Intro. [Recording date: May 14, 2021.]
Russ Roberts: Today is May 14, 2021 and my guest is author and economist, Donald Shoup. He is Distinguished Research Professor in the Department of Urban Planning at UCLA [University of California, Los Angeles].
I want to thank Plantronics for providing today's guest with the Blackwire 5220 Headset.
Don, welcome to EconTalk.
Donald Shoup: Well, thanks for inviting me. I was afraid you'd never ask.
Russ Roberts: Well, the time has come.
Russ Roberts: Our topic for today is a crucial part of life and one that we're so used to we don't notice it after awhile, and how strangely we've organized it in many situations. I hope and think this conversation is going to be an eye opener. And, that topic is parking. You have written extensively on parking, including an 800 page book, The High Cost of Free Parking. I have, I confess, not read that book, but I've read a number of your essays which we will link to, as well as to the book if the reader wants to go deeper.
It's actually--I'm joking about it, but it's a profoundly important thing that we almost never think about, even as economists and in public policy. What's wrong with how we handle parking now in American cities and in a lot of cities around the world?
Donald Shoup: Well, everything. I think most of my recommendations are the opposite of what we are doing now. I think that, to summarize an 800 page book in three bullet points, I would say that the right things to do are first to charge the right price for on-street parking, for curb parking. And, by 'right price,' I mean the lowest price the city could charge and still have one or two open spaces on every block. So, the parking will be well used--most of it is occupied--but readily available because there will always be one or two spaces available when you arrive at your destination.
And then, to make that politically popular, I recommend spending all the curb parking revenue to pay for added public services on the metered streets--to pay for cleaning the sidewalks and repairing the sidewalks. In Los Angeles, about 40% of all the sidewalks of Los Angeles are broken; and in many other countries a problem.
That's the second point, is to spend the meter revenue in the metered area.
And then third, which is a big point, is to remove off-street parking requirements. Almost all American cities require a lot of off-treet parking for any new building. It's a requirement that you have to meet. If you wanted to build a restaurant, the typical requirement is 10 parking spaces for every 1000 square feet of the restaurant area, which means in effect that the parking lot is about eight times bigger than the restaurant itself.
So, I think those are the three basic points. Those are the reforms, and what we're doing now is just the opposite.
You said, 'What are we doing wrong?' Well, requiring ample off-street parking everywhere, which makes everything more expensive and increases the cost of housing, that has to come with, typically, two parking spaces for every dwelling. But, not just for housing, but for hundreds of other land uses. Planners have had to set parking requirements for pet stores and nail salons and funeral parlors. Every conceivable land use, 10,000 command motes[?] for off-street parking.
Russ Roberts: So, let's dig into that a little bit. I think most listeners, even some economists, might find those suggestions a little bit jarring. In particular, I mean, don't we want to require--if you're going to build, say, a new apartment building, shouldn't it have a parking garage? Shouldn't it be large enough, the parking area? Because otherwise, without that, all those new residents coming into the neighborhood are going to be in their cars and they're going to clog up the rest of the parking spaces and make it harder for other people. Isn't it appropriate that they have to supply the parking along with the building?
Donald Shoup: Well, I have two answers to that. First, the developers will provide parking. This is[?isn't?] they provide parking only because of parking requirements.
Russ Roberts: Sure.
Donald Shoup: They know that their future residents will want parking, and they'll just put in extra bathrooms or bedrooms. They know how much the parking spaces cost to build. An underground parking space could cost $40,000 or $50,000. At that price, maybe one parking space is enough for the dwelling unit if the parking isn't bundled in with the rent. If the parking is bundled in with the rent, it seems free; but of course it raises the rent.
So, I think the developers have every reason to provide parking for their customers, but they do not need planners to tell them how much they must provide.
Of course, there are many wonderful parts of the world where there are no off-street parking spaces. Would you like to live on the Île-de-France[?] or in Mayfair, or Belgravia? Many of the places that we like to go to, most of the houses don't have parking in the building. They may have parking available in a parking garage where you can pay to park your car. But, I think that every restaurant knows if their customers want parking, they'll have to provide it or validate it. But they don't need somebody who has no knowledge of how much the parking spaces cost to tell them how much they must have before they can open.
Russ Roberts: But, for those places that don't provide it--let's take a restaurant or an apartment building that decides not to provide it. One argument will be: Well, they don't provide it because they're going to free ride on the parking that other people have already done. They're going to just park on the street, and that street parking is then going to get harder to find because of these new developments. So, what's your answer to that? I know you have one, Don. Don't worry. It's a rhetorical question.
Donald Shoup: Yes. Well, thanks for asking it. I think that, if you say--well, let's get back to the parking requirements are there. They're there for a reason. I agree that if curb parking is free, then anybody could open a new restaurant without any parking and take advantage of that free on-street parking. But, if there isn't enough of it--if it's unpriced--it'll get crowded. What people want is more than there is at the curb. And then the new restaurant without parking will cause a problem. It will cut into the parking for other restaurants that were already relying on the free parking.
