The high cost of free parking: urban intensification edition

Problem definition matters in policy.

I worry some people in Auckland are experiencing poor parking management by Auckland Council as being a problem of the removal of mandatory parking minimums. 

The problem isn't removing mandatory parking minimums. 

The problem is the failure to price or manage on-street parking in places subject to intensification. Expectations of being able to find free on-street parking reduces demand for on-site parking where on-site parking has high opportunity cost. 

So solve the underlying problem. It isn't that hard. Set resident parking passes for the street, keep some spaces back as paid parking (easily managed through apps), and let folks decide whether they want to pay for an on-street spot or forgo some living space on-site or not have a car. 

My column in yesterday's Post.

No parking

While central government works to wreck Christchurch's downtown through endless uncertainty about whether anchor projects will proceed, Christchurch Council is doing a number on its suburbs.

Council's having at a neighbourhood cafe and bar in Cashmere. Why? They want it to have 62 more car parks than it currently has. It seems one neighbour's been complaining - perhaps there's parking overflow on side streets.

Mike Yardley's been checking into things:

Hospitality New Zealand's regional manager, Amy McLellan-Minty, tells me "a council employee who lives nearby" triggered the storm. She considers the council's treatment of the Vaughans as the worst she's seen.

Since the council's Kaizuka swoop last August, Hospitality New Zealand notes the district licensing committee pointedly requires licence applicants to produce a far more prescriptive floor plan, to avoid any confusion. So is this heavy-handed treatment of Kaizuka by the power-trippers primarily a butt-covering exercise?

Local councillor, Tim Scandrett, has previously failed to make any headway. Crs Phil Clearwater and Scandrett notified me they'd be meeting council staff, in a bid to resolve the fiasco.

Living in Huntsbury, I know how cherished this venue is. The social media response from the local residents' groups has been emphatically supportive of Kaizuka.

The ludicrous council dictum for 62 more car parks has been roundly pilloried, particularly given the overwhelming number of patrons walk or bike there for a meal or drink. The Vaughans have clearly had a gutsful trying to strike a pragmatic resolution.

With 18 jobs on the line, a Christmas miracle is needed.

Flow-on effects to side streets are real potential adverse consequences for some local residents, but you could equally ask why those households didn't bother with sufficient onsite parking.

In either case, isn't the better solution to put one side of the affected street to residents' passes, so the locals know they'll have a place to park? It isn't that hard. And it makes more sense than killing a business.

The high cost of free parking: Christchurch Hospital edition

Remember when Aaron Keown campaigned on free parking at the hospital during the Christchurch Council elections? And then they were snuck into the three-year plan?

Keown said it was such a minute detail in the plan that many would not have picked up on it. However, it would make a huge difference to hospital visitors who were often stressed enough as it was without worrying about the parking meter.

He knew of a family of five who had been to visit their dying relative and waited while life support was turned off. Meanwhile their parking meters had run out.

"They all had parking tickets."

Royce Gordon, who was visiting a relative yesterday, welcomed the change, saying it was a terrific idea, but she questioned how many people would have 10 cent pieces in their pockets.

The new regime will apply to on-site hospital parking and should start this month.

Yay! We aren't going to use prices to ration the quantity of something in scarce supply! Nothing could go wrong! NOTHING!

A shortage of parking in and around Christchurch Hospital is causing headaches for staff and patients and some patients have reportedly missed their surgery as a result.

The Canterbury District Health Board's website says providing adequate parking at the hospital has always been a challenge and will become more difficult when the development of the Acute Services Building begins later this year.

One nurse at the hospital, who only wants to be named as Francis, said on Wednesday that families of patients often complain and she knows of some people who have missed their surgeries or their children's operations because of the problem.

She said people are told if they park illegally in certain situations they can get out of the fines, but she says that's not the point and people still worry when they can't find a park.

When prices don't ration supply, queueing does. Parking lots used by those coming in for surgery and expecting to find a parking space aren't the best place to ration scarce supply by queueing.

Kudos to @McMahon4SH who caught the link:

@rnz_news Keown's 'free' parking seems to have backfired a tad.
— Paul McMahon (@McMahon4SH) July 16, 2014

It surely won't be all down to the change in price - there is a lot of construction and road work going on that will be affecting alternative parking spots. But free parking isn't helping.

Back to the RadioNZ story:

Canterbury District Health Board member Aaron Keown said management is looking into options for other parking in and around the hospital, including a park-and-ride system.

He said several organisations involved in nearby projects do not meet regularly and there is no overall coordination of transport in the area.

