Thought experiment: a politically feasible way to introduce a parking market

One of the most blatant subsidies to car use is undoubtedly the parking subsidy. Parking can be very expensive, with parking in garages, both underground and overground, often being more expensive than the car that is parked therein. So, it would be best for parking to be priced to reflect its costs, a price that the user would have to pay. The best way to do so, I think, is through a parking market, allowing people to trade parking spaces and thus determine an adequate price for them, that often reflects their actual cost.

Now, I've spoken a lot about this, but I've never really talked about it considering practical political concerns. Meaning, how can a parking market actually be implemented in our cities considering the current political climate?

For example, I like the proof of parking system in Japan very much, but it's a system that relies on a population more used to paying for what they use and in a country where street parking is largely banned. In North America, street parking is frequently used, and even when it's not, it's available as a possibility in most cases for residents, and people aren't used to paying for parking.

So here is the result of my reasoning, how I think introducing a parking market can be possible, at least, for residential parking.

First hurdle: dealing with street parking

Street parking is, without a doubt, the single most difficult obstacle to deal with, because the possibility of it can serve as a free alternative provided by the government, so it can short circuit the entire parking market. Why pay for something when you can get it for free? So we have to find a way to integrate street parking into the market.

Some places have introduced street parking permits people have to buy, but this is far from ideal, because residents as a whole dislike them (unless the majority of residents do not own cars), the price of these permits tends to become a political issue (so not following the market's logic) and it doesn't quantify the number of parking spots, in most cases, there is no limit to the number of permits cities will issue.

So, the question then becomes: how to introduce a limited number of parking permits, while leaving its pricing out of the hand of elected representatives, all in a way that current residents won't see as a slight on their ability to park?

Well, I may have an answer, inspired by what happened in the densification of the Rosslyn-Ballston corridor in Arlington. I think it is an approach that:

1. Does not have government directly charging for parking
2. Does not remove parking rights from current homeowners in the area (though condo owners and renters will face a parking squeeze)
3. Quantifies the number of parking spots and allows for them to be traded on an open market
4. Does not require complex and expensive enforcement, residents will do the enforcing themselves

OK, so what is it? Issuing free parking permits to each property owner depending on the street-fronting width of their lot.

Here is an example, take this area:

Example for parking permits based on street fronting width

So you have 8 houses on lots of varying widths. Well, let's say that you say that you need 6 meters of curb for each car parked on the street. Well, then you divide the width of each lot by 6 meters and that gives you the number of parking permits each homeowner gets.

So, in the example, the owners of lots 2, 3, 5, 6 and 8 all get 2 parking permits (12m divided by 6m = 2). 

Owners of lots 1 and 4 get 3 permits each (18m divided by 6m = 3).

The owner of lot 7 gets 4 permits (24m divided by 6m = 4).

These permits can be distributed yearly and may be simple plastic cards to hang on the rear view mirror, so they can be handed to visitors. That way, neighbors can also ask each other to lend them the permits if they expect a lot of visitors. People could also sell their parking permit for the year or rent them, in case they don't need them, which creates a resale market for parking permits.

Since these permits are freely given to homeowners, the acceptation level may be high, because people may see it not as a restriction on their right to park on the street, but as a protection of their right to park on the street ("I'm guaranteed two available spots on the street" rather than "I'm limited to two spots on the street"). Street parking thus becomes a right that comes with owning property, and as bigger lots tend to pay higher property taxes (especially if in combination with a frontage tax), the cost of street parking gets integrated into the taxes of each property owner. Since the parking is provided by the city, this is defensible on an user-payer approach.

What about apartments?

In this scenario, the owner would still get the permits, then distribute them how he sees fit to his renters. These could be included in rental contracts or rented apart from the apartment. So if a landlord has 3 parking permits and 6 units, he can offer his parking permits separately, so renters who want one have to apply for one, and if his renters are not interested, he can rent them out on the open market.

What about condos?

In this case, the condo association is the one receiving the permits, and the distribution of these permits is to be sorted out among the different condo owners. Again, the city government doesn't decide these things, it just issues the permits and lets the condo owners decide. Arguably, it's better for new condo constructions, because the condo builder can sell these parking permits apart from the condos, which leads to less problem for condo associations.

What about enforcement?

