Sunday, May 18, 2014

Parking management: a survey of the ways to balance supply and demand of parking

As mentioned previously, parking is a crucial factor of how a city looks and incorporating parking in a city while preserving density and a nice look is quite difficult. At least, it is when you need to provide huge amounts of parking.

But how do we decide the amount of parking available? The issue of parking management is a complicated and crucial one, at least as much as the issue of actual parking design (surface lots vs underground vs elevated, on-street vs off-street, etc...).

There are different approaches, all of which flow from this basic economic chart:

Supply and demand graph

Okay, so for those not familiar with it, this is a supply-demand graph, linking the quantity of a good (y-axis) versus the price of it (x-axis). The two lines represent supply (here, how much parking will be built and offered) and demand (how much parking will be used by people). As the price of parking increases, meaning the parking fees paid by users of it, people will be tempted to build more parking as it will be more profitable (so higher supply). However, as prices increase, people will also tend to use parking less because the cost will be an annoyance, so the demand curve goes down (less demand) as prices increase (to the right), while supply curve goes up (more supply) as prices increase (to the right).

The intersection of both lines is supposed to represent equilibrium, the price point at which there is just enough parking built as there is demand for it. Of course, it is a simplistic representation, demand fluctuates in time, wildly even, while supply is mostly static. Still, the graph will serve its purpose.

So there are three categories of approach to parking management:
  1. Supply management
  2. Demand management
  3. Market management

Supply management

Supply management comes naturally to urban planners who are used to manage the supply of, well, everything through zoning: supply of single-family houses, supply of apartments, supply of commercial lots, supply of industrial parks, etc... In most North American and European cities, municipal authorities are also involved in parking supply anyway, as they build streets wider than necessary to allow parking on it, or have simply taken existing street and sectioned parts of it off to parking, which is often free, at least in residential areas.

1- Minimum parking: the maximum demand is the minimum required

This is the approach in most of North America. Its rationale is that on-street parking isn't sufficient for all the parking demand that is expected, especially when it is free, and without off-street parking, there will be parking overspill: car drivers will double park, park on the sidewalk, park on lawns, etc... So you need off-street parking, but if off-street parking is priced while on-street parking isn't, the parking overspill on public roads will still be there as drivers park on the street to avoid paying parking fees. What they decide to do then is to have each developer provide enough off-street parking to make sure that on-street parking is not required. That way, they don't have to deal with the headache of having to find lots to convert to parking and they can dump the costs of building and managing the parking on the private landowner, who is forced to provide parking as a condition to getting a building permit.

But how much should be required?

The idea is to have enough parking so that even if the parking is free, you have an excess of it. So let's see the basic graph shown above and show what happens if you assume the price to be nil.
Supply and demand if parking is free
So in this case, the free parking results in a demand of Q parking spots, as the low price attracts many people to use it. However, normally the fact that there is no direct revenue to parking would mean people wouldn't build much of it. Building some often makes a bit of sense, for example, stores who depend on customers who come by car will offer some even if free because they get some revenues from the customers who use it. But they won't build much of it, just enough to deal with the basic demand, as spots that are used by only 10 people a month... or a year, make no financial sense. So, anyway, builders will offer "q" parking spots.

As Q is bigger than q, what we have is a shortage of off-street parking. This shortage means overspill, into the streets or in the parking lot next door, creating frictions between residents and landowners. So to avoid this, they reasoned:

"Let's simply mandate each landowner to build more parking than they would need in the worst possible case, that way their parking will always be sufficient for the demand they create."

This worst possible case is of course: free parking, if all or almost all people come there by car, in the single worst hour of the worst day of the year. So they went ahead, found some stores near highway interchanges, where land is cheap so that, even without being required to, the developers offered an insane amount of parking. Places where the only way to get there was a car. Then they went on Black Friday or just before Christmas, counted the cars at the maximum and then applied the maximum observed to all similar stores.

In effect, it modified the graph like this:
Supply and demand with a minimum requirement
So the minimum required is a greater number than "Q", the demand for parking if parking is free. There is in fact no equilibrium price in this situation as legal requirements mean that the supply line is always superior to the demand line. What this means is that such a high minimum requirement will necessarily lead to parking being free. Charging for parking will just drive people away and the costs of managing parking fees will make parking revenues not pay back what it costs landowners in lost customers.