But if we get the price of curb parking right, you can't expect the, 'Oh well, they can park on the street for nothing.' They'll have to pay for parking. The customers will have to pay for parking on the street. Which works just fine in older cities, like San Francisco, or Boston, or parts of Washington, D.C., and Georgetown. There are a lot of buildings without any parking at all, and yet everybody loves to go to Georgetown and Washington.
I think that where people really want to go to is usually places that don't have a lot of big parking lots. The big parking lots enable us to park free, but they also create places that few people want to go.
Russ Roberts: So, let's walk through this alternative universe where we wouldn't have this mandated off-street parking.
So, you build a restaurant or you convert something that was in a different use for a restaurant. Now a larger number of people are going to come to this block. What I think you're suggesting is that, if that turns out to be the case and nothing else changes, there will be an increased demand--some people will, of course, choose to walk to the restaurant. Some will possibly take a bus or other form of public transportation and not need any parking at all. But those who do park, they're going to increase the demand for parking on that city street; and we're going to assume, probably correctly, that the number of spaces on the street at least in the short run is fixed. So, there's an excess demand for those spaces on the street that are, let's say, unpriced--literally: not just priced too low, but priced at zero. That means that other restaurateurs and other customers of other restaurants will have to look longer for parking. They're going to have to drive around the block more often.
But, your point is that's not the fault of any restaurant. That's the fault of the price of parking. It's set too low, and we can get rid of that excess demand by raising the price. And, if we had set it correctly before to have one or two empty spaces on the block on most evenings, when the new restaurant comes in, there'll be a higher price that would then leave one or two places open. So, the restaurant is implicitly going to--if that's the public policy response--the restaurant will have to take into account the higher price because it's part of what it's going to cost to come to the restaurant as a customer.
Then they'd have to choose, well maybe we should build some places of our own--a garage or an open space for cars to park so people can come to our restaurant. Or, they could just charge a higher price for the food than they otherwise would charge. But, they should: because this is one of the costs of opening a restaurant, is that there are going to be more demand for a scarce commodity.
Then your other point, as I understand it, is: Well at that higher price there's going to be more revenue for the city, so actually the neighborhood and the amenities around the restaurant are going to get better because of that revenue.
Have I summarized it accurately?
Donald Shoup: Yes, exactly. And it is working out in some cities. It isn't just a proposal. It's already happening and quite successful.
The best example is Old Pasadena--the original commercial area, Pasadena, California--which was just a premier shopping area in the United States back in the 1920s. A very ill-timed investment: In 1929, they widened Colorado Boulevard, which was the main street, by 14 feet on each side to build a trolley car down the middle of the road in 1929.
And so, the property owners had to either take off the first 14 feet of their building and put on a new facade, circa 1929, or, some of them actually moved the facade back 14 feet. They cut out the middle of the building and preserved the original facade.
So, it was a perfect example of upscale shopping in 1929. If you could imagine a better period, I don't know what it would be.
But, then the Depression came along, and World War II, and the area declined. And then everybody had cars and there were no parking spaces in Old Pasadena.
So, it declined for roughly 50 years. There were wonderful buildings in terrible condition. Oten, anything above the first story was empty. Even some of the ground floor was empty. And people thought it could never be revived. But, what they did was to begin charging for curb parking. They told the merchants or the property owners, 'We want to put in parking meters to solve your parking problem,' because they only had the curb parking. And, they decided to build three off-street parking structures--public parking structures--and to charge for curb parking.
But the merchants strongly opposed parking meters. They thought it would drive away the few customers they had.
The merchants and their employees all parked on the street and moved their cars every two hours, complained about the lack of parking for their customers. And, the city actually bought the parking meters and had to store them for a couple of years while they argued.
Finally, the city said, 'If we put in the parking meters, we'll spend all the revenue fixing your sidewalks, cleaning your alleys, planting street trees.' And the merchants said, 'That's different. Why didn't you tell us that? Let's run the meters until midnight. Let's run them on Sunday. Let's charge a high price.'
And the only thing that changed was the destination of the revenue. Instead of going into the city's general fund, it was sequestered to pay for public improvements; and that you could borrow against parking meter revenue. So, they borrowed--it was only five million dollars--they replaced all the sidewalks and cleaned all the alleys, and put the overhead wires underground.
And, immediately the sales tax revenue doubled within the next five years. So, that shows that it had to be--it's the best measure we have of commercial success of employment and things like that.
And that was one of the premier destinations in Southern California for visitors and for residents: 30,000 people on an average weekend wander around just looking at the beautiful--well, they're not looking at the beautiful sidewalks, the beautiful street trees. They're not looking down at their feet. They're looking around. And, the meter money--it's about one and a half million dollars a year for 15 blocks--pays for the debt service and all the investments. That's only about $400,000 a year. So they have a million a year to spend for--they clean the sidewalks every night. They steam clean them twice a month. They have, sometimes, police patrol on horseback on the weekends--just for decoration I think. They don't need them.
So, I think that--there are other examples of how this has worked, but I think Old Pasadena is the poster child.
Russ Roberts: But, that story--one has to be careful, I think. I don't think this is what you are saying, but you have to be careful you don't invoke the Yogi Berra line, 'It's so crowded no one goes there anymore.'
