Parking Market Failures

By Eric Crampton 02/09/2013

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.