So this is the current system in North America, in most of it anyway. It results in excessive amounts of parking everywhere, which is the point of it really. It makes sense if all you care about is car drivers and you don't care about all the negative effects excessive parking has on sprawl and on alternative modes of travel.

2- Direct management of parking supply by public authorities

This type of management is common in many cities that had downtowns dated before the car but that decided to adapt their cities for car travel. Even with on-street parking, there was insufficient parking to deal with the demand of a car-centric society. Meanwhile, as land prices were often expensive and current landowners had properties grandfathered in, there was little private endeavor to offer parking lots, even if they charged for it. It was easier for stores to just move to the suburbs, where they could satisfy minimum parking requirements at a fraction of the cost. So in order to try to save their downtown, some cities opted to build parking lots themselves, and then either offer them for free or charge a below-market price.

Essentially, cities use tax money to subsidize parking, either directly or through cost of opportunity (the city would make more money just selling the land to a developer and taxing the property than by running a parking lot on it). Often, the parking price is fixed by politicians and the price stays frozen for years upon years. If demand for parking at that price goes over supply, the city will move to build new parking lots.

Returning to the graph, it means a vertical supply line:
Subsidized public parking
Now, that is only one case, with direct management, you could have cities decide to have the parking authorities self-fund themselves, which still leads to more parking at a lower price than the market. Why? Because the public authorities would likely not profit from it, so the profitable parking lots would subsidize the unprofitable parking lots, whereas private parking providers would want every parking lot to be profitable. Also, if the public authorities demanded higher prices than private providers would for the same supply, then that means that private developers would build parking lots faster than the city and thus the city would never build any.
Self-funded public parking
If we look at the intersection of both supply and demand for these two cases, we get:

In both cases, the subsidized price (Ps) is lower than the market price (Pm), and the total quantity of the subsidized situation (Qs) is higher than the total quantity without public intervention (Qm).

One of the big advantages of this approach over the previous one is that it makes it easier to reduce supply if need be. For instance, if you build subways and/or dense residential areas and suddenly less people come by car, it is easier to repurpose parking lots by selling them to developers when these parking lots are located on their own lots rather than when they are part of each lot, which can be hard to split apart.

If you have this:
Commercial area with distributed public parking lots
And you realize that you don't need as many parking lots, you could sell one of them and allow its development into commercial buildings:
New buildings in orange replacing one lot
This is great because it allows new areas to be built at first with plenty of parking at first as there might not be a large pool of customers withing walking or biking distance. But as the area densifies and transit gets better, these parking lots may be removed one by one.

But if you have this:
Typical commercial area with each lot having its own parking
Removing excess parking is difficult as it's hard to build new stores on excess parking and you need the cooperation of the landowner, it may also mean the removal of old stores, for example:
New buildings in orange
And in this case, all the existing landowners may protest the risk of overspill from the new buildings with less parking than they were forced to build prior to this. Redistributing parking around would mean splitting up lots, so there are a lot more issues than in the previous case.

3- Maximum parking: limit car use by limiting parking

This exists but is quite rare, I know Ottawa has it near its Transitway stations and the Canadian federal government (located in Ottawa) also adopted a policy of offering very few parking sports to its employees, but beyond that, I don't know. This is a reversal of the usual. People realized that imposing minimum parking enticed more and more people to come by car as it hid the costs of parking by bundling it in store prices, in office rents and in house prices, people essentially subsidizing parking with their purchases or with lower wages. They also realized that if you limit the number of parking spots, then you limit the number of people who can come by car to a given destination.

This can easily create overspill if alternative modes of transport aren't present. So it requires good enforcement of legal bans on double parking, sidewalk parking and other parking restrictions. The idea is to push people to travel without cars, without caring about the exact means of doing it, leaving it to the parking lot owners of finding ways to limit demand for parking or by making parking such an annoyance that people decide to opt out of car use just to avoid having to find parking. It's not a direct cost in the form of payment of fees, but it's still a cost linked to parking.

In terms of the supply-demand graph, you get something like this:
Maximum parking rule
As the quantity is fixed by law, the result will be a higher price (whether in terms of fees or annoyance/time lost) for a smaller quantity of parking.

