Parking Industry

Why Parking Minimums Impose a High Cost3 min read

Jul 1, 2019 3 min

Why Parking Minimums Impose a High Cost3 min read

Reading Time: 3 minutes

Our cities are livable only if they can be traveled around with ease. This needs a solid network of public and private transport. Also central to urban mobility is the smooth management of parking spaces. To solve the problem of inadequate parking, cities are now resorting to imposing minimum parking requirements in residential areas, shopping complexes, commercial areas, et al. But is this the way to go for solving parking woes?

Minimum Parking

The problem with minimum parking requirements

The problem with parking minimum requirements is simple – they increase parking supply and reduce the price, but without affecting the cost of parking. By bundling the cost of parking spaces with the cost of development, they essentially increase the prices of goods and services sold at sites that offer free parking.

While cars come with many external costs, the external cost of parking is thought to be greater than all the other costs combined. When city planners are asked to set the parking minimums requirements, they’re put in a difficult position because they have to largely rely on guesswork. Because planners aren’t aware of parking demand or cost at every site, their initiatives end up subsidizing cars, increasing traffic congestion, polluting the air and water, rising housing costs, and ultimately hurting livability in cities.

Many cities require parking in proportion to the size of a building. Because of the high cost of structured parking, developers have a strong incentive to build in areas that allow for surface parking with cheaper land, thus encouraging sprawl. Land used in surface lots may cost developer less money but could have been used by the city for more profitable uses.

Apart from the average cost of building parking space, there is the marginal cost to be considered, which can be far higher because of breakpoints in the cost. For instance, a dramatic breakpoint happens when the second level of underground parking is constructed because it needs several spaces on the first level to be removed so a ramp to the lower level can be constructed. In this case, the marginal cost of the first parking space on the second level is higher than the average cost of all lots on the first level. Because of this high marginal cost of excavating a second parking level, developers are severely limited in what they can build on a site.

Harmful effects of parking minimums

More parking for cars equals less housing for people. By increasing the cost of development, minimum requirements reduce the supply and increase the price of real estate. They reduce the supply of apartments and increase the price of housing. Moreover, parking requirements reduce the number of sites developed. If required parking spaces increase the cost of constructing a building by more than the increase in its market value, they reduce the residual value of the land. This is a problem because the residual land value for redevelopment must be greater than the value of the existing building. So, if parking minimums requirements reduce the residual land value, they make redevelopment unlikely.

Wrapping it up

When city planners don’t know the costs of constructing parking space, they can’t take this figure into account when estimating the need for parking spaces at new buildings. Instead, they use the occupancy of parking spaces at existing buildings to determine this, not taking cost into account. Because drivers park free at existing buildings, parking requirements so calculated will reflect the demand for free parking. It is clear that minimum parking requirements limit urban development, forcing developers to offer more parking than necessary and ultimately promoting an unsustainable city.

City planners must consider minimal, not minimum, parking requirements i.e. an adequate number, after taking all costs into account. If such a calculation isn’t possible for every building in every location, each driver can pay for their own parking.