviewed at City Journal. Shoup and Ben Joseph suggest that cities should move from regulating to the number of parking space to regulating parking design. However, as I see it regulating for design will be subject to the same knowledge problems Shoup points out in regulating for quantity.

  • I think this is by far the weakest section. I live in a neighborhood (West Campus in Austin, Texas) which is in the process of creating a parking benefit district. The only way that the benefit district has gotten resident approval is because: 1) the residents are students and disorganized politically. Even though student government has gotten involved in the issue, city councilmembers know that few of them are even registered to vote locally, let alone will actually vote in local government elections. Public comment period made it obvious that many business owners in the district supported it and the vast majority of residents opposed it. 2) The only reason most business owners support it is because the city has threatened to put meters in unilaterally if the residents don’t come up with a plan on their own. The PBD process has simply created years of bitter negotiations, but little support for meters in general.

    In the required public comment period for the PBD, it also became clear that there were many people who benefitted from the current situation. There was a sharp disagreement between businesses and residents without cars on the one hand, who found customers and guests had a hard time finding spaces, and students with cars on the other hand, who generally left their cars parked on the street all day long, then used them in the evenings, returning to largely the same parking spaces that they had previously left. Even in areas where more people drive to work, if the neighborhood is dense enough to require paid parking, there will be people who generally leave their cars on the street for days at a time and perceive any meters as a threat.

    Having watched Professor Shoup expand on his reasoning for PBDs in a lecture, I began to suspect that a lot of his reasons for pushing PBDs is that, regardless of their political feasibility, he simply has a preference for spending to get more and more local, believing that whoever decides on the spending within the PBD will do a better job than big bad city hall. The optimum size of an area for spending on public goods and the political process for choosing projects within that area are both fascinating questions, but it left a very sour taste in my mouth that what amounts to a radical change in the answers to those questions was being pushed under the false cover of political viability.

  • Emily Washington

    Dan, thanks for sharing the experience of PBDs in Austin. Does your PBD require residents to pay for parking, or only visitors to the neighborhood? The former seems *much* more politically viable, even though in some neighborhoods it might not solve parking shortages.

    The issue of devolving political control (and spending) to more local levels is something I hope to deal with more on the blog in the near future. Among free market supporters, moving control toward more local levels is generally thought to be an improvement because it gives voters greater influence and promotes competition between jurisdictions. It does seem that in many cases this theory doesn’t play out in real life.

  • Sorry, I didn’t see your reply until now. There will be some residential parking permits handed out (cost: ~$20 / year) to residents whose residences provide less-than-zoned parking through grandfather clauses. The number of permits is capped and well below the number of residents who would want them. More residents would want a permit than there are existing spaces.

    There actually is a total parking surplus in West Campus. All of the major apartment complexes have built huge garages that are mostly empty. Some of them built parking in excess of zoning requirements in anticipation of building more apartments on adjacent lots later to share the same garage. The problem is that a lot of students who are the best candidates for buying a long-term space (e.g. those who only drive on weekends or only drive when going home to their parents) also get the best deal when it comes to free street parking, because they only have to deal with the pain of finding a space every so often.

  • Also, regarding the devolution, I’d love to hear your thoughts on the subject. I feel like it’s taken as a given by some people (e.g. Professor Shoup), but I’ve rarely seen it work in practice. In practice, I often find the smallest and most local forms of governance to be the most corrupt, and the ones people have the least influence over, because the media coverage is so weak. If this is true at the city level, the neighborhood level is the ultimate of who-you-know politics.

  • baklazhan

    Regardless of how you feel about Shoup or anything else, a situation where there’s both a shortage and an excess in practically the same place is obviously dysfunctional and should be fixed somehow.

    The fact that residents with less-than-zoned parking get the benefit of cheap parking permits is interesting. I think other residents would be justified in complaining– after all, they paid for the construction/purchase of their parking garages, so why should the people who didn’t be any more entitled to the street space than they are? Still, it’s probably better than the existing situation, so if that’s the concession needed to make it work, then so be it.

    I suppose it could be argued that if the people with private parking get theirs in the form of curb-cuts for their garages, but that’s not that great a compensation, particularly for garages with many cars.

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