So, the argument, again, would be that the free curb parking was completely full when it was free, but it was full of, often, employees and owners. So, if you were a would-be customer who wanted to shop in that area, you'd go there on a day, maybe on a weekend, and you couldn't find any parking, so you'd circle the block a few times, and after a while you'd get frustrated. Maybe eventually you'd find a place.
But, the idea would be that, once you price it, people can make plans. Because they're aware--after experience, not through their knowledge of economics of course--but they're aware through their experience that, 'Oh yeah, when you show up there you can usually find a place.' That wasn't true before.
So, that's the argument: You pushed out people who were using the spaces and causing it to be basically full, and rationing spaces via time so the customers who came knew that it wasn't free. You just had to circle the block a couple of times, and that was not any fun. And that is what discouraged people from parking in the spaces before.
Now, the price discourages them--the money price--but at least you can pay it if you want to. And you know in advance that you will likely find a place, because in theory they've priced it so that there's always a few places available on any one block. That's the argument, right?
Donald Shoup: Well, that was my initial argument. That was my rationale for recommending the right prices. And they'd also built public parking garages that you had to pay to park in.
So, it was free to park on the street and you had to pay to park in the garages. And the garages were basically empty at the beginning, because: Why pay if you can get it for free?
So--but, I think that the biggest benefit of the Pasadena example is not opening up the curb spaces, although that's important. I think it meant that people had the incentive to park in the garages if the first 90 minutes is free and then you paid two dollars an hour after that.
But, it wasn't really the open spaces on the street that made the big difference. It was the money that made the difference. It was the spending that made the difference: the fixing the sidewalks, planting beautiful street trees with cast iron grates on the sidewalk, cleaning up the alleys and getting rid of all the dead animals and the mattresses and planting trees in them. And so, now the alleys are good for outdoor restaurants. And people come and love to walk around in the alleys of Pasadena. What city do you know of where people like to walk around the alleys?
So, I think, in practice--in this particular case, and maybe in many others it will be the same--that it was the money that made the difference. That it was a new source of revenue. It was a very valuable land that was being given away for free. It was a grave misallocation of land.
And, it has happened in other cities up the coast a bit. In Ventura, it had a nice 19th century-century main street with free parking, which was always full. So, the city had built two parking structures a block away, which were usually empty, while people hunted for the curb spaces right in front of the restaurant they wanted to go to.
So, I have a second life going around and spreading this word about how to manage parking. And, I gave my talk in Ventura and it went very well. And I usually make a vacation. We stayed for three or four days after that, went to a number of restaurants, and almost every restaurant I went into, the head waiter or the owner would come over and say, 'Oh, I really liked what you said, Professor Shoup. I think this is a good idea.' And I said, 'Well, what did you like about it? Did you like that it will reduce air pollution, or cruising for parking, or carbon emissions?'
And they looked at me as though I was the dumbest person on earth, and they said, 'No, we want the money. We want all the amenities you're talking about.'
And so, what they did is they did put in the parking meters. And, one of the surprising benefits was that they had to hire people to manage them, the parking meters. 'Ambassadors,' they're usually called. But, they hired them as police cadets. A lot of people would like to get into the Police Department, but it's hard to get in without--with only a background as a real estate dealer, for example. So, this was in the recession.
So, what they did was they hired police cadets--who were uniformed, costumed, as police officers; and they would show people how to pay at the parking meter and explain things to them, and even pay for the first time if they were out of town. They would show how to do it by putting money in the meter or with a credit card. I
And, it turned out that they hired nine of them, and it turned out that the presence of the uniformed officers on the street cut the crime level by half. It wasn't much to begin with, but it greatly reduced the willingness of anybody to try to do something illegal.
So, I think what surprised me and other people was this reduction in violations. And they also made the unusual choice of having their parking meters communicate through wifi rather than a cellphone connection because it was cheaper. You don't have to pay a cellphone charge for every transaction. And they opened up the wifi for everybody. So, at a coffee shop, they previously had to pay for wifi for its customers. It could skip that and, when you opened your laptop, it said 'Wifi courtesy of the parking service.'
So, I think that, again, I think the money was a very important outcome. And, of course, in Ventura it did shift many people from the paid parking on the street to the free parking in the nearby garage.
I think we have so much excess parking, now. There's a lot of opportunity to shift cars from overcrowded curb parking into underused off-street parking.
Russ Roberts: Or public transportation if it's available, of course. Or people walking longer distances, either not taking their car at all.
I like your point--in one of your essays you point out that people like free curb parking because "garage parking is so expensive." Well, it's actually the opposite. It's: Curb parking is so cheap, and it's artificially cheap. And it should actually be more competitive through that higher price, that the revenue as you point out is then going to be available.
Russ Roberts: When you propose things like this, inevitability when you argue for prices being used, as I have done through much of my career in different settings--not so much for parking, but I will now be, I think, an evangelical supporter of your work because I find it persuasive. But, when I talk about things like this--we're in the middle of a number of shortages in America due to COVID or public policy, and shortages of course always can be seen as an example of not letting prices clear the market. So, there's people lining up for gasoline because of a pipeline problem we're having right now in 2021.
