Cities worldwide are experimenting with a groundbreaking legal change: the abolition of parking minimums.

Rather than forcing developers, homeowners, or businesses to provide a minimum amount of parking based on density or square footage, cities let them build to their own needs. Parking waivers have been implemented to varying degrees in Edmonton, San Francisco, Minneapolis, and of course, Houston, which calls the policy “market-based parking.”

But most cities still force landowners to adhere to these minimums. The regulations are costly. They increase home prices and consume valuable urban space that could go for other uses. Their perceived benefit is to reduce externalities linked with new development, like spillover traffic. I will unpack whether that benefit is real, or if it even matters.

What’s the market demand for parking?

If developers don’t have to build lots or structures, will they? The short answer is: not to the same degree.

While financial institutions often want a standard amount of parking to underwrite projects, there are enough counter-examples to suggest that developers build less when left on their own.

Miami’s recent form-based code ended downtown parking requirements, and since then several towers have been built without a single spot. Tempe, AZ, waived its parking requirements for one project, and the developer built a master-planned community (ironically called Culdesac) that is totally car-free. In Austin’s West Campus area, which houses the University of Texas students, reduced regulations led developers to build less parking. This can apply to whole cities: one report shows that after Mexico City abolished parking requirements in 2017, the space dedicated to it in new buildings has fallen from 42% to 33%.

The reason is that parking costs a lot—$21,500 on average for structured spaces, and far more in high-demand cities. That is why developers often don’t build it, and consumers don’t pay for it, unless the government mandates it. The market clearly wants less space devoted to automobile storage.

What happens if there’s less parking?

If cities waive parking requirements, and developers build less, will this lead to severe shortages—i.e. the spillover problem mentioned above? It is tough to know because the concept is largely untested in the U.S.

But if the market doesn’t produce much parking, it will likely produce alternatives that help people navigate a parking-free world.

I can imagine how this might work in two separate scenarios, both of which have a supply-side and demand-side equation.

Let’s take scenario 1: a residential neighborhood where on-street parking is already scarce. If a parking-free development is added, but new tenants still own cars, it will worsen the shortage. The demand-side solution is to roll out a permit program that charges for dedicated street space to park vehicles. This would reduce the tragedy-of-the-commons issues that can cause overcrowding.

Most U.S. city neighborhoods currently have either free or underpriced on-street parking. This means residents will use the space for car storage, often bringing in 2nd or 3rd automobiles they seldom use. If cities charged market prices for space, it would cool demand and free the space up—meaning more room for incoming tenants from the new, parking-free project.

But if there’s still on-street under-capacity, cities could allow the supply-side solution: commercial garages or lots within residential areas. Having centralized structures like this would save people the hassle of searching for scarce on-street parking. This would likely require legal changes, though, for neighborhoods now zoned for residential.

Let’s take scenario 2: a large, parking-free residential project is built in a downtown area. These neighborhoods are better equipped to meet the situation, but some of the same forces apply. On the supply-side end, if the project has lots of residents who still own cars, they can park in nearby commercial garages and lots. Many American downtowns have a glut of this infrastructure.

The more likely adjustment may yet come on the demand-side. If tenants in a residential building with dedicated vehicle storage don’t want to pay the costs of storing their cars, then they likely just won’t own one, but they will still need to get around. So, we’d see the rise, to the extent we haven’t already, of nascent industries that cater to them, such as bike-share, scooter-share, vanpools, and micro-buses. It would create a whole new client base and scalability for these companies; which would, in hand, enable yet more people to pursue the cost-savings of car-free and parking-free living.

This is the experiment that, to me, is the most interesting one coming from a world without vehicle space minimums. Transport networks would necessarily change to satisfy the growing crop of people who need alternative ways of getting around. It’s an experiment that most governments are too scared to even try. Hat-tip to the ones that have.

[This article was originally published by the Independent Institute.]