“Parking shortages” threaten to derail Richmond’s BRT, but in the current paradigm, there will never be enough parking. Aaron Williams has many thoughts on the matter.

Photo by: World Bank Photo Collection

Economics is the study of scarcity

In Richmond, a failed understanding of the scarcity of parking has the potential to derail the GRTC Pulse while sending $24.9 million back to the federal government and undermining the progress of RVA. There are several ways to deal with the presence of scarcity in our lives.

In normal markets, like beer or food, prices are the mechanism that match finite supply with consumers. As prices go up, quantity demanded decreases and quantity supplied increases. As prices go down, quantity demanded increases and quantity supplied decreases. Basically, if an individual is buying goods, they’ll buy more when prices are lower. If an individual is selling goods, they’ll sell more when prices are higher. Prices pull these competing forces into equilibrium where supply equals demand. This model isn’t perfect because of time inconsistencies and differences in information, but it’s pretty dang close for most products.

Why parking is different

This model fits parking, but it requires one more level of sophistication. There are two types of costs: fixed costs and marginal costs. Fixed costs are how much an individual pays regardless of how many goods he or she consumes. Marginal costs are how much an individual pays for each additional good he or she consumes.

On-street parking is financed entirely through fixed costs in the form of taxes. The out-of-pocket marginal cost is nothing more than an occasional parking ticket or a woefully underpriced, optional parking pass1. So an individual who stores a car on Floyd Avenue year-round is paying the same amount for parking as the woman in the nursing home on Allen who doesn’t own a car and the Millennial in Oregon Hill who prefers a fixed-gear bike. When the fixed cost is exponentially greater than the marginal cost, the market falls apart–welcome to East Berlin circa 1980.

Induced Demand

So what is the mechanism that brings the Fan’s parking into equilibrium? Time and inconvenience. There’s more to cost than cash. We mock central planning because East Berliners had to wait all day for a loaf of bread and ten years for a new car, but it’s an apt metaphor for the way we’ve designed our parking system.

So why not just add more parking until this time cost disappears? Adding more spots would lower the time inconvenience in the short term (like a week or a month), but people adapt, demand responds to the lower prices, and more people decide to park on streets in the city. This is called “induced demand” and it is well documented in the study “An Analysis of the Relationship Between Highway Expansion and Congestion in Metropolitan Areas”. In a cost-free environment, inconvenience won’t decrease, but more cars will be able to park. So why is this bad? Because this isn’t a cost-free solution.

More parking has one benefit: more parking. Meanwhile, an 8.5-foot by 18-foot on-street parking spot has at least a $4,000 construction price not including maintenance. There’s also the cost of the real estate and the foregone productive value (opportunity cost) of the space. Additionally, parking increases driving which worsens environmental quality, speeds global warming, drives our oil-centric foreign policy, increases congestion, weakens social structures, endangers pedestrians and cyclists, and rips apart the fabric of cities.

Currently, the elimination of a negligible fraction of parking spots is motivating certain Richmonders to oppose the GRTC Pulse. The opponents suggest spurning more than $40 million of outside investment that has the potential to expedite the core of our public transit system, appreciate property values, and lead to millions of more dollars in economic productivity.

According to a study by Eric Betz, parking covers more area of America than any other one thing. There are 500 million empty parking spots in the U.S. Pavement doesn’t solve the parking problem. This cycle of more supply followed by more demand will persist because the difference between the fixed cost and the marginal cost is so dramatic, and because 80% of Richmond’s population lives in the suburbs. Basically, the only supply-based solution is to pave until the destination isn’t a place worth visiting anymore. Then parking will always be convenient!

The Answer

Changing supply is not the answer, especially when it comes at such a high cost to residents. Instead. pricing solutions and demand solutions are the answer. Pricing needs to be reintroduced into the market. In a perfect world, every spot except for one would be filled on every block. Meters with fluctuating prices can make this perfect world a reality thanks to technology. Furthermore, private parking options can’t compete with highly subsidized “free” parking. If more spots had meters, private alternatives would be able to compete and would become more prevalent. Sure this means some parking decks and lots, but more importantly, home owners would sneak a spot into their back lot and some two car families would switch to one car. Most importantly, some would seek alternatives.

Which brings us back to BRT. As the price of alternatives decreases, people’s demand will shift away from cars. BRT lowers the price of riding the bus because it’s quicker, more predictable, and cool. This means more people on the margin will shift from cars to buses. How many? Estimates on both sides of the argument are close to useless because Richmond hasn’t made a progressive transportation decision in more than 50 years.

Fortunately, subsidies from the federal government and state government have lowered the marginal cost of experimenting with BRT so much that it makes perfect sense to try.

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