And the public officials often will talk about how they're not going to allow price gouging--meaning they're not going to let markets clear. They're not going to let prices rise to cause the shortage to disappear. They're not going to allow the prices to create an incentive for more provision. And I would just add--we haven't talked about that, but of course one of the advantages of the city benefiting from more revenue is that they might have an incentive to provide certain types of parking because it would carry its--at least in theory it could carry its weight. You know, we treat it as if it were fixed: but, as you say, you can create a garage if it's financially or socially valuable.
But, when you propose things like this, people say: 'Well that's all well and good, but what about poor people? Right now they get free parking and that's appropriate because it's hard for them to afford stuff. You're pushing them into these, now, pay spaces on the curb or more expensive garages. Some of them are going to be poor workers. You shouldn't--that's a terrible policy.' I assume you've heard that argument before. What do you say to it?
Donald Shoup: Well, I'll back up a little bit to explain why I think curb parking is different from most other situations where you're trying to recommend market-clearing prices, say for gasoline--is that: curb parking payments are land rent. It's a transfer payment.
Russ Roberts: Right.
Donald Shoup: Whatever the driver pays, comes right out the other side of the meter and fixes the sidewalks or plants street trees or provides free wifi, or something like that. So, it has the unusual advantage--is that all the money is rent that can be spent on other uses.
Russ Roberts: You say that because the parking space is just sitting there. You don't have to produce it. You don't have to craft it. It just--
Donald Shoup: That's right. It's pure land. It's Henry George's recommendation that you should tax land. Well, this is not a tax. This is a user charge. So, I think that you can use the use of the revenue as an explanation of why you should charge for parking. Well, you can't use that for gasoline in a gasoline shortage. Although, you could use it--a gasoline tax would be like a transfer payment.
But, anyway, I think since it is a transfer payment, there is more opportunity to explain to people why they will benefit from market-priced curb parking; and all the land owners and the merchants will see that they will benefit from the market-priced curb parking, and they won't pay anything themselves. It's not a tax.
But, that makes it also easier to explain the issue of how this will affect poor people, because I think many people who initially would say, 'You can't charge for parking: it will hurt poor people,' they're just pushing poor people out in front of them like human shields, saying, 'Don't charge for parking because it will hurt poor people,' when really what they mean is that, 'Don't charge for curb parking because I'll have to pay for it.'
Donald Shoup: And, I think that really poor people, of course, do not own cars. They cannot afford cars. And, they can benefit from the public services. If they walked, if they biked, if they took transit, they will get the benefits of all the spending without paying anything.
And then if the concern is really for low-income drivers, it's easy enough to have lifeline payments. We have lifeline discounts for electricity, and water, and natural gas. If you want to do it, you could do this for low-income people, as well, for parking.
I'm sure there would be a transaction cost that would be pretty hefty. But, I think that when you think of poor people as a class, the poorest--well, what about the homeless? The poorest people do not own a car. So, if you really are worried about the poorest people, this is not going to affect them. But, the public services will benefit them.
I think that it's also a small amount. It's only a dollar or two that--it's not a big part of your budget. And, it's for a short time. Curb parking is usually for a short time.
And then I guess, to get further into the weeds, I would say, 'Well let's look what happened when San Francisco began doing this--charging market prices for curb parking. They started in 2011 and--adjusting prices. It isn't all of the sudden that you start out with the prices you have. And almost all the prices were either $2 or $3 per hour, all day long.
And then they began nudging prices up or down depending on whether there was under-occupancy or over-occupancy. But, by 25 cents an hour, every three months they would change the prices. If they had over-occupied blocks, they would raise it by 25 cents. The under-occupied blocks, they would reduce by 25 cents an hour. But, if it was at the right occupancy, they just left the price as it was.
And, it took about three years for the prices to settle down. And, after that, the average price declined by four percent--which means it stayed about the same.
And what happened was: If you have the same price all day long, it's too high at some hours and too low in other hours. Especially in the morning: 17% of all the meters went down to 50 cents an hour in the morning. The spaces began to fill up, which means that there were more customers for shops that opened early in the morning, like coffee shops or small grocery stores, and things like that. So, that increased sales, and sales taxes, and of course you can employ more people that way.
In the afternoon, the prices did go up, but only I think six blocks reached maximum of $6 an hour. So, now--and the prices varied very much, surprisingly to me, by location. One block, the price could be $3 an hour, and two blocks away it would be 50 cents an hour.
So, in previous days, when the meter prices were two dollars everywhere, low income people could not pay less by walking farther. Now you have the choice. If you're willing to walk two or three blocks, you can pay 50 cents an hour rather than $3 an hour right in front of where you're going. People who are indifferent to prices, they will pay $3 an hour. People who are short of money and are willing to spend some time walking, they could pay 50 cents an hour.
So, I think that's much better for poorer people--poorer drivers. They have an option of spending time to save money.
Russ Roberts: How did users know what prices were at any particular point in time and make those decisions?
Donald Shoup: Well, I think many people must not have known what the prices were, or more people would spend time walking. On the web, if you were savvy, you could look on the web and it showed you the price and every space on every block, and every time.
I think what they haven't done, but what I would recommend at the restaurants and the stores, could just post a map on their front window saying here is the parking prices in this neighborhood. So that, if you are price-sensitive, which low income people are, you would probably pay attention to this. The regulars would know, 'Well gee, there's no point paying $3 an hour if I could park two blocks away and walk.'
