How to Stop Giving Parking Developers A Free Ride

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How to Stop Giving Parking Developers A Free Ride


Jan 18, 2021

By Joe Cortright

Read More: https://usa.streetsblog.org/2021/01/...s-a-free-ride/

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From 1960 onward, an increase in parking provision from 0.1 to 0.5 parking space per person was associated with an increase in automobile mode share of roughly 30 percentage points according to a study of nine cities. We have too much parking for many reasons: because we’ve subsidized highway construction and suburban homes, because we’ve mandated parking for most new residential and commercial buildings, and because we’ve decimated transit systems. But a key contributor to overparking is the strong financial incentives built into tax systems.

- In effect, our system of local property taxation plays a key role in subsidizing parking and car use. In nearly all US cities, the property tax is assessed equally on the value of both land and improvements, so if one improves a piece of property (by constructing or enlarging a building), the owner’s property taxes go up. — The contrary is also true, if a property is unimproved, or just covered in gravel or asphalt, the owner typically pays lower taxes based only on the value of the bare land. In cities with high vacancy rates, the property tax actually rewards landowners who demolish buildings. The perverse incentives created by raising taxes on those who improve their land with active uses like offices, stores and homes, led Henry George in the 19th Century to propose a “single” tax on land, what is now generally called the “land value tax” (LVT).

- The Land Value Tax, in essence, fixes the anti-development incentives that are built in to the property tax. Constructing a new building on a piece of land doesn’t cause the owner’s taxes to rise, and those who own valuable property can’t avoid or minimize taxes by leaving it fallow. If a downtown block is zoned for office use, for example, it pays high taxes even if it’s a vacant lot. But despite its appeal, there’s been little enthusiasm for land value taxes in the US. — Only one large city, Pittsburgh has seriously flirted with the idea, for a time taxing property more heavily than improvements. But elsewhere, it’s been a non-starter. The City Council of Hartford Connecticut is considering an expanded fee on private commercial parking lots and structures that mimics some of the important features of a land value tax. Call it LVT-lite.

- In Hartford, as in many US cities, much of the downtown area is given over to car parking, and surface parking lots pay lower rates than those lots with improvements. The low rate of taxation on parking lots lowers the holding costs for landowners, and makes parking a more profitable use than developing these lots for other more intensive uses. One way to change that dynamic is to raise taxes or fees on parking, which is exactly what the city’s proposed ordinance would do. — The Hartford ordinance would establish a sliding scale of fees for parking lots and structures based on the number of parking spaces. The fee would start in 2022, and be phased in over a period of years. When fully implemented, for large parking lots, the incremental fee works out to $125 per parking space per year, which is about 25 cents per working day per parking space.

- For cities, imposing fees on parking makes fiscal and land use sense. For too long, we’ve subsidized the assault on urban living by cars, and nothing has been more detrimental to cities than dedicating scarce and valuable urban land to car storage. Many of these subsidies are buried literally and figuratively in the way we pay for urban infrastructure, like stormwater runoff. In Hartford, and many other cities, we have the perverse situation where car-free households are taxed to cleanup runoff from streets and parking lots, while road users pay nothing for the damages they cause. — Ultimately, a full-fledged land value tax would help correct the perverse incentives in the current property tax. But until then, charging a higher fees for parking lots is more efficient and fairer.

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