Minimum parking restrictions in the Auckland plan (#binthemins)

So another hot topic in the debate around the Auckland Unitary Plan is whether there should be minimum parking restrictions for new developments. I.e. when a new dwelling is built, developers will be required to build a certain number of car parks depending on the size of the dwelling. I’m not that familiar with the actual detail (it’s covered well by Auckland Transport Blog here), but the main gripe people seem to have is that most new dwellings with two or more bed rooms in suburban Auckland will be required to have two car parks.  Generation Zero have been doing some great advocacy around the Unitary Plan and have produced this graphic, complete with a trendy twitter hash tag #binthemins

Source: Generation Zero

Source: Generation Zero

On its face, as an economist I am suspicious of any arbitrary restriction. Therefore my first question is “what is the market failure this is seeking to correct?”. Or in more simple terms, “why do we think the market will under-provide car parking?”. I don’t personally have an answer to this, but I haven’t thought hard about it, so I pose that as question to our readers (UPDATE: Eric Crampton rises to the challenge here).  In this context, I found this tweet by Pippa Coom about Cameron Brewer’s support of the restriction quite amusing.

Now the Gen Zer0 guys don’t tackle the market failure question, which  is fair enough, talking about a lack of market failure isn’t very sexy politically (even though an infographic about market failure or lack thereof would excite the authors of this blog!). As you’ll see from this inforgraphic they are mainly focusing on the unintended (or intended depending on how cynical you are) consequences of the policy.

Now I’m not an expert on Urban planning or any of the literature in this area, so I thought I would put my economist hat and on have a brief think about the problems they claim the policy will cause. From an economics perspective it sounds like this policy causes an over supply in parking or at least a distorted distribution of parking relative to what would occur in the absence of the ban (unless someone can tell me what the market failure this is fixing is!)

(1) Ridiculous cost

Building car parks add to the cost of building a house. As an economist the cost of something doesn’t worry me so long as people are willing to pay for it. But what happens when you force car parks to be built? You probably push up the total cost of building the house or developers cut back another part of house to try and hit a price point. I.e. you either have more expensive houses, or slightly worse houses that have nice parking.

I’ve seen people say that you are “forcing people to pay for something they don’t want”. This line of argument is correct and false at the same time. What is actually happening here is what economists call “pure bundling”. I.e. you can only purchase the two products together, not separately. (more on the economics of bundling here)

So it’s correct in that people who place zero value on having a car park may end up purchasing a bundle that includes a house and a car park. But it’s false because their valuation of the housing component of the bundle is just greater than the price of the bundle. So nobody is being held at gun point and forced to buy a car park.

But the knock effect of the bundeling is that because costs have increased, people who don’t value a carpark are likely to be squeezed out of the suburbs they would prefer to live in or they will have a crappier home. This sounds like a welfare loss to me?

(2) Poor use of Urban Space

This is the one that is hard for an economist not familiar with the urban design lit to talk about. They are basically saying that mandatory car parks will result in ugly buildings (e.g. this post, yet again at ATB) and urban spaces that aren’t fun to be in. In economics language, they are basically saying that there is an externality associated with good urban design and that we will get worse urban design. Whether this is true or not is a factual issue that I’ll leave to people who research this.

But based on my anecdotal experience when I have traveled, I think I agree with the argument that there are externalities associated with god/bad urban design. Areas designed for people rather than cars are generally more pleasant to spend time in.

However, we do need to be careful with arguments like this, as what I consider “good design” and “pleasant” may differ markedly to other people’s preferences. So the more work that can be done to make this kind of assessment objective and focus on commonalities in preferences, the better. As Matt noted here, we need to be careful that we don’t use externalities as a veil to impose our value judgements on other people.

On a more technical note, this means we need to make sure the externalities being discussed here aren’t “pecuniary”, what does that mean? Eric Crampton has covered that well here in his “Primer on Externalities”

 (3) Reduces transport choice

I would rephrase this to “distorts transport choices”. On its face building too many car parks doesn’t reduce people’s choices, it’s just now much easier to drive.

If you already own a car park, then the cost of that car park is sunk when you are deciding to drive or use public transport. So you rationally ignore that cost of your car park when you pull together your spreadsheet comparing the costs of driving or catching the bus (I’m assuming you are all like me and have spreadsheets for this kind of thing!).

So because the cost of parking is sunk, your decision is distorted towards driving. If it’s easy to rent out your car park the cost is of course not sunk, but it has a very low opportunity cost if every one else has a car park and therefore doesn’t need to rent yours!

Note also that is basically just the bundeling issue discussed above….to get a house you have to also purchase a carpark.