Mr Keown said the lack of parking combined with forthcoming road works and transport plans will make the situation disastrous.

Higher prices could perhaps be an option too.

All of this is made worse by the quake-closure of the parking lot across the street from the hospital. But that lot's closure pre-dated the pricing changes.

Auckland parking

NBR reports that the supermarkets aren't happy with Auckland's proposed new parking regs [gated, sorry].

It seems that Auckland's proposed limiting supermarkets to one car park per 200 square meters of floor area. The supermarkets are right that this will put a substantial hindrance on their operations; I'm glad they're opposing it.

At the same time, the supermarkets are opposing the removal of minimum parking restrictions on smaller businesses, figuring that those businesses' customers will free-ride on supermarket-provided parking. They might, but supermarkets are also perfectly able to place restrictions on permitted parking within their facilities. The most obvious solution is to gate the exit and provide free exit on scan of a supermarket register receipt. You don't even really need staff on it - the airport here in Christchurch does it all automatically. It might not be cost effective to do it, but it's then pretty debatable whether the potential externality is big enough to justify compelling all small businesses to supply parking.

Further, much of the potential externality gets internalised where supermarkets serve as anchor tenants in malls or strip malls.

Why do Councils figure they have to regulate this stuff? Is Auckland going from mandatory parking minima to mandatory parking maxima? Can't we just let property owners decide how much parking they need and how to restrict access?

Dynamic pricing: parking edition

I love this.

Palmerston North has become home to what may be the world’s most high-tech carpark, where the amount drivers pay depends on how many spaces are available.

The 33-space carpark in the city’s Church Street has been kitted out with solar-powered sensors by local parking technology firm Frogparking that can tell which parks are occupied. Drivers pay for parking through their smartphone.

Frogparking has been providing ticketless parking systems to Palmerston North for a few years, but director Don Sandbrook said the new system was its most advanced yet, with cheaper parking if there were lots of spaces available and higher prices if they were nearly all taken. The tariff ranges from 50 cents to $2 an hour.

Regular patrons can use a GPS-enabled windscreen tag that will automatically bill their credit card, but there is no cash option.

Sandbrook said there was plenty of on-street parking nearby for “little old ladies” who found the technology complicated. “If you don’t have a smartphone, we don’t want you to park in the carpark.”

Even better if you could launch the app while still driving to see whether it's worth aiming for that lot or heading elsewhere.

Drivers pay only for the time they are parked and local retailers can send codes to customers’ smartphones that entitle them to have their parking fees refunded if they take up shopping offers.

A local cafe, Cafe Moxies, has been the first to do that, but three other retailers are offering parkers in-store discounts.

The comments section is predictably full of folks who hate the use of prices to ration scarce resources. Those raging against that parking prices could vary by up to $1.50 per hour should be grateful for the lack of adversity in their lives allowing them to feel aggrieved by so little.

Many thanks to reader Eli Gray-Stuart for the pointer.

Lockean Parking

In the Lockean framework, private property can be appropriated from the commons through the mixing of labour. If you mix your labour with the untilled soil, leaving as much and as good yet for others to till, then that tilled soil is yours. You have homesteaded it.*

And so we come to parking spaces in snowy places. Normally, you appropriate a parking spot by putting your car into it. All available spots are up for grabs. Because cities refuse to charge market-clearing prices for parking, there's excess demand that's solved by first-come-first-served queueing.

But suppose you've had a snowstorm. None of the parking spaces are available because they're all snowbanks. When you shovel out a spot, you have homesteaded it. At least a little bit. You've mixed your labour with the uncleared snow and have some ownership right to that space, at least for a little while. Standard practice in many North American cities then allows the clearer of the space to own it and to signal ownership by the leaving of an appropriate marker. A chair, a road cone, a barrel - something big enough to say "Hey, I cleared this spot. I know you could move the barrel and take my spot, but you'd be a total jerk if you did."

The Boston Globe tells me [HT: @BKDrinkwater] that this practice has even been recognized in official city practice [I don't know if it's a bylaw.] If the city declares a snow emergency, you can set out a marker owning a space for 48 hours after the end of the snow emergency. So you get a limited homesteading right. But the city's practice doesn't put in a homesteading requirement.

And so we can get problems where the state comes in to enforce a pre-existing social norm through official practice. What if you declare a snow emergency, and it doesn't snow? By the city's rule, you can then appropriate any old parking spot without having mixed your labour with it. Or can you?

