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Supply and Demand in Downtown Residential Parking

Downtown Chicago Building Roundup: North

Downtown Chicago Building Roundup: North (Photo credit: Gravitywave)

I’d like to delve a little bit further into the pernicious effect of parking minimums, particularly as it distorts the market tenets of supply and demand. Seeing an article over the weekend in Crain’s Chicago Business about the decline in parking demand in downtown Chicago residential buildings, I could not avoid beating my favorite drum about the high cost of parking and its negative externalities. Here is the problem, according to Crain’s:

Demand for parking is dropping in downtown apartment buildings. At Lakeshore East, a development of mixed use high rise apartment and condo buildings just north of Millennium Park, south of the Chicago River and east of Michigan Ave., around 40% of renters lease a parking space, down from the developers projection of 55%. This would be fine in a true free market where the developer would assume the risk of overbuilding on parking. However, the City’s zoning code, in its infinite wisdom, requires parking in new residential developments at ratios of 0.55 to 1 space per unit. Thus, the developers initial projection for parking is at the lowest end of the parking ratio in the zoning code and is still over market demand.

Of course, I agree with Matt Yglesias in that the “problem with this regulatory minimum is that it makes it harder for existing buildings to recoup the losses previously incurred through overbuilding of parking.” Because the zoning code won’t allow for pooled or shared parking between buildings, each building must have its own allocated parking. The costs of this parking, of course, get passed onto the occupants of the building indirectly, regardless of whether the occupants have a need for a car.

Because of the over supply of residential parking downtown as mandated by zoning, parking is artificially cheaper than it should be. This, of course, encourages greater auto use in the densest part of the city, the part in which public transportation of various modes operate at a very high frequency practically around the clock. It also encourages the catering of urban design towards the car and away from alternate transportation modes, despite the fact that the alternate transportation modes may make up a larger share of trips in this area.

Ideally what I would like to see in this circumstance is free market pricing for residential parking, or if the zoning will continue to manipulate the market,  parking maximums (for all types of parking). This will allow for shared parking at closer to the true cost of providing that parking. It will also allow the free market to decide what the best use of property is under right and can reduce the cost of development and occupation of residential and other space. Most importantly, removing the parking minimums and over-supply of parking will be supportive of the existing public transportation infrastructure in place downtown, as it is the dominant mode of travel within the area and its externalities are significantly better than the car.