But, in San Francisco, so many of the drivers were tourists. And, they were just happy to get an open space where they wanted to be. And they don't have any real incentive to try to check on the web where they should pay for parking.
Russ Roberts: But, of course, that reduces the ability of the congestion price in any setting to have its impact: because, if you don't know what the price is, you're not going to be discouraged until you've done it a few times. And then you leave town, your trip is over.
But presumably there were enough people who came to know what the prices were in various places and at various times so that it worked fairly well.
Russ Roberts: But, you argue that Los Angeles and San Francisco have very different downtown areas and charm because of their different parking policies.
I think--you know, Los Angeles is a sprawling, decentralized, and somewhat charmless city in my view. It depends on what you think of as charm, I suppose. But, I lived there. I taught at UCLA [University of California, Los Angeles] for two years back in the 1980s. San Francisco is incredibly charming.
But, are you going to suggest that the parking differences there are important, the parking policy differences, in helping create why LA [Lose Angeles] and San Francisco are so different? You seem to suggest that in one of your pieces.
Donald Shoup: Well, yes, but it's not because of the curb-parking policies. I think it's because of the off-street parking requirements.
Russ Roberts: Yeah, talk about that.
Donald Shoup: Yes. Los Angeles has off-street parking requirements, even in downtown. I think 20 years ago, San Francisco eliminated off-street parking requirements downtown and put in maximum parking limits. For most uses, the maximum is that no more than 7% of the building can be for off-street parking.
In Los Angeles, every building has to have off-street parking all onsite--in the building or on a surface lot adjacent to the building.
So, these are diametrically opposed policies. One city requires parking and the other city restricts it.
Say, for a concert hall downtown, like our famous Disney Hall which has a six-level underground parking garage with a cascade of elevators that take you straight from the garage into the lobby of the building--you never set foot on a sidewalk.
San Francisco has a different policy. They limit off-street parking and their concert hall, Louise Davies Hall, there's no off-street parking.
LA requires, as a minimum, 50 times more off-street parking than San Francisco allows as the maximum.
Now somebody's got to be wrong. Maybe both of them are wrong--
Russ Roberts: He-he-he-he--
Donald Shoup: But, if you look at the outcome, they're just totally different. LA has a number of iconic buildings, but they all have a parking garage under them, or beside them.
Say, one time, we went to a concert. It must have been in the summer because it was light late in the evening. We ate dinner at the Central Library and walked up to the Disney Hall. And, after the concert, the sun had set, and so we had to walk back to the Central Library where we had parked our car, and we were the only two people on the sidewalk.
And, in a dark sidewalk in downtown Los Angeles, two old people don't feel very safe.
But, when you come out of Louise Davies Hall in San Francisco, the sidewalk is just thronged with people. All the bars and flower shops and bookstores are open. It's a long walk to your car if you even drove.
So, I, and most people, would say that downtown San Francisco is more exciting than downtown Los Angeles.
Russ Roberts: And, they'd be correct. And the question, I guess, is how much that's due to the parking.
Russ Roberts: But, your point is, whatever it's due to, the parking--there's sort of two--pardon the phrase--levels here. For the parking garage requirement or solution to the LA-mandated requirement, that just makes the building more expensive. Right? That means that there's going to be fewer interesting buildings built, because every one that is built has to have this massive onsite parking, either below ground or next door.
If it's next door, they have to buy more land.
But, the use of the land for parking on the surface of the city means that asphalt and parked cars are the amenity that your eye enjoys rather than something more interesting and varied, and fun to explore--a bar, restaurant, a store, or whatever.
And I think that difference is quite important.
I assume your opponents would argue, 'Well, that's all well and good to say that you shouldn't require off-street parking. But, how are people going to get there?'
And so, your answer I suppose is--go ahead.
Donald Shoup: Well, you could be there. The best way to travel is to be where you're going.
I think Los Angeles has a lot of surface parking lots downtown. Small: they demolished old buildings to have a small parking lot. It's very hard to build on them to get a building and the required parking on a small site. So, they remain parking lots.
But, what would happen if you didn't have parking requirements? You know, it's hard to know what doesn't happen because of a policy, but we have the best proof you could ever get in Los Angeles. We had a different urban renewal program in LA compared to other cities. We had a thriving downtown in the 1920s. Downtown LA, on Spring Street and Broadway, are said to have the biggest collection of intact office buildings from the early 20th century of any city in the country, or maybe the world.
But, they didn't have much parking. And they were aging.
So, in the 1950s, LA demolished everything in a different part of Downtown, on Bunker Hill, and just moved the central Downtown a mile away. They built a new building, very slow to take off. Still there are empty parking lots on it. But, it emptied out the Old Downtown.
And, for a while, the buildings became sweatshops. But even that wasn't profitable, so eventually they were busy on the ground floor, but empty above ground.
And they could not be converted into housing. This is where the housing beganto be expensive, in the 1990s. But they couldn't convert these older buildings--beautiful buildings, again, in terrible condition--into housing because they did not have the required parking. They were built in 1920, they didn't have a lot of underground parking. Many of them had some parking, but not much. But, they couldn't be converted into another use.
