There’s no such thing as a free parking space

Housing affordability, cutting greenhouse emissions and easing the rising cost burden on low income families are the issues of the day across the country. Congestion in our cities is a problem, and encouraging public transport use is also a challenge.

People are looking to the Rudd Government to address these challenges, but for all the discussion taking place, one factor which is linked to all these policy challenges has been overlooked. It relates to the minimum parking regulations that are a standard component of the urban planning frameworks of our cities.
In 2005, Donald Shoup, an economist and professor of urban planning at the University of California Los Angeles published a book titled The High Cost of Free Parking, which provided important insights into problems associated with minimum parking regulations.

These regulations dictate the minimum amount of off-street parking spaces that any urban development must provide. They are meant to ensure there is an adequate supply of off-street parking for the additional cars that will be attracted to the development, minimising any spillover of cars parking on surrounding streets.

Most off-street parking provided in our cities in accordance with minimum parking regulation is free, but it is a mistake to think that because drivers don’t pay, nobody pays. By requiring a development to provide a minimum amount of off-street parking, the cost of providing this parking is bundled into the cost of development. This is then passed on to the public through increases in the cost of all goods and services sold at sites that offer free parking.

This has various ill effects. Firstly, “free” parking distorts transport choices because by bundling the cost of parking into the prices of goods and services, the true cost of driving a car is hidden and it appears relatively cheaper to drive compared with walking, cycling, or taking public transport. For example, if you had to pay $2 upfront whenever you parked at your local shopping centre, you would think twice before driving and you might instead decide to walk, cycle or take public transport instead. By encouraging car use in this way, it makes it harder to promote the use of public transport and contributes not only to congestion but also the greenhouse emissions caused by car use.

Secondly, “free” parking makes housing more expensive, because residential developments are also required to provide a minimum amount of off-street parking. Although the regulations vary, houses are often required to have two parking spaces. This increases the cost of owning or renting a home, when you consider the cost of land in our cities, providing two parking spaces can be very expensive! Even if you don’t own a car, or only own one car, you still need to provide the two parking spaces, in which case you have to pay for something you don’t want and won’t use. Given the problem of housing affordability, it doesn’t make sense to have regulations that increase housing costs and don’t benefit people who don’t have a car or don’t need two car spaces.

Thirdly, “free” parking harms those on low incomes. Increases in prices, caused by bundling the cost of parking into the cost of goods and services, have a disproportionate effect on those on low incomes. According to ABS statistics, those on low incomes own fewer cars and therefore benefit less from the availability of off-street parking when compared with those on high incomes. The rising cost burden, especially on low incomes families, is a major problem and it doesn’t seem right to have regulations that increase the cost of goods and services such as everyday groceries, and also make those on low incomes subsidise the car use of those on high incomes.

If these are some of the problems caused by minimum parking regulations, surely the solution is to remove these superfluous regulations.Many developments would still provide off-street parking, but it would be provided on the basis of commercial considerations, and it is likely that considerably less would be provided than is currently the case. This would result in some spillover of cars parking on surrounding streets, putting pressure on the limited supply of on-street parking available in our cities.

The best way to manage this increased demand for on-street parking would be to charge a market price for on-street parking, a price which matches the demand for parking with the limited supply. There are number of ways such a new pricing system could be implemented, local governments could manage it themselves, or on-street parking could effectively be privatised with local government leasing on-street parking to private entrepreneurs who would then manage it.

Given that parking regulation is linked to so many of the policy challenges facing Australia, there is a strong argument to comprehensively reform parking policy. It is a national issue, requiring a national response ideally as part of a broader reform of urban policy in Australia.

Krystian Seibert is a Melbourne economist, his article ‘There’s no such thing as a free parking space’ is in Policy Magazine.