Active enforcement of this system is not really required. Enforcement can be reactive, meaning that if there are problems with parking, then permit owners themselves will complain to the police and call them to verify the cars parked on the street. This does mean that in low-density areas, the rule may not even be applied, not changing the status quo... and that's positive for acceptation, I think.

What about fractional permits?

This is the biggest problem with this approach. In the previous example, I made it simple, each lot width was a multiple of the width associated with a permit, but in real-life, it's not going to be the case. For example, what if instead of 1 permit per 6 meters, we had 1 permit per 10 meters, to take into account driveways and fire hydrants? Well then, you'd have:

Houses 2, 3, 5, 6 and 8 deserve 1,2 permit each.
Houses 1 and 4 deserve 1,8 permit each.
House 7 deserves 2,4 permit.

Overall, you have 12 permits maximum. Houses 2, 3, 5, 6 and 8 all get 1 guaranteed, house 1 and 4 get 1 too, and house 7 gets 2 guaranteed. That makes 9, leaving 3 permits in surplus, so you look at the fractions, house 1 and 4 thus get an additional permit because their fractions are higher than others (0,8 versus 0,4 and 0,2), and the last one goes to house 7.

What if all houses have similar widths? Well, you can either use the surplus permits to have a visitor section that doesn't require permits or organize an auction for them (distributing the proceeds as property tax rebates for people with fractional parking permits).

Advantages

The advantage of this system is how adaptable it is. It is a rule that can work both for low-density housing situations and for high-density areas, and that is, I believe, somewhat likely to be acceptable for residents in both situations. In low-density areas, these permits have very little impact, in high-density areas, they become more restrictive. So this is a rule that evolves with cities and that doesn't require sporadic reforms or arbitrary interventions by politicians or officials in order to work. By allowing permits to be traded on an open market rather than having a fixed price, you also take away the government decision-making that makes parking prices so politically contentious.

This approach also quantifies street parking supply by limiting it with permits, and so can help lead to the establishment of a proper parking market that will create a pricing dynamic for parking spaces.

Second hurdle: dealing with parking requirements

Unlike in Japan, where people see no issue leaving it to car owners to find a place to park their cars, North America and Europe tend to prefer "upstream" solutions to that issue. So instead of leaving car owners with that responsibility, we prefer to heap as many restrictions and rules on developers as possible. These restrictions are thus invisible to most people, as only developers have to deal with them directly. Whether that's a good or bad decision, that's up to everyone to decide (I vote: bad thing).

Hence why we have parking requirements for new constructions, so that the responsibility of finding parking spaces for the occupant is actually on the developer, and not on the occupant himself. So, how can we establish a parking market in that context, while maintaining the upstream parking controls we apparently like as societies?

The answer that seems apparent to me is to simply allow for a transfer of parking to satisfy parking requirements. Simply change the rule that off-street parking has to be provided on the same lot as a new construction, and allow for any parking spot within a certain radius to be used, if the developer buys the rights to it from the current owner.

So, for example, if someone has a double-width driveway and there is a vacant lot next door:

Single-family house with a double-width driveway, deep enough for 4 parking spots, next to a vacant lot

Now let's say a developer wants to build a triplex on the lot next door, but due to limitations on curb cuts and a 2 parking per unit limit, he can't really build 6 parking spaces on that lot. However, the single-family house owner no longer uses all his parking spots, so the developer can approach him and offer to buy half his driveway for, say, 5 000 or 10 000$. If the owner agrees, then the triplex can be built:

The triplex can go ahead thanks to a parking transfer

Furthermore, such a system allows for a gradual reduction of parking spaces over time, as long as you do not enforce parking requirements on existing buildings after a few years, because you can still have minimum parking requirements for new developments that require more parking spots than can be reasonably expected, and 2-3 years later, the unused parking spots can be sold to developers who will need to satisfy high parking requirements. By attrition, the number of parking spots per unit can be reduced, adapting to the situation.

The advantage of a system like that versus a simple reduction of parking minimums (though both can and should come together) is that it provides a financial incentive for many residents to actually support such a change, because it may allow them to sell their unused parking and make potentially thousands of dollars. It won't short-circuit the die-hard NIMBYs, who care only about status, but it may create a group of people who will support the change because of that financial incentive.

