Living Economics

There Is No Free Parking
Free or subsidized parking has suffocated the development of mass transit and increased traffic congestion and air pollution.

Free off-street parking is as American as apple pie. But the estimated cost of subsidizing off-street parking in 2002 was estimated to be as much as what the U.S. spent on Medicare or national defense in that year; a whopping $127 - $374 billion (ITS Review Online).

These are only direct cost. There are also poorly understood external costs1. Specifically, free or cheap curb parking also generates excessive congestion, air pollution, and inefficient space allocation as drivers cruise excessively to find empty spaces and occupy parking spaces longer than if parking is priced fully to cover true cost.

Free or subsidized parking also explains why most American cities are charm-less compared to European cities. If parking spaces are priced to fully cover their full cost, the demand for parking spaces would be drastically reduced and American cities would look more like San Francisco than Los Angeles2. Because American land-use planners estimate how many free parking spaces are needed at peak demand, people have no incentive to patronize mass transit. So a vicious circle of subsidized parking leading to low demand for mass transit, and inadequate mass transit in turn leading to high demand for subsided parking is completed.

The market solutions to off-street parking are quite simple:

Let land developers, not city planners, decide on the supply of off-street parking developers will optimize the parking spaces to reflect the true land value.

Increase parking fees to generate 15% vacancy rate cruising to find empty spaces and the resulting congestion and air pollution will be reduced.

Charge variable rates to reflect demand changes over peak and off-peak hours.

Use progressive rate in sought-after spaces to favor short-term users.

Set parking prices to equal or exceed transit fares.

Provide free or discounted parking to car-pooling vehicles.

Charging the full cost of curb parking will not only internalize the external cost of free parking, allocate a scarce resource (i.e., parking spaces) to high-priority users, but also generate more revenue than the total property taxes in many neighborhoods.

Note:
  1. Uncompensated cost imposed on innocent third parties due to unassigned or poorly assigned property rights or when the cost exceeds the benefit of exercising properly assigned rights. Also known as negative externality.
  2. Uncompensated cost imposed on innocent third parties due to unassigned or poorly assigned property rights or when the cost exceeds the benefit of exercising properly assigned rights. Also known as negative externality.
  3. The Louise Davies Hall in San Francisco holds 2,700 seats and offers no parking spaces, while the Disney Hall in Los Angeles provides 2,265 seats and 2,188 parking spaces.
  4. The Louise Davies Hall in San Francisco holds 2,700 seats and offers no parking spaces, while the Disney Hall in Los Angeles provides 2,265 seats and 2,188 parking spaces.
References:
  • ITS Review Online. Summer 2005. "The high cost of free parking."
  • Online TDM Encyclopedia. "Parking pricing." 5/11/2006.
  • NPR. 4/30/2005. "Professor Shoup discusses the ideas behind his book, 'The High Cost of Free Parking'".
  • WSJ. 2/3/2007. "The parking fix."
Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (28) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (19) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (46) Profit maximization (48) Property Rights (42) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (27) Taxes (7) Technology (9) Type of goods (31) What Price Means (27)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All
Search

• Microeconomics Lectures • Macroeconomics Lectures
Instructor
• Instructor Log in • Sample TOC • Demo/Register • Video Tour
Student
• Student Log in
Close
Instructor Log in

Class
Close
Student Log in


Open Menu
Term
Definition