And, it was a very smart urban planner who dreamt up the idea of the adaptive reuse ordinance: You could convert any older office building into housing without any new parking.
And, the critics said, 'Oh, this will be a disaster. Nobody will lend for a conversion to apartments without parking,' and, 'No bank will lend for a condominium without parking,' and, 'Nobody will want to live in it.'
But, the only thing disastrous is that nothing would happen: that it would just continue as it was.
But, the law was passed and, in the next eight years, 57 historic buildings were converted into apartments--and with beautiful restorations. Employing lot of people--architects and plumbers, and electricians, and drywallers, and roofers, and tilers, and everything else led to something like 8,000 apartments.
And they all occurred simply because the city stopped requiring off-street parking.
So, it showed what had been being prevented--what must have been preventing all these conversion to apartments--was the required parking.
As soon as you got rid of the parking requirement, then developers saw, well, this is a terrific opportunity to convert empty office buildings, which had beautiful interiors and grand lobbies, and fantastic exteriors, into apartments.
To get back into your earliest comment, they didn't come without parking. The developers often made deals for offsite parking. They could rent--say, you're able to rent a parking space in a garage on the same block.
And so, I think that often it's the planners getting out of the way that can lead to great opportunities.
In your session with Alain Bertaud, he was the one--I don't remember whether or not he talked about parking, but he makes the same case: that I was at a conference with him once. It was in Beijing. That's right. I preached what I'm preaching to you. And, at the end of the session, of the three day conference, our Chinese hosts and the foreign visitors were assembled and they asked, 'Well, what city on earth has the best parking policies?' Alain said he thought Tokyo has the best parking policies, and I agreed with him.
What's different about Tokyo? They prohibit on street parking. It's not totally enforced during the day time, always, but it is ruthlessly enforced at night. So, you cannot own a car without having off-street parking. And, they have very low off-street parking requirements. So they have a number of small parking lots--they call them coin parking lots--that you don't need any permission to open one, but it's a small piece of land that you can park in. They have very clever automatic machines that, if you go in, your car is immobilized in the space until you pay to remove it. So, there is--and it's market priced of course. So, Tokyo streets are, in many cases, almost entirely pedestrian. And they're not wide.
So, I think--we have not only minimum parking [?], but we had minimum street widths in the United States. In California, every street has to be at least 40 feet wide and that means parking on both sides of the street. So we are dedicating land to cars, either off-street or on-street.
Then I think, getting back to what you said earlier, we're all s used to cars, most of us are appalled at the idea of any reform of taking away a subsidy for cars.
Russ Roberts: It'd be weird.
Donald Shoup: We have become the people who are demanding the subsidies for cars.
Russ Roberts: Yeah.
Donald Shoup: So, it has worked out perfectly for the car manufacturers. I think, added up all the subsides for cars in the United States, through the tax code for oil depletion allowances and the various ways that--the minimum street widths, the minimum off-street parking requirements, there are enormous subsidies for cars that are largely hidden.
I guess one of the other things that I'd like to say is that the parking requirements hide the cost of parking. It seems to have no cost to anybody. Nobody realizes that they're paying anything.
Just because the driver doesn't pay for it doesn't mean the cost goes away. The cost is still there and it's bundled into the prices for everything we buy. Getting back to the issue of poor people: Even people who are too poor to own a car have to pay higher prices for their groceries so that richer drivers could park free when they go to the grocery store.
And they don't know it. The rich drivers don't know that they are driving up grocery prices, and the low income people who walk to the grocery store don't know it. It's embedded in our economy.
Russ Roberts: I want to go back to the Alain Bertaud point--which, first of all I want to say, when a guest brings up a previous guest it always warms my heart. So, I appreciate that. I'm glad you heard it. One of my favorite episodes actually. I learned a lot from that episode and I encourage listeners to go back to it.
But, there's a different point that he made that I think ties in really beautifully to your point, which is that he was--I don't think we did talk about parking. We may have. But the main point, one of the things I loved that he talked about, was the requirement of minimum square footage for an apartment in most American cities--many cities around the world--arguing, of course, that: 'This is for the good of the renter. It's not good for a renter to have too small a space. A human being should have a minimum amount.' And as a result, that means that apartments in New York City are going to be very expensive. So, rather than having the choice to live in a small apartment close to an area you might want to be living in, it's priced you can't afford it.
And, that is an example of how a central planning dictate or mandate has these consequences by removing the choices that people would otherwise make, makes them actually worse off, not better off.
Your example, I think, is a very appropriate one that's similar when you're talking about the rehab of those Los Angeles apartments. They wanted parking for their--the people who built those buildings, they wanted parking for their customers. They knew their customers, their renters would want those spaces, or their condo owners, so they provided it in a different way. They chose the best way to provide it they thought would be good for themselves. To do that, they wanted to take into account what their renters and people who lived there wanted, their owners of the places.
So, they--some people probably provided--they built a garage. Other people gave them credit at a nearby parking lot and gave them free parking there. But they didn't require two places necessarily for every unit, which meant, therefore, that the unit itself was cheaper. That the poor people wouldn't necessarIly be priced out having to pay for a parking spot implicitly embedded in that requirement.