It also allows for off-site parking lots to be built to satisfy multi-family developments in areas with a lot of redevelopment pressures. If there is a lot of demand from developers for parking, one developer could ostensibly take over a vacant lot, or one with a low market value, and transform it into a parking lot to satisfy parking requirements for the entire bloc.

This has a big advantage of allowing small-scale developments in densely-built areas, even with some off-street parking requirements. A big problem of low-rise walk-ups in dense urban areas right now is the parking requirement, even if it's just 0,5 space per unit, it's nearly impossible to have underground parking to satisfy this requirement in a way that isn't absolutely dreadful. The only way (without rear alleys) is to have front-loading slip-under garages like this:

Low-rise walk-ups in Montréal, built in the era of parking requirements

Whereas large-scale buildings can have an entire parking lot with a single entry point for the entire building, which at least avoids having walls of garage doors at ground level:

Mid-rise 130-meter wide building in Montréal, with just one curb cut to enter the parking garage underneath

With the ability to satisfy parking requirements with parking transfers, in such an area, you could have a developer build a single 2 or 3 story parking garage, with a small setback and hidden from the street by trees, and therefore satisfy the parking requirements for an entire bloc or two of small low-rise buildings, attached or detached, maybe even at a more affordable price tag.

Visualization of urban housing dynamics

So I've been talking a lot about my understanding of the dynamics of the housing market (though it's a bit of a misnomer... commercial uses also follow the same dynamics). However, I've been doing so largely with long blocks of texts, which may be daunting to read and understand, especially as the subject is complicated. Like a lot of people, I often understand concepts better visually, so I decided to draw a schema of what I think the housing market is like, and how developers and urban planners interact.

In the end, this is what I ended up with, if you follow me on Twitter, you would have already seen it:

My understanding of the dynamics of the housing market

So, let me break things down a bit, to explain how I think it works. I'm not an expert, so I'm open to criticism, but I think this tool might be really useful to understand the ramifications of housing policies.

Three different inter-related processes

You may notice there are three different squares, each identified differently: "MARKET", "PLANNERS - CITY" and "DEVELOPERS". These are three different spheres of influence with their own internal logic which are inter-related.

The "MARKET" sphere of influence illustrates a simple process: how housing prices are fixed. For this process, the things that matter are demand for housing and housing supply. In other words, how many people want to purchase a type of housing and what are their purchasing power, and the actual amount of housing that corresponds to those desires. Unlike, say, electricity, housing is not one very specific good, it is very varied, someone who wants a house to raise a family in will not buy a studio apartment. 

Things like transport infrastructure, commute time, proximity to stores, air and noise pollution, quality of schools, etc... will all have an incidence on demand for specific housing. So if I wanted to, I could expand very widely the number of actors who have an influence on demand for housing, but I wanted to keep it simple, so it's all summed up under "demand for housing".

The decision-makers in this sphere of influence are many. The concept of "market" itself is just an abstraction for the sum of economic decisions of millions of people. In theory, everyone who either owns an housing unit, rents one or wishes to buy one is involved in the market. However, I think the biggest deciders are people actively looking for a house, those actively looking for a buyer for their property and speculators who, depending on the market, will buy or sell in order to make a profit from that process.

The output of that sphere of influence is the market value of housing: how much a specific type of housing is worth, how high a price it can be at and still find a buyer.

The "PLANNERS - CITY" sphere of influence illustrates how most regulations affect housing economics. Namely, regulations and technological possibilities combines determine what it is possible to build, at what cost, and where. For example, thanks to modern technology, we can build buildings more than 4 stories tall without too much problem, however, due to the norms we have, we generally force tall buildings to conform to strict building rules that require more onerous construction methods (for example, concrete buildings rather than wooden-framed buildings and the inclusion of systems like sprinklers).

This also includes zoning regulations that forbid certain types of building and so sometimes push the construction cost of buildings into infinity, because it will simply not happen. It also includes all development charges or other costs that may be required of someone who desires to build something. There is also the issue of the cost of land, which may include the market value of the buildings on that land currently, but I try to make it as simple as possible.

The output of that sphere of influence is determining what building a new housing unit will cost, including regulatory costs, land, labor and material.

