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This article from Principal Economist Shane Martin was originally published on LinkedIn.
I recently came across a tweet that said free on-street parking in New York City was equivalent to a subsidy of $500 billion (that billion with a ‘B’).
This seemed to be an unbelievable number – so much so, I didn’t believe it. However, I also know that public provision of lots of space to store private property comes at a high cost. So, how much is the land in NYC that’s used for free on-street public parking worth? It turns out that you don’t need to exaggerate the value to come up with a huge number. Let’s look into it and do some back-of-the-envelope arithmetic.
According to one estimate, there are approximately 3 million off-street parking spaces in NYC
A standard parking space is roughly 8’x20’ or 160ft2
This is roughly 11,000 acres of on-street parking in the five boroughs or 5.6% or so of the total land area of the city.
Laid end-to-end, these parking spaces would stretch from NYC to roughly, Perth Australia.
Estimates for NYC land value are a bit all over the place and it’s tough to pin down an actual number.
This article suggests that the price per buildable square foot (which isn’t the same thing as a square foot) is between $106 in The Bronx to $638 in Manhattan. Buildable square feet take into account the allowed floor area ratio (which varies from 0.5 to over 10 in residential areas and is over 1 in all commercial and manufacturing areas).
So, the absolute lowest value of raw land per square foot is about $53 (assuming a FAR of 0.5 for all of the Bronx – which is not the case).
This means that even if all free, on-street parking was valued at the lowest conceivable value, the total value of land in NYC dedicated to parking would be about $25 billion. So, we’re working with $25 billion as a floor.
In Manhattan, a square foot of land was worth somewhere around $700 per square foot in 2014. If all parking land had that value, on-street public parking in NYC would be worth about $335 billion.
The tweet I referenced suggested a land price of $1042 per square foot in NYC. I suspect this is actually the number for Manhattan (not all of NYC) as that would track with the 8-year-old figure of about $700 above.
Now, it’s reasonable to expect that there is less free on-street parking in the high land-value areas than in the low land-value areas. This is borne out by the figures. Manhattan contains about 6.5% of NYC’s on-street parking spaces while making up about 8% of the land area. That said, it’s not as stark as I thought it would be.
Taking a complete “best guess” based on everything I learned, I think a land value of $80-$100 per square foot (which is about $3.5-$4.4 million per acre) could be plausibly representative of the average land value for a parking space (keeping in mind that many of them are in highly residential areas of Queens and Brooklyn).
Using this figure suggest a conservative estimate of $38 to $48 billion (~60 to 74 billion NZD) as the value of the land available in NYC for free on-street parking.
Of course, when you start from a value of $500 billion and then someone like me comes along and says its only $38 billion, it seems not that bad. But $38 billion is a ton of value!
So, why is an American economist, who isn’t from New York City, and who lives in Auckland, New Zealand spending the better part of a day working all this out? Because most cities (including Auckland) have the same issue of providing tons of “free” car parking at the expense of other things that have value to the residents of the city. And you don’t need to exaggerate the numbers to show that the cost is enormous. In fact, a recent estimate for Auckland (using a different methodology) suggests that the value of free on-street car parking is in the range of 1 billion NZD per year. I have no reason to think this number is exaggerated, but even if it was, the real number would still be hundreds of millions of dollars per year of “free” parking.
What is the value of this 'free' on street car parking
Is the right amount of car parking zero? Almost certainly not! But, like all things in life, the provision of on-street car parking involves tradeoffs. Those parking spaces are bus and/or cycle lanes that can’t be built, footpaths that can’t expand, courier vans that can’t unload because parked cars are in the way – and in new developments, it’s extra housing that can’t be built. If we ignore the cost of providing “free” parking and we ignore these alternative uses, we’re almost certainly making suboptimal decisions.