[Mayor] Walsh said he supports the concept of the earned spot. “If you use manual labor to get your car out, I think for 48 hours, a couple days, you can have it,” he said. But last week, after the forecast fizzled, Walsh said “there was clearly no need for saving spaces after that storm.”

Still, many did, especially in South Boston, where residents report being locked in by the system: Whether they agree with the idea or not, if they don’t put one out for themselves — even with no snow on the ground — it would simply mean they have no place to park. So people like Ivaska [earlier dubbed Captain Cone] and a man named Dan Bothwell went on a tear around the neighborhood, tossing everything they found in a parking spot. “I call it my Winter Olympics,” said Bothwell, 37.

“People say to me, ‘Why do you get so mad?’ ” he said. “I say, ‘Because it’s not a South Boston parking issue, it’s a common sense issue. If you get 12 inches and you shovel your spot, you get it for a day. But everybody hates people who abuse it, yet they won’t be an adult and move the cone if they need to park. If something happens to your car, you go to their house.’ ”

The situations can get famously tense. Already this winter, punches have been thrown and nail guns used to shoot out tires. “I hope I’m wrong, but I honestly believe something bad will happen to someone soon. It’s out of control.”

The mayor said that he sees no problem with people moving markers from spots if a person has not shoveled — “That’s not an earned spot,” he said — or if they’re past the 48 hours, and he has a particular peeve with people who put them out before the first flakes fall.

“You can’t put it on blacktop,” he said. “To me, that’s not grounds for saving a space. That’s not how I grew up.”

The streets are empty now, but storm fever will arrive again, and so will the early space-savers. Captain Cone is not betting on common sense.

I love the induced prisoner's dilemma. I also love that it takes an entrepreneur to initiate the revolution. Everybody fears retribution so nobody wants to be first mover against the norm-breaker, and because everybody else fears that the game unravels, they all put out space savers. Until Captain Cone comes around, pushing everybody back to the better equilibrium.

You could likely write a political economy masters thesis on social norms around this issue: how the institution evolved in different cities, how it interacts with city practice - whether parking wardens leave the cones there or biff them, and what happens when code conflicts with norm.





* Cat has homesteaded nothing [very mildly NSFW].

Parking Market Failures

Does any market failure argument justify parking minima? Many cities require that residential developments include some minimum number of off-street carparks. Can these be justified?

Well, I'm glad you asked, Agnito.

The best argument I've heard for these regulations is that on-street parking is rivalrous and non-excludable. If you have an apartment building with too few carparks, residents will park on the street or might keep flitting between a few different no-parking zones, staying one step ahead of the enforcement officers. A lot of people see paying for parking a bit like hiring other kinds of personal services: why pay for it when you can apply yourself and perhaps get it for free? And if you find the perfect parking spot, there's then a huge opportunity cost of leaving the space: people with really good parking spaces never give them up. Finding the perfect space can be a joy to be shared with others. Further, where excess congestion from everyone's free-riding on on-street parking gives incentive for the able-bodied to park in handicapped spaces (or in front of fire hydrants), disastrous consequences can ensue.

Having mandatory parking minima then avoids the free-riding on the on-street parking that could best be left for higher-turnover use. And where long-term on-street parking is discouraged only by time limits, it also encourages other socially wasteful forms of entrepreneurship.

The best response to this kind of argument is that it's massively second-best relative to the more efficient solution: price on-street parking. Do that properly and everything else sorts itself out.

Of course, in that world, Seinfeld wouldn't have been nearly as good. And where Gerry Brownlee wants to ban Auckland from using congestion charging, we might not be able to get first-best parking charges anyway.

For the record though: there is no real-world market failure sufficiently large to justify mandatory parking minimums. At least not in Auckland, best I can tell.

Bland by design

I could grok changed building rules in Christchurch post-quake. Earthquake and liquifaction changed what we might want from foundations.

But the percentage of building frontage that must be in windows, no matter what? That car parking be hidden?

For example, the rules requiring buildings facing a road or public space to be between 60 and 90 per cent windows would not suit many businesses.

"Such blanket provisioning ignores that such a percentage of glazing may be inappropriate for the retailer, who may need more security, such as a jeweller or a bank; whose security requirements must take a higher priority than urban design,'' the submission said.

"Furthermore, it ignores the needs of department stores or larger stores who may need to place stock on shelving attached to solid walls around the perimeter of building."

The Property Council said that, because glazing was so expensive, the rule would boost the cost of new shops.

"We are strongly opposed to any provisions in the plan change that call for an increase in development costs without sufficient justification."

