Road Rent – On the Opportunity Cost of Land Used for Roads

There are a number of ways to view the cost of automobile travel. For instance

This post looks at the idea of road rent. At the margins, what is the value of road space, and how might that cost look on a per vehicle-km traveled basis?

Real Estate

Land has value. Land used as roads has value both as a road and potentially for other uses. What if the value for other uses was higher than that for use as a road?

In Greater Sydney land values range from to $AU210,000 per m² in Barangaroo on Darling Harbour to under $AU1000 per m² in Western Sydney [link].  In Minneapolis, we estimated a few years ago that average assessed land value as $144 per m² for roads and $30 per m² for highways. [Junge, Jason and David Levinson (2013) Property Tax on Privatized Roads. Research in Transportation Business and Management. Volume 7. pp. 35-42.] It seems that assessed value is about 2/3 of market value in Minneapolis.

In some places it is much higher, in some places much lower, the examples used herein are simply an illustration.

The idea is that there is land holder (such as a government land agency) that has to decide whether to allocate land to road uses or for other purposes.

Parking Rent

Consider a typical suburban residential neighborhood with `free’ parking in front of houses. The land is valued at $1,000 per m². Each house requires one parking space out front, and parking is permitted 24 h per day. Conservatively, a car takes 10 m² when parked (the road is the access lane, we consider that separately). It would cost $10,000 for the land owner to purchase the land equivalent of the parked car. The annual rent on that would be $400 (at 4% interest).

In this example $400 is how much the car owner should pay annually  to their municipality for a permit to park their car to cover the cost of land (not the cost of infrastructure, or any other costs of roads and mobility, just the cost of land). This is a bit more than $1/day (more precisely $1.095/day). In more expensive neighborhoods, this would be higher, in less expensive neighborhoods, lower.

For Minneapolis, I have previously estimated about 220,000 on-street spaces. At $400/space per year, this would raise $88,000,000 per year, a not inconsiderable share of the city’s $1.3B annual budget. Instead it is mostly given away free.

Consider the implications if property taxes were reduced by up to $88M in total, and parking permits sold at $400/year (payable monthly with the water and trash bill). People would realize the cost of on-street parking, and there would be less of it, and less vehicle ownership at the margins, and fewer trips by car. Space freed up could be re-allocated.

Alternatively, $400 per year is the value of public subsidy from publicly-owned land to private car owners who get `free’ on-street parking. In short from the car-less to the car owners.

Alternative Uses of Road Space

The economic idea of opportunity cost is important here. Opportunity cost is value of the next best alternative. The next best alternative to road space might be renting it out. So for instance an urban US freeway that destroyed blocks of extant development when it was built has an opportunity cost associated with the value of that real estate.

So the question arises as to what other uses  could be made of the road; for if there were no other uses, you might as well store cars for free. Here are several other uses that could be  considered to replacing a parking lane:

  • Park or parklet,
  • Bike lane,
  • Bus lane,
  • Paid parking, via meters,
  • Shared car parking (rented to the car sharing company),
  • Shared bike parking (rented to the station-based or dockless bike sharing company),
  • Taxi or ride-hailing stand,
  • Bus stop,
  • Shared scooter parking (rented to dockless scooter sharing company),
  • Food truck or ice cream vendor,
  • Road for moving motor vehicles (a parking lane could be another moving lane),
  • Sold off for development.

The last item deserves some discussion. Consider that our road with two parking lanes (one on each side) is maybe 10 or 12m wide (~32 to 40ft). This is wider than some houses are long. The city could in principle retain the sidewalks and sell off the roadbed for townhouses or single family homes. Given the houses are already serviced by alleys, and so long as not all roads were sold off, some roads could be. An illustration of this is the Milwaukee Avenue in Seward in Minneapolis, as shown in the figure. You will see there is no paved street in front of the houses. This could be tightened up further or realigned should there be demand.

Milwaukee Avenue, Seward. Source: http://maha2014.dreamhosters.com/history
Milwaukee Avenue, Seward. Source: http://maha2014.dreamhosters.com/history

This is not appropriate for every street. However, (1) there are places this can be done, where roads are in excess and housing scarce, and (2) this illustrates that land currently used as asphalt to store and move cars has value, and that houses have value even in the absence of streets for cars in the front.

There are always excuses — utilities may need to be relocated, fire trucks would need to go slower down narrower sidewalks. But these excuses can be overcome, there are numerous examples of narrow paths that function as roads.

Driving Rent 

Note: 1 are = 100 m² and 1 hectare  (ha) = 10,000 m²

Typically each car is in use 1 – 1.5 hours per day, and parked for the remainder. In the previous section, we considered parking, the `remainder,’ in this section we look at the time in motion.

When in use, the car is occupying not simply its area (the 10m² = 2m x 5m), but also is preventing the use of other space around it. On a freeway with a capacity of 1800 vehicles per hour traveling at a freeflow speed of 100 km/h, (i.e. just before the speed and flow drop due to congestion sets in) there is a critical density of 18 vehicles/km.

18 vehicles per km is 55.5 meters per vehicle. Lane width is 3.65 meters, so the area occupied is 202 m². Let’s round to 200 m². Each moment  a car is in use, it is using 200 m², on which it should pay rent. So for an hour a day, this