Now this system can work, but only in places where there are alternatives to cars. If you put in low maximum parking allowances on big box stores at highway interchanges, you'll just get regular parking overspill. Plus, it's politically very hard to achieve in most times, car drivers perceive it as an attack on their lifestyle... which is a bit true.

Demand management

Most of the time, we are in a logic of supply management. If parking is "lacking" because of increasing activities in an area, we react first and foremost by trying to add to the supply of parking. But as the graphs show, increasing supply isn't the only option, reducing demand is another. This can be done either by limiting parking time, charging prices for parking to put a price on it and therefore get people to reconsider other modes of transport, or by trying to limit parking thanks to a limited number of permits.

1- Time limits

This is a method used in commercial areas to avoid having people use limited commercial parking for long-term parking, for example people taking buses or subways and using a commercial parking as a park-and-ride or people visiting friends in the area and using the parking lot instead of hunting for a parking spot on the street. This method is a pretty "soft" one in that most people will not feel much concerned by it and it involves no additional costs on those who already respect the time limit.

That being said, I doubt this is really all that useful. Enforcement is the main issue. Unless one is willing to invest in cameras or in extensive record keeping of cars parking and leaving, it is quite hard to apply this limit, and quite easy to contest. I've never heard of any case of fines for staying too long, but it may well happen sometimes.

2- Parking fees

One of the most usual types of parking fees is the parking meter. Often seen by many drivers as just an "hidden tax" (in fact, free parking is an "hidden subsidy" and it's simply fair that they should pay for it), in many cases, the parking meters exist mainly to reduce the demand for parking by making people pay for the time they occupy a parking spot. It's like an incentive for people to go about their business quickly because the longer they take, the more money it costs them. Often, the cost is more symbolic than anything, like 1$ per hour or the like. But even a small fee can have a great effect on demand and allows for a much bigger turnover of parked cars, which is very useful for commercial areas with limited amount of parking.

Off-street parking lots generally have fees too when they are not attached to a business or office. When parking gets tight, raising fees is often an easier solution than building new parking lots.

Residential parking permits, despite the name, are not limited permits but just fees to allow overnight on-street parking in residential areas. They often operate on an unlimited basis, with the monthly or yearly fee the only thing keeping demand down. It's meant to discourage people from owning cars in certain neighborhoods by making them pay regularly for parking, and to avoid visitors from parking in residential areas, depriving residents of parking spots, which is a big issue if parking in the commercial area is metered.

3- Unbundling of residential off-street parking

This is a special type of parking fee I find important to point out. In most cases, parking spots are bundled in the price of housing, whether owned or rental. You want to live there? You must pay for the parking, regardless of whether you will use it or not. This actually provides an incentive to have a car, if you have to pay the thousands of dollars to have a parking spot, might as well use it. After all, your parking may cost you more than your car did, as parking can cost up to 50 000$ in some instances (underground garages), and it counts in your taxes.

If parking is unbundled from the cost of housing, people have a choice of whether they will buy it or not. This is most often seen in mid-rise and high-rise condo buildings as they often have a smaller number of parking spots in garages than units. So people who want to buy a condo but opt out of the parking can save tens of thousands of dollars, which can provide plenty of incentive to make do without a car. And once someone opts out of owning a car altogether on account of an expensive residential parking, it reduces the demand for parking everywhere else.

So reducing demand for residential parking is the most bang for your buck. Once you reduce it, you reduce car use everywhere else as less people will have cars. However, it is also more price insensitive, opting out of a car, especially in America, is a big decision, so even if parking is expensive, many people will bite the bullet and pay for it nonetheless, unless they live in a big city with great transit.

Unbundling of parking is harder in low-rise areas. It could take the form of small parking lots in which people could buy places and each place would be attributed to someone in particular. In single-family areas, as parking is often a simple driveway and lots are big enough already, parking is actually pretty cheap and unbundling it would be hard and not very effective.

4- Limited permits

Residential permits generally have a fixed price and an unlimited amount, but there is an alternative: permits that are limited in number but with changing prices. The idea would be to auction off a number of parking permits for a parking lot or for off-street parking. This number would be limited to the number of places there are actually available, with strict enforcement of the parking restriction to people without permit. Enforcement is easy because the permit holders themselves will likely call the police to have offending cars removed from "their" parking spots.