The submission criticised the requirement for car parking to be hidden from view, saying visible parking was a principle marketing attraction for retailers.

"This is completely impractical for many retail activities, which rely on visible parking to attract sufficient customers in order to remain viable,'' it said.

Prescriptive zoning rules are what deliver boring, expensive cities. Get a long enough list of "every building must", and you'll get a pretty short menu of options that can fit the bill.

I just don't get why we have to be so prescriptive about things that are orthogonal to "risk this building causes to others that are avoidable at reasonable cost." Minimum engineering standards that keep buildings from falling onto passers-by make sense. Council failed to do anything about this prior to the quakes, and even hindered owners who had wanted to tear down buildings that wound up falling down and killing people in February's quake. Even if we take a hard econ line on that individuals should be free to live or work in a dodgy building and trade safety for money, risk imposed on passers by seem sufficient to require either strictly enforced minimum standards or liability rules with compulsory insurance.

I wonder how much intersection there is between the kinds of people who think prescriptive town planning rules are great things and the kinds of people who don't like the tilt-slab construction that's been the consequence of trying to tick all the planning boxes on a budget.

Meanwhile, in America, Matt Yglesias has taken up Donald Schoup's banner on the high cost of free parking. Parking minimums are pretty common in the States: developers then have to put in more parking than they'd like to. Other places have parking maxima, preventing developers from providing as much parking as they think appropriate.

What happens when you stop being so prescriptive around parking?

Michael Manville of UCLA studied a liberalization of parking regulations in one section of Los Angeles and found that deregulation leads to the construction of more housing units and fewer parking spaces. Conversely, tighter regulation leads to a lack of affordable housing and a surplus of parking spaces. That might make sense if parking spaces were a public good, like clean air. But they’re closer to being a public bad. When Chicago mandates the creation of ahigh number of parking spaces per square foot of downtown office building, it reduces the price of parking, but it has a number of negative consequences. Cheaper parking means more traffic congestion on the streets. It also means lower ridership for Chicago mass transit. Perversely, cheaper parking offers a subsidy to commuters from outside the city limits at the expense of Chicago residents living within walking or biking distance of the central business district. And, of course, it leads to dirtier air, not cleaner.

Yglesias recommends abolishing requirements that buildings have parking spaces; I'll also recommend abolishing requirements that they have maximum numbers of parking spaces. If the highest valued use of a piece of land, as seen by the person with skin in the game, is a parking space, why need Council get involved?

Maybe, just maybe, if Christchurch Council focused really hard on a small number of rules around building safety, and dropped the other stuff, they'd be able to competently administer a set of useful rules instead of, well, what we have instead.

Increasing consumer surplus through price increases

As I noted last year, the University of Canterbury administration has this year increased the price of an annual parking permit threefold from (roughly) $100 to $300. This raises the price from what was a subsidised rate to something they calculate as being approximately marginal cost. Needless to say, this is something that the Economics department had been advising for a long time, given our propensity to value efficiency even at the expense of our own direct wellbeing. After a few months of experience with the new policy, it has become clear, though, that it is not only efficiency enhancing, but it has also increased consumer surplus even without consideration of what use the university makes of the increased revenue.

How can that be? It is an application of how the deadweight loss triangle in a standard S&D diagram understates the cost of a price floor or ceiling. Previously a parking permit at Canterbury did not confer a right to park; it conferred the right to hunt for a park. Many of us wasted a lot of time searching for a park before giving up and parking on the street several blocks away. The problem was particularly acute on wet days. Some of those who successfully found parks had a low willingness to pay, others who missed out valued the parks much more highly. How do we know this? Well this year, as a result of a trivial price change from next-to-nothing to three times next-to-nothing, the carparks are never full.* Even on the wettest days, one can come in late and always be guaranteed a park. Those cluttering up the parks last year but not this clearly didn’t value the parks highly; this year, it is only those put a high value on parking who get the parks. And how high can that value be. Well we don’t know for sure, but I am sure this story could be replicated here.

So there we have it. The price went up, and so did consumer surplus. Could the same happen in reverse. Well imagine if you were to impose average cost pricing in the retail electricity market despite it being an industry with sharply increasing marginal cost. Everyone would get a lower price for power, but with no guarantee that the lights would come on on demand. Consumer surplus might well go down. And that is without even considering the lost government revenue from publicly owned power companies….

* I find it difficult to comprehend the size of the demand response; think of the Slutzky equation: there is a huge shortage of on-street parking around the university, so there are no close substitutes for on-campus parking; $300/annum is hardly a large fraction of anyone’s expenditure, student or lecturer. Can the income elasticity really be that high? 