The "DEVELOPERS" sphere of influence is where the magic really happens. In the end, the ones who build cities are the developers, and the process for deciding what to build, if anything, actually involves the output of the two earlier processes. Developers have to take into account the market value of housing, which helps them determine the price what they build will fetch on the market, depending on housing type and location, but they also have to take into account the actual cost of building that housing type in the current regulatory, technological and economical context.

When the construction cost of housing is lower than the market value, then that means that developers can make money doing it. And a developer can no more work without a profit than a worker can work without wages. So if the construction cost of housing is HIGHER than the market value, then building it would mean the developer would actually lose money. They're not going to do that, they have to eat too.

So the output of the housing market and of the regulatory process actually decide if the developers build, and what they build. The output of this process is new housing, which will, in return, change the housing supply and therefore affect the market value for housing.

Ramifications

So what is the point of this schema? Well, housing economics have to be understood as three connected processes, involving at least three different decision-makers, all of whom have direct or indirect influences on the end result of what type of housing is built and at what price. Often, people limit their criticism to the developers, as they are the one actually making the physical building, but developers are in fact often at the tail-end of the entire affair, they're responding to market values and to construction costs dictated by local governments. However, the developers cannot be forced to do anything, they always have the option to opt out and do nothing and they will if they have no way of earning income (profits) on projects.

Some people thus conclude that developers are greedy and self-interested, but every one else is also greedy and self-interested. Property owners want to sell their property as high as possible, prospective buyers want to pay the lowest price possible, elected representatives want to keep their job by appealing to their voters, why single out developers? Ultimately, economics is not a moral play, if you have a desired outcome, then you need to look at the actual levers that you have to influence the system in the desired direction, to reward people for doing what is socially desirable.

So if you want lower market value of housing, then you can either increase supply or decrease demand. To increase supply, the only way to do so is to incentivize developers to build more and faster, and to achieve that, then you need to make it possible for them to build at a lower cost, which is the opposite of what generally happens, as people try to squeeze every penny out of the "greedy" developers.

You can also look at what makes high-demand areas so desirable and try to increase the supply of such desirable locations. For example, if transit-friendly urban areas are in demand, building new transit lines can expand the amount of locations that share this desirable trait.

Another important thing this schema tells us is the sphere of influence of public policy. Too often, people want regulations to fix market value (rent control for instance) or to dictate developers to do certain things (through Affordable Housing rules or even direct public housing construction), but that's not the natural influence of public policy, which is determining the construction cost of future projects. That's the main vector of public policy and planning, when you try to go outside of that, then you're trying to fit a square peg in a round hole and creating a lot of unintended consequences. Yet, people next to never talk about these primary effects of public policy, and that is why most housing markets are screwed up.

So this schema tells us to consider public policy mainly as to how it impacts the construction cost of future housing projects, and to stop trying to intrude so much in the other processes. I think this would restore some sanity to the housing market in major cities.

The golden cage trap

There is a revival of interest towards urban design in the West right now, that much is hard to deny.  Much of it is the result of a lot of individual realization of the attractiveness of traditional urban designs, whether they be European villages, American small towns, traditional streetcar suburbs or big city downtowns. Meaning that people raised in soulless suburbia face an awakening when they experience for the first time a human-centric urban design, either on vacation, or while out of town for their studies or for their first job. (My own personal awakening comes from a trip to Japan, hence my focus on the country over and over as a model)

Typical suburban commercial strips

Kyoto

Old Montréal

Main street of Saint-Jovite, an old Québec town

A lot of people who have had their interest in urbanism piqued by such experience frequently ask the same question: "Why can't we build more places like that where I live?". Their focus however is on reproducing the experience they had, the feel of the place, the shape of the buildings, etc... This leads to an architectural or superficial urban planning bias, where the most important is the look of a place, form over function.

As a result, there is this intense focus in most urbanist discussions on the "feel" of a place rather than how it sits in a perspective of a functional, sustainable city. When developers and architects design areas based on that impulse, then they often fall into a trap, what I call the "golden cage" trap.

The "golden cage"

A golden cage, for me, is a neighborhood which feels very pleasant to live in, that offers a lot of comfort to residents. It's calm and peaceful, generally with a lot of greenery and trees, and maybe even bike paths and other infrastructure for outdoors activities. That is the "golden" part... the "cage" part is that the neighborhood is also isolated and cut off from most major economic activity centers. There are few jobs in the area, few stores, except for a few small ones, and poor transit mobility.