And, I think that the inability to allow entrepreneurs, owners of property, and the users of that property through the marketplace to find out what's best for them is one of the biggest problems with what you're talking about.
I think this is a fantastic application of economics. I want to talk a little--
Russ Roberts: Yeah.
Donald Shoup: Can I respond to that?
Russ Roberts: Sure, absolutely.
Donald Shoup: Going further into what you were saying, often parking requirements are two parking spaces per unit. Well, with the [?oldest?] study that I could remember on what happened, I think it was Oakland imposed its first parking requirements, it's only one parking space per unit. But that means if you have more units, you have to have more parking spaces. If you have bigger units, you don't have to add parking--
Russ Roberts: Great. Fantastic--
Donald Shoup: So, the way the developers responded was to build fewer, but bigger and more expensive units.
Russ Roberts: Yeah.
Donald Shoup: And the same is true, I think, always. If you have a small apartment but the parking requirement is based on the unit--not the size or the number of bedrooms--the natural reaction is to have bigger and more expensive apartments. Not intended.
Russ Roberts: No, it's the way it's--
Donald Shoup: It's unnoticed.
Russ Roberts: It's a way to avoid the implicit tax on number of units. It means you're going to get fewer units. It's horrible. You're going to get fewer but larger units, and more expensive units.
Russ Roberts: There's one other example that you write about that I wanted to get to about affordability, which relates to what we've been talking about, which is that a lot of people have a garage, either attached to their house or next to their house. In my case it's just a storage area. I've never driven my car into my garage. It's just auxiliary space.
But, other people convert them into rooms. They do the same thing: They want more square footage, more room to live. And, in theory, as you point out, they could convert those spaces into apartments. They wouldn't be very large. They'd be relatively inexpensive, presumably, in the marketplace, but there's a regulation that makes that hard to do. What is it?
Donald Shoup: Well, a bit of a parking requirement. In most California cities, you have to have for single-family housing, you have to have two and up to four off-street parking spaces. And, it has to be covered. That sounds sensible: It has to be covered. This was introduced in LA's [Los Angeles's] first parking requirement in 1936.
The question was, in my mind, 'Why does it have to be covered?' When I dug into the history of it, it turned out that they say it had to be covered because they thought, if it was not covered, it could be converted to some other use, like a garden or a play area.
So, if it were a garage, it would be dedicated to cars. So now, almost all single-family houses have a covered garage for two cars, and many of them have been illegally converted into apartments because--especially if it's a multi-generational family, typical granny flat, but it could be for children or even for rental. It was permitted. There are a lot of things that are forbidden, but it happens.
Russ Roberts: Yeah.
Donald Shoup: The city can't crack down and say, 'Everybody get out of these garage apartments,' because we'd have more homeless people.
So, the solution in California was at the State level, so that there aren't any NIMBYs [Not In My Back Yarders] really in the neighborhoods saying you can't allow this. The state prohibited cities from prohibiting garage apartments. Now every homeowner is allowed, by right, to convert a garage into an apartment with no parking spaces required. The driveway is enough for the off-street parking.
And, this has led to an explosion of garage apartments in Los Angeles. I think, from the year before the state legislation--I think it was 1916 to last year--the number of permits per year has increased by 17 times.
Of course, LA is now bragging about the fact 'This wonderful policy we have,' but they only have the policy only because it was forced on them by the state.
So, I think that we have a lot of opportunities: we have a lot of potential for small, relatively inexpensive housing. It's inexpensive because it's so small. A two car garage is--like you're talking about, these units previously were prohibited even in an apartment building because they're too small. Well, they're not too small, because we know that there are a lot of people living in them.
And, it used to be the main evidence you have--so, everywhere, was that there would be an occasional fire. Five people would die in a garage apartment fire because they were illegal. The electricity was run by an extension cord from the main house. Nothing was up to code, because you couldn't get an up-to-code apartment building--I mean, garage apartment--because you can't get a permit for one.
Now, I think there a lot of up-to-code apartments, and they're just right for one person. I think that, if it spreads throughout the United States--a state-level requirement that cities allow garage apartments--you will get, I think, a lot of small, affordable apartments.
And Portland--I think it was Portland--had a very good idea: that they paid for the conversion of a--well, not for a conversion of a garage, but a totally new granny flat in the backyard--they would pay the owner's cost of building it in exchange for if the owner allowed the city to house a formerly homeless person in it for five years.
Russ Roberts: Whoa. Wow.
Donald Shoup: This person, they would give them full social services and they would try to help them and deal with any of the other problems that they have--maybe drug use or illness or something like that.
But, I think, if you have an organization like the Veterans Administration that really wants to house homeless veterans and has the budget for it, if they offered to pay for granny flats, garage conversions, I think it would be very hard for people to say, 'No, we do not want any otherwise homeless veterans living in a garage in our neighborhood.' People would be less willing to get up at a public meeting and say, 'I'm against having a VA [Veterans' Administration] garage apartment on my block.'
Russ Roberts: So, I think this conversation is a lovely example of one of the great lessons of economics, which is that nothing is free, and how appealing the word 'free' is to us and how seductive it is.