This would be particularly useful for offices that expand and that would normally be required to expand their parking spots as well. The office owner could be offered the alternative of having the parking minimum requirements waived in exchange for the emissions of parking permits for its employees, to limit how many of them may drive to work. This could even be used for all new constructions, with builders being allowed to build less parking than normally required with the condition of restricting access to the parking through a permit system. This may make it more politically palatable to reduce parking minimums.

5- Parking cash out

This is a reverse system used in California, where people who are provided with a parking spot by their employer can opt out of it and get a payment equal to the cost of the parking spot. The fact that it is a reward for not using parking instead of a punishment for using it makes it less likely to create political backlashes. However, it doesn't correct the issue of the escalation of subsidies to different transport modes, which is a bit like an arms race (government funds highways, offers them for free to cars, people switch to cars massively, causing congestion, so government increases subsidies to transit to reduce its cost and encourage people to take it to reduce congestion, car drivers whine about transit subsidies to justify opposing tolls and higher gas taxes, transit users point out under-taxed cars to defend their own subsidies and ask for more, etc, etc...). It would be much better if subsidies were cut, as they hide the real cost of transport and encourages sprawl and wasteful decisions.

Market management

In both supply and demand management, supply is in a way controlled by public authorities through regulations or interventions, meaning that the objective is either to vary supply to obtain a desired price, or to vary the price to obtain a certain demand. In the market management style, there is no given objective, both the amount of parking and its price can vary depending on how much parking people are willing to pay for.

1- Laissez-faire

This theoretically is the simplest thing to do, yet it is also the hardest. In essence, not do anything, let things sort themselves out. The issue here is that there is always a distortion of the market through the existence of parking on public ways, legal or illegal. Which means that private for-profit parking lots will face unfair competition from parking on the street. There are also free rider problems, for instance, as I said, it makes sense for stores to offer at least some free parking to attract customers, even without regulations to do so. But there is the free rider problem as people may try to use existing parking lots, vacant lots and even lawns as free parking.

So ironically, for this solution to be possible, you need intense enforcement of parking regulations to push people into the private lots provided for profit. Well, it is an irony that isn't one, free market policies in general always require government enforcement at one level or another to get people to play by the rules of the market.

What would laissez-faire look like? That's a good question. If I may haphazard a guess, it would yield much less parking at a higher price. Stores would still offer free parking, but most of them would offer much less of it, at least in urban areas. Big box developments could still exist and offer plenty of free parking, but only in places where land is cheap (near highways at the outskirts of inhabited areas for instance) so that providing parking is quite cheap. Parking in downtown areas would be rare and expensive, parking at offices would likely be quite limited, with parking actually provided by third parties who charge for it. The bundling of parking in housing could still occur.

2- Proof of parking system

I already talked about it in another article. This is the Japanese system wherein people need to provide a proof that they have an off-street parking spot in order to get license plates for their car, without which they don't have the right to use the public road. This is a market system because it forces people who want to buy cars to find a parking spot for their car without having one provided by government regulation. Since people are forced to find parking spots BEFORE they buy their cars, this makes sure that they can't simply buy a car then park it illegally anywhere like on vacant lots, yards, parks, etc... They're forced to have a parking spot and to pay for it anyway, why not use it?

So prospective car buyers have to go out on the market to find parking spots if their house or apartment doesn't have one, and there are private parking owners who gladly go to meet them on the market to lend them their parking spots. As these parking are distributed a bit everywhere, if demand for parking falls, so does the number of parking lots, if demand increases despite rising prices, then new parking lots may be built. There is only so much parking as people are willing to pay for. And the price of parking is much higher in densely built areas.

Now this system works only for residential parking. However, as I mentioned, residential parking is the crux of the issue. If people have no residential parking or find it too expensive, then they opt out of owning a car, which reduces demand for every other parking lot out there. So in a way, this system allows demand for parking lots everywhere to be reduced by having residential parking costs be explicitly shown to car drivers and having them pay for it directly instead of having it being subsidized through "bundling" in various costs everyone ends up paying for.


So this was just me enumerating the ways of dealing with parking supply and demand issues. Right now, most of North America is stuck in the "minimum parking" mindset where everything is about imposing more and more parking until there are no parking problems anymore, regardless of the other problems it may create. In a money-based economy, the price of goods is an important signal to guide people to wiser consuming choices, so I think it is essential for parking pricing to be part of the solution and not to keep insisting on providing free parking, no matter the cost.


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