The Economics of Parking

A few days ago, Wendy Siegle asked me a question about the current situation with Houston’s parking ordinance. The gist of her questions was this: What is the real issue with parking in Houston? She observed that the perceived problems seem to be confined to Central Houston, and that different people want different things to happen – businesses seem to want requirements lowered, while residents seem to want requirements increased.

This is a very complex issue, so trying to phrase a short answer to the question took me a few minutes. I then read what I had come up with, and realized that a little elaboration might make it more clear. An hour later, when I felt I had fully explained the nuance of what I was talking about, I realized that my email was now quite long, and that it might actually work better as a blog post.

I sent Wendy the email anyway – but I’m sharing my answer here as well. I’ll tell you, my readers, the same thing I told Wendy: read the short answer, and if you feel 100% comfortable with it you can skip the rest. Otherwise, keep reading and I think my explanation should make sense.

The problem, in short

The problem is that Central Houston is quickly urbanizing. This means that both:

1. The cost of the land makes automobile-oriented development increasingly financially infeasible.
2. The population density is reaching a point at which an automobile-dependent transportation network cannot adequately serve the population.

Therefore, we are at a tipping point beyond which auto-dependent governmental programs (such as parking ordinances) will not adequately respond to the interests of residents, businesses, and others.

Again, if you’re totally comfortable with this statement, you can skip the elaboration below. Otherwise, keep reading!

Exactly what this means

Because the value (and cost) of land is so high, business owners etc. want to reduce their parking. They would make more money building something else on top of their parking lot (and collecting rent or increasing the size of their business), and they know that people will still show up.

The way in which people “show up anyway” is usually to walk more – whether this means they walk from their home, or they park farther away (on-street or in a shared or paid parking lot) and walk to their final destination.

The same residents who often express a desire for the city to fix the sidewalks etc. and make the community more walkable are then complaining when people treat the area like a walkable place – walkable places have more space for people than they do for cars, and because cars take up more space than people in the first place, this means that that parking will be scarce.

In the marketplace, scarce goods must be priced appropriately or they will be over-consumed and unavailable. We can easily control how crowded the parking on any street will be by setting a price high enough to discourage whatever percentage of drivers we see fit. The greater the demand for parking on a street, the higher the price would have to be to discourage many people from parking there.

However, right now the city – and the angry homeowners – mistakenly hold the idea that people have “the right” to park for free wherever they go. Contradictorily, they also believe the nobody else has “the right” to park on the publicly owned, paid for, and maintained street that is adjacent to their personal property.

It is normal for people to desire what is easiest or most convenient for them, even when it is hypocritical, unrealistic, inconvenient for others, or economically impossible.

What is not healthy is when the city listens to these desires, declares them legitimate, and tries to enact public policy to accommodate them. This pattern of governmental behavior is commonly known as socialism.

The Solutions

There are only two solutions to the parking problem in any city:

1. You can demolish the places that are attracting people and replace them with parking lots until you reach an equilibrium between the number of places remaining that people would like to go to and the amount of empty space designated for those people to leave their cars. This is the gist of all US development policy since the 1930′s, and the result the kind of development most commonly referred to as suburban sprawl.
2. You can allow the free-market to solve the parking problem with the result being that parking will not be free, and in very popular areas will be quite expensive. This results in high percentages of people choosing an alternative method of transportation, which in turn results in a human-oriented, walkable urban development pattern.

Importantly, you do not need a major regional transit system for option #2 to work. If the government does not provide one, the private sector will. This is the case in the New York METRO region, where a number of private bus systems have emerged as major transportation providers. However, the private sector cannot provide regional transportation as affordably as the government because they cannot access the cheap financing that the government can, and they cannot use eminent domain to clear pathways through areas that were developed with insufficient through-access for current needs.

The Reality of the Situation

Unfortunately, most cities are unwilling to use market pricing for roads or parking, and the side effect of this is that there will be too much traffic for the roads to perform optimally, and, with regards to parking:

1. People will clog up side streets with parking for destinations that are several blocks away rather than pay to park anywhere or choose a different mode of travel.
2. Businesses will not provide parking because it costs them a lot of money, and with all the free on-street parking the business will not be able to charge a reasonable price for their off-street parking. No business is going to choose to lose money just to make someone else happy. If the government does not force them to do this (through parking ordinances) they will not do it.

Thus, in most US urban centers, on-street parking in residential areas is heavily used by people coming to that neighborhood only to park and walk somewhere else. This is, in effect, the third choice. If you are not willing to appropriately price parking, then you must accept that urban residential areas will receive a lot of spill-over parking from nearby commercial areas. If you do not consider that side effect this option could even be called a “solution,” but because this doesn’t make very many people happy I wouldn’t call it that.

I hope this post was helpful for many of you, I’m looking forward to hearing your comments on the subject!