Parking regulations and subsidies have a big influence on our transportation system — a bigger influence than is commonly appreciated.

Private interests subsidize the cost of motorists through the practice of free or underpriced parking. This is particularly true in suburban and rural areas, but not exclusive to it. For instance, Tower City Center, one of the most transit-oriented retail centers in Greater Cleveland, validates parking vouchers for shoppers, but it does not provide a similar discount to customers who arrive by transit.

The same is true for employers. Free or underpriced parking subsidizes a large share of an employee’s cost for driving to work. The effect of this subsidy is to increase solo driving. While those who drive alone receive that subsidy of a free parking space, those who rideshare, use transit, bike, or walk often receive nothing.

Unpriced parking is not really free, however, as consumers ultimately bear parking costs through higher taxes and retail prices, as well as reduced wages and benefits. The choice is actually between paying for parking directly or indirectly.

Private subsidy, public price tag

The subsidy for parking is significant. Several years ago, urban researcher Todd Litman found that there are an estimated three to four parking spaces per vehicle in the U.S., with total annualized value of $1,500 or greater per vehicle. This averages 12 cents or more per vehicle-mile, or slightly less than the average vehicle operating costs (not including fixed costs of insurance, leases/interest or depreciation). In other words, charging motorists directly for all parking would approximately double the perceived cost of driving.

Nationwide, in 2002, the total subsidy for off-street parking was somewhere between $127 billion and $374 billion a year, according to the April/May 2005 issue of New Urban News. If the subsidy for free and underpriced curb parking was counted, the total subsidy for parking would be far higher, the article noted.

Self-defeating parking requirements

Unfortunately, local governments and lending institutions are complicit in this subsidy, even as they and local taxpayers end up paying for it. Zoning and building code requirements for providing an oversupply of parking lots often are not based on supply/demand or land use or transportation policy goals. Rather they are based on custom. The result is that up to a third of all land in suburban areas, and even in some urban ones, is devoted to parking. The oversupply of parking is an opportunity cost to cities and schools, since parking lots have a lower taxable property value than buildings and often produce little or no income tax.

Such large expanses of parking lots also create impervious surfaces, which imposes costs on taxpayers and all sewer system users. Those costs result from building storm sewers, retention basins and flood-control projects to handle the unnecessarily large flow of water run-off from rain and snow melt, as well as infiltration into sanitary sewers. The cost of additional sewer projects in the Cleveland-Akron area, according to the Northeast Ohio Regional Sewer District, exceeds $1 billion over the next 10-15 years. In Akron alone, the price tag approaches $250 million, which the city cannot afford.

An elastic demand/supply equation

Although businesses may fear that paid parking will scare off employees, research by Donald Shoup and R.W. Willson of the Congress for New Urbanism shows that is not the case. Many employees do not value their parking spaces at the same rate it that costs employers to provide them. When employees have to pay market rates for parking, many of them shift to other modes. Shoup and Willson cite a case where an employer stopped paying for parking for solo drivers and 98 percent of them shifted to other modes, suggesting “the potential for a considerable amount of waste involved in offering parking subsidies that are worth less to employees than they cost the employer.”

There is also a fear among retailers and other businesses that, if they do not provide free parking, it will place them at a competitive disadvantage. Again, this need not be the case, if systematic solutions are implemented and if something of value was provided by the municipality in exchange to the affected businesses, such as streetscape improvements and increased police patrols.

"Free gasoline for employees who drive to work would seem like a reckless offer, yet employer-paid parking is a much stronger incentive to drive to work alone," say Shoup and Willson.