Now, often things like mandating free parking--say, on the street or a decision by the city to offer free parking--sometimes there are some special interests involved. They may be mistaken about what's in their interest, but sometimes there is something more public-choice oriented.
But, a lot of what we're talking about I think is simply an inability, as you suggested earlier, to imagine what's being hidden by a policy that has persisted and people have become accustomed to.
So, just to summarize--to just take one piece of our conversation--once you start metering spots in the city you get less driving around as people search for the rare spot. You get less pollution. You get less asphalt from the requirement that, if we got rid of this requirement of minimum off-street parking. We get more affordability of housing. We get lovelier areas of sidewalk, alley, and wifi, and other opportunities. So, it seems like an extraordinarily better thing than a lot of what we have now.
So, to close, I'd like--so, I'm on your side. Just hadn't thought about it much before. And this extra bonus of the way that those parking requirements push us towards larger apartments is just another example of the hidden effects of policies that I think people often blame on market forces. 'Well, landlords don't care about poor people. They don't provide any cheap, inexpensive housing like they used to.' Well, they're incentivized not to. That's the tragedy here.
So, I think you described yourself earlier as a crusader. How's that crusade going?
You wrote a very large book about it. You've continued to write essays about it. You've got some converts in certain cities who have tried your ideas and have been happy with the outcomes. There may have been other factors involved about, say, reducing crime or increasing sales tax revenue. But a lot of people have found good outcomes from these policies. So my question is: Do you think we're winning this? Are we making some progress? Are you optimistic? Talk about what you think the future might hold for parking policy.
Donald Shoup: Well, when I published The High Cost of Free Parking, I think half of the planning profession thought I was crazy and the other half thought I was daydreaming: that these are good ideas, but they wouldn't work.
But, they have been working. Cities are removing off-street parking requirements. San Francisco, Berkeley, Buffalo, Hartford, Connecticut, maybe this whole State of California if current parking legislation passes. Even Edmonton in Canada; Houston has removed all street parking requirements. Mexico City, Rio de Janeiro. Yes, I think a number of cities have begun to follow this policy.
And you talked about a lot of the upsides of these policies that I'm recommending.
Well, what's the downside? Well, the downside is that drivers will have to pay for parking. And, everybody wants free parking--including you and me.
So, I think you have to show the benefits to the stakeholders of charging for parking. And that's why I think parking benefits--which haven't moved as fast as I thought they would, but they are--you have to show people the money. You have to show people they have a personal incentive to change the rules.
If you show people to Pasadena around, people come--planners come--from other cities on bus tours to visit a former Skid Row. Old Pasadena was a Skid Row and now it is one of the most popular destinations in Southern California.
Russ Roberts: Well, the only point I would add to that is that--actually I don't like free parking, because there's no such thing. What you're advocating, of course, is rationing via money rather than time, at least on the curbside issue. And when I have to go someplace and I have to worry about whether I'm going to find a parking place or how far I'm going to have to walk from a different option as a result, that creates anxiety for me. I love the privilege and thrill that I have of paying a couple dollars for a parking place and knowing I don't have to circle the block 12 times and worry whether I'm going to squeeze into the one spot that's left that's barely big enough for my car. I'm not a good parker. I'm not good in reverse.
So, I think it's a combination. I think your point, obviously, is right about the benefits to many from the revenue use. But, I do think that rationing with time rather than money, and again even poor people, even though they have a lot of time, they can't find a place--not so helpful to them for getting to work on time and everything else that we need to do. So, I do think most of it is up-side; and, as I said, I'm happy to join the crusade.
Donald Shoup: I've been lucky, from journalists who've taken interest in this, and podcasts like yours. I'm happy to get the word out. Because, I think, for a long time, most people thought parking was boring and unimportant, and a crazy thing for an academic to spend a lot of time on. And academics, I think--universities spend a lot of time saying how equal they are and how equity is so important. But, in practice, they're very hierarchical. They have presidents and chancellors, and deans, and provosts, and distinguished professors, and full professors, associate professors, assistant professors, and lecturers, and even seniors, juniors, and sophomores, and freshmen. It's all very much graded.
And UCLA [University of California, Los Angeles] and I bet other places, all their parking privileges are rated that way. We have 187 different kinds of parking privilege at UC [University of California] based on who you are and how high up you are.
So, I think that it was a very low class thing to study. It isn't just the titles we have, but it's the things we study. National and international affairs are really important. State legislation or state planning is a step lower, and local government is really the bottom. What is the lowest-status thing in local government? Well, that would be parking.
So, I've been a bottom feeder for about 50 years. But there was a lot of food down there, and I think a lot of academics are now realizing that; and it's becoming a feeding frenzy. So many academics are doing such great work--much more sophisticated than my early attempts. Academic work is cumulative--that you build on what other people have said before. And, none of these ideas, I suspect, of mine were by invention. The ideas are out there. A number of people have been thinking about it. But I think that maybe we have reached a critical mass. We even get on Russ Roberts. That shows that we have arrived. So, thank you very much for inviting me.
Russ Roberts: My guest today has been Don Shoup. Don, thanks for being part of EconTalk. You've definitely arrived, and I wish you well.