Free-Market Parking

Today I want to take a look at the free-enterprise approach to parking in more detail. Let’s look at why the free-enterprise system makes sense in the first place, then we’ll try to understand why free-market parking solutions would work in Houston.

The common-sense argument against parking regulations

First, remember that the traffic patterns flowing to and from every property are unique, thus the exact parking ‘needs’ for each property cannot be accurately established by any ‘standard’ ratio. We already stratify properties into 69 different categories – even if we further broke them down into hundreds of categories there would still be more exceptions than properties that were adequately served by the rule. So as we move forward in search of the best solution for parking in the city, we have to keep in mind that the government does not know how much parking any particular property really needs.

But there is someone who knows exactly how much parking each property in the city requires – the owner of each property!

Think about this. If you own a business, who else on this planet knows your customers better than you do? Would you expect the city to be able to tell you when you should expect customers to visit your business? Would you expect the city to tell you precisely how each person would come to arrive at your property every day?

Yet this is exactly the pretentious, authoritarian imposition of the city upon property owners. They are telling you how many cars you must accommodate on your site – whether you actually need more or fewer parking spaces in reality is irrelevant.

Remember these edicts are issued from the city based upon no meaningful research of any kind. For the most part planners in the 1920’s and 30’s sat around tables and guessed how many parking spaces they could reasonably impose on different kinds of properties. After the first wave of cities came up with their requirements, other cities rapidly copied them. While there was some variation among the guesses at the time, those differences have been slowly disappearing over time as cities survey each other and then change their ordinances to match the most common standards from other cities. Whichever requirements were by chance the most commonly guessed in the 1930′s have slowly become the de-facto standard as cities survey each other and try to use whatever standards they find most frequently used elsewhere.

Regulatory Stifling of Science

Let’s contrast the public sector strategy of copying everyone else until we’re all the same with things that the market has been left to control.

In an effort to compete with each other, retailers across the nation have extensively studied the way customers respond to subtle changes in the interior layout of stores, as well all things like packaging, lighting, and the  arrangement of display counters. Any number of experts on retail interiors can be hired to help you plan the interior of your store in a way that will maximize the sales per square foot, and they’ll give you rich data to justify every recommendation. They can tell you what color you should paint the walls to attract males age 25-29, or how many shirts to place on a display table in order to maximize sales to Moms shopping with their children. All of this research was paid for by individual businesses and business associations as a means for learning how to outperform their competition.

Imagine for a moment that the government had enacted regulation in the 1930′s to ensure that retail stores were more uniform and orderly in their appearance. Let’s say that they were concerned that advertising was too influential on people of average intelligence, and that these average people were spending more money than they should because of the tricks of clever retailers – while the most intelligent portion of the population was shopping more logically and growing ‘unfairly’ richer as a result. So, pretend that they passed a law that all stores had to display their goods on standard size white shelves, that these shelves could be between five and six feet tall (nothing out of reach of the average adult!), and that they must always be spaced five feet apart from each other.

With that kind of governmental control over the layout of retail stores, who would bother investing research in customer reactions to different store configurations? That investment would be a waste of money, because (1) nearly every store would already be using the same layout, so you comparing different layouts to see which is best would be virtually impossible, and (2) even if you could come up with a better layout than the government required, they probably wouldn’t let you use it to your advantage anyway.

This is the reality of parking in America. Research on parking ratios offers little benefit to businesses that would have to fight the city every time they tried to take advantage of the knowledge – and it’s very difficult to come up with sound data in the first place because there are so few properties (as a percentage of the entire real estate market) that aren’t carbon copies of each other (due to the mandated requirements).

Market Incentive to Optimize Parking

Try for a moment to think like a small business owner. It costs you a couple thousand dollars to build a parking space – but more importantly you can’t build anything else on the dirt that a parking space takes up, so you must either buy more land or build less building if you’re going to create parking spaces. If you’re a retailer and you have excess parking then you’ve invested thousands of dollars in asphalt that isn’t resulting in any sales at all. Wouldn’t it be in your best interest to minimize such wasted investment?

If that example doesn’t resonate with you, consider another case that I’ve frequently consulted on: churches. A church has an extremely unique parking situation – a big crowd for about 4 hours a week, and 164 hours a week with very few people around. The church needs parking in order to have people in attendance for services, but parking is very expensive. How expensive?

For a great answer to that question, read through the Victoria Transportation Policy Institute’s Transportation Cost and Benefits Techniques. According to this report the up-front cost (land + construction) for surface parking ranges from about $2000 per space in the exurbs to $5000 per space in urban areas, with the major difference being the cost of the land underneath. However, parking lots suffer a lot of wear and tear as they bake in the sun and have multi-ton vehicles rolling across them all the time, so there’s a significant maintenance expense associated with keeping that parking usable.

According to the VTPI, the average annualized cost for each parking space (land + construction + maintenance + debt service) in the suburbs is $885, and the average annual cost in urban areas is $2062.

Now think back to the example of the a church. According to the City of Houston, a church must provide 1 parking space for every five seats in its auditorium. So, a church with a 500 seat auditorium would be required to provide 100 parking spaces. The annualized cost for their parking lot then ranges somewhere between $88,000 and $206,000. That’s enough to hire several new full-time staff members – or to support multiple missionaries abroad!

If you asked a church whether spending a couple hundred thousand dollars a year on parking spaces was a good idea they would almost certainly say no – but the City of Houston says they don’t have a choice.

On the other hand, if you give the church a choice, what would they most likely do? They need the parking spaces – but those parking spaces have a lot of value that they aren’t using. What about selling that value to businesses? Businesses need parking, the church has parking, why not make a trade? The church could rent parking spaces out to some retailers or office buildings etc., and probably bring in enough income to cover all the costs of owning the parking lot. They might even make a little money off their parking – which they could use to support their organization.

The businesses benefit by locating next to or near to an existing under-used parking lot, and therefore they don’t have to buy land for parking. Buying less land means it costs less to open your business. Alternatively, you can use more of the land you’ve already got. Consider that normal parking lots require about 300 square feet per car – that’s more than a typical office cubicle, about the same as a regular office. So for every parking space a property owner doesn’t build he can instead build an additional office. If he can avoid building seven parking spaces, he’ll have enough space for a small restaurant or convenience store.

The rent from an average convenience store would almost certainly exceed the roughly $6,000 – $14,500 per year it costs to build and maintain the seven parking spaces, so if the property owner can find someone with excess parking to share he’s potentially got a large profit-margin incentive to do so.

The Final Verdict

As you can see, with all the potential cost savings and additional profit that property owners could reap from optimizing parking, the business community and the development community would have an enormous incentive to experiment with different shared-parking arrangements and different total quantities of parking until they found just the right number of parking spaces so that every parking lot is always heavily used but no (or very few) frustrated customers are lost because they couldn’t find a place to park. This research would require a lot of time, energy, and money to conduct – which is why the government isn’t going to do it. But businesses stand to make vastly more profit over the long term if they can figure out the perfect amount of parking, and if we let them, they’ll do it.

The best, most important thing the City can do in this instance is remove itself from the equation. Drop the parking ordinance, use parking meters to prevent over-congestion of on-street parking, and let property owners act in their own best interest to provide the right amount of parking for their unique situation.