21 replies
  1. Matt Nolan
    Matt Nolan says:

    My one “justification” (note I agree with you that I
    don’t dig the weird compulsion of bundling) would be that there is a
    co-ordination/timing issue that makes “letting people decide” make no

    For example, if building offstreet parking has increasing returns to
    scale, we could make this justification.

  2. Eric Crampton
    Eric Crampton says:

    Here’s the plausible market failure: without parking minimums, building residents will free-ride on free-parking available on-street or in other lots intended for customers of other firms, increasing their monitoring costs.

    And the generalised best response: start pricing on-street parking, or put in residents-only parking restrictions for on-street parking of more than a couple hours and have tags for residents.

  3. Andrew W
    Andrew W says:

    On point 3, here’s my quick case that yes it does reduce transport choice:
    Firstly it distorts the choice as you say – but the next step after what you describe is that this then leads to public transport services underperforming, and therefore they get cut back or eliminated entirely, or in the cases of suburbs designed and built between the 1970s and now, never provided to a useable degree if at all in the first place – reducing or removing the choice.

    (how one routes a bus through a spread-out 1970s+ neighbouhood full of cul-de-sacs is another issue but one that again reduces transport choice)

    • Agnitio
      Agnitio says:

      I guess this is a feed-back effect of sorts, rather than being a direct effect.

      So the argument would be, even with good PT, if you distort people’s decisions towards driving, PT patronage will fall relative to the counter-factual. This causes the bureaucrats to look at trends and say “hey, not many people catch the bus so we don’t need to spend as much money on PT”, so then PT quality deteriorates over time. But you still need the follow on decision to cut funding for PT, which is the feed-back effect.

      • Andrew W
        Andrew W says:

        Actually refining my point a bit, I’d say that it’s urban design policies like Minimum Parking Requirements (MPRs) and zoning – both also bureaucratic decisions – that produce neighbourhoods and destinations (ie shopping precincts) that are built in such a way that make it difficult people to realistically choose transport methods other than driving – contrast Botany and other outer suburbs with Auckland’s “streetcar” suburbs (where most developments pre-date both zones and MPRs) for the likelihood that a walk to the local shops or to the local bus route would be convenient or appealing, or even possible.
        A circuituous and difficult-to-access bus such as those that serve Howick or Westgate will never be as frequent, therefore as available to choose, as a highly accessible bus such as those on Mt Eden or Dominion Rds.

    • Matt Nolan
      Matt Nolan says:

      I think we have to be a bit more careful here – essentially you are saying that PT is not supplied on the basis on private demand in the first place, so we need a full description of the justification for government to provide public transport! Calling this a reduction of choice is a bit of a long bow.

      Remember, if public transport is subsidised to account for any perceived “benefits” the government views – then the fact that the cost of a substitute falling reduces demand for PT doesn’t imply a loss of choice. All it implies is that it is in the interest of individuals to use cars instead.

      • Andrew W
        Andrew W says:

        Sorry I don’t understand what you’re telling me that I’m essentially saying – can you clarify?

        • Matt Nolan
          Matt Nolan says:

          Just that we need to be a bit careful calling it a cut in choice! If the govt is cutting funding solely on the basis that people are not using the buses, when any “externalities” are already being funded, the cut in funding isn’t reducing choice … tis a result of the distortion!

          • Andrew W
            Andrew W says:

            Could it be both? Making it easier to drive and harder to do otherwise results in fewer people using public transport, which leads to service cuts in both frequency and operating hours, further reducing both the attractiveness and availability of PT as a choice of those that were still using it, which results in further distortion the choice in favour of driving.

            • Matt Nolan
              Matt Nolan says:

              Distortion indeed I completely agree – if we think about how funding is cut, it is likely to come through lower frequency, a lower frequency which I know would induce a change in my transport habits (although I always take the bus, it would definitely be a cost). So this is cool.

              But this is not what I’d normally define as lower “choice” – which pertains to a situation where government directly does something to stop someone doing something. In the case we are looking at, the fact that fewer people are using the bus and that a govt will then want to reduce funding to meet that is a response to choices by people given the distortion. So this tells us that the responsiveness of public transport numbers to subsidies and taxes may be higher than we expect – which is useful.

              The main reason I state we should be careful, is because if we start calling it choice, we start going on about rights based arguments for the avaliability of a service – while these are true, it is actually a separate argument, and mixing the two can get things confused 🙂

  4. detmackey
    detmackey says:

    Heterogenous preferences and all that, but it would be an odd set of preferences that placed value on unused carparks over something (anything!) else.

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