As a result, very few people can live and work in the same neighborhood, and people have to leave the area frequently to accomplish most tasks of modern life like shopping, working and social activities. As a result of that and the lack of transit connection to the rest of the metropolitan area it is a part of, more trips require cars, which kill the life on the street and community areas, as most of the population is either in their private home or out of the neighborhood at all times.

Examples of golden cages

The most common example of the golden cage is the typical North American suburb, at least, well-designed ones. They often have parks and plenty of trees, sometimes offer bike paths and pleasant areas to walk through...

Images from Boucherville, where I grew up. Nice place to have a walk or a bike ride, with plenty of parks, but nothing within walking distance and poor transit service, jobs and major stores are located at freeway interchanges outside the suburb itself

However, many New Urbanist developments are in fact not that much better. Since redeveloping areas is long and difficult, often, New Urbanist thinkers prefer greenfields development where they can build an entire neighborhood or small town from scratch, trying to replicate the success of old towns. However, these areas often end up being isolated and poorly services by transit, with poor access to the rest of the metro area.

Seaside in Florida is an example of New Urbanist small town, designed from scratch... 92% drive or are driven to work, 5% work at home... 0,4% walk

Seaside town center

Seaside residential area

I referred in my last post to the example of traditional American small towns as an example of a good, walkable development from the past. Seaside notably takes a direct inspiration from American small towns. However, these towns existed in another era where people mostly lived their entire lives, work and shopping included, in the same, small community. The modern world is not like that anymore, not at all. Ours is a world of massive economically integrated metropolitan areas with hundreds of thousands of people living, working and shopping there. As a result, it is essential for a well-functioning neighborhood to have reasonably fast access to other areas of metropolitan areas. If you don't offer good enough transit to offer that, then people will be forced into cars, and once they are into cars, then they will need parking, and once most people require parking, then every store or office will be isolated by an ocean of parking, contributing to the "golden cage" problem.

Indeed, many small towns in America and in Europe suffer from that, they have badly withstood the metropolitanisation of urban economies and have seen their residents start shopping and working outside their old downtown core. They have been hollowed out by this competition from job centers and stores on the periphery. If they want to preserve their vitality, they would need to have a car-less mobility option that could connect them efficiently with the rest of the metro area, not only for residents wishing to access the jobs and services of the rest of the metropolitan area but also for residents of other areas wishing to access that town's jobs and services.

What doesn't help is that in most cases, transit is often seen as a municipal service, not a regional one. So transit companies tend to only cover cities and offer only limited interconnections with various urban areas or towns in the same metro area. The absence of regional intercity transit in North America is one of the biggest problems we face in my opinion.

Prescription

What I'm getting at is that an urban area's vitality depends on access, both the residents' access of other areas and other areas' access to it. An area cannot thrive only on good design. Take for example the 1980s' trend of pedestrian malls. Many cities in North America decided to create pedestrian-only outdoor malls from commercial arterials and invested a lot of money in good design to draw people in. These worked only for a while, but when the novelty effect ran out, they were largely abandoned... except the ones who were conveniently located and easily accessible by transit.

Rue Prince-Arthur Est in Montréal, a pedestrian mall that is facing high vacancy rates, the problem is that the subway is a bit off, and on the way there, people walk alongside...

...Saint-Denis street, which is a vibrant commercial area with much better transit access and that gives access to a big urban college campus (UQÀM), even if the design is worse, the much better location makes it a winner

Good urban design needs to be a second consideration after the issue of access, both to and from the area. A lot of architects and urbanists love talking about good design from the ground up, as if they had to build a city from scratch, but often the only areas that fulfill these criterias are isolated areas with poor access, exactly the kind of area that should not be prioritized for development projects. The real challenge and way forward is not greenfield development of that kind though, it is in redeveloping areas with good potential thanks to existing good access. In which case, often we are stuck with past decisions and must learn to deal with them. If you love rear alleys and the area doesn't have it, then you must find a way forward without alleys, and vice versa.

Also, the issue of offering better car-less access across metropolitan areas and between regions is crucial and is one much too often ignored. All in all, we need to recreate the links between urban areas or to create new ones to increase transit accessibility, to open up the golden cages. And until then, we should avoid building new ones.