Popcorn, Parking, Exercise and the Theory of the Second Best

The University of Canterbury recently announced that it will be charging faculty and students alike something close to marginal cost for parking. The stated reason was that they saw no reason why scarce resources should be allocated to providing an amenity benefit that is of value to some staff and students but not to others.

The economists, of course, cheered. A parking permit at Canterbury is currently very cheap, but it is only a licence to hunt, not a guarantee of a park. We have been saying for years that parking should be charged at a market-clearing price. After all, charging parking at less than marginal cost generates a deadweight loss in which the marginal units consumed are valued at less than cost, and so reduces the total value that the university can deliver to staff and students. If there was a reason for thinking that the UoC-specific elasticities of demand of students or of labour supply of staff are higher for those who want parking than those who do not, you could make a Landsburg popcorn price-discrimination argument for subsidising parking, but that assumes that the University is a profit-maximising monopolist, rather than a not-for-profit utility maximising institution.

Then today, I heard from students that in another move, the Univeristy is increasing the student levy next year but including free gym membership as an offset. My first reaction was that this is the exact opposite of the move to increase the price of parking, and is silly for exactly the reasons that the former policy makes sense. But then it became clear. The students explained that a student levy can be added on to a student's interest-free student loan, whereas the cost of gym membership as an optional extra cannot. Given that every dollar of student loan is roughly equivalent to a straight out grant from the government of 33c if it is paid off at the slowest possible rate (from memory of a back-of-the-envelope calculation I made some time ago, so don't take this number to seriously), the new policy might make sense as a way of increasing the total government contribution to the University, as long as that benefit outweights the effect of the created deadweight loss, including, possibly, the cost to some students of having to queue for gym services.

But then I reaslied, we have to pay for parking permits out of after-tax income, but the University's expenditure on parking net of parking fees is not subject to fringe-benefit tax. So subsidised parking is also a way of increasing the government's total contribution to the University......   Isn't second-best analysis fun!

The high cost of cheap parking

Seamus loves citing the old line by former University of California Supremo Clark Kerr:

"The three purposes of the University? To provide sex for the students, sports for the alumni, and parking for the faculty."

Apparently, Dalhousie has failed on one of these three margins.

For professor Dan Middlemiss, the thought of another year navigating the parking lots of Dalhousie University was simply too much to bear.

On Monday, after an hour of waiting in line for a parking pass on the Halifax campus, the expert on Canadian defence policy stormed up to university administrators and handed in his resignation.

“I went straight upstairs, I said, ‘I’m not kidding this time, I don’t have to put up with this. I’m resigning,’” he told a CBC camera crew after flagging it down.

Prof. Middlemiss had been one of hundreds of professors, students and staff lined up on the campus Monday afternoon in a bid to snatch up an annual parking permit from a dwindling supply.

Normally, it’s a calm and orderly affair, but this year, amid news that the university was trimming parking privileges, Dalhousie drivers staged a run on the university’s security office, which issues the $260 permits.

...
Dalhousie only has 2,000 parking spaces for roughly 20,000 students and staff. In past years, administrators have sold upwards of 3,300 parking permits, earning them the derisive nickname of “hunting passes.” According to Prof. Middlemiss, in order to teach a 2:30 p.m. class he needed to have his car in the lot before 7 a.m. Otherwise, he would be stuck circling the block for a metered space — or hiking in from a distant residential street.

“I’m getting old to the point where I’d like my beauty sleep,” he said.

Simply letting the market clear by prices rather than queuing would solve a lot of problems. Equilibrium prices could be high though:

Drivers can get around the musical chairs of Dalhousie parking by paying $1,200 to $1,400 for a reserved space in a parkade, but even then, each year administrators are forced to turn away more than two-thirds of the applicants.

If all the parking spots cleared in prices, there's no way prices would be as high as in the parkade.  I don't quite understand why they don't build another parking garage that would charge high daily prices.

We used to have problems finding parking at Canterbury; it doesn't look likely to re-emerge as a problem here anytime soon.

Fortunately, New Zealand universities have never been called on to provide sports for the alumni. Or, perhaps unfortunately; having a US-style alumni network which could be drawn upon for support in times of earthquake would be ridiculously helpful. University sports then could be serving as a very expensive insurance policy.

I have no clue to what extent we're successful in ensuring sex for the students; we kinda leave them to their own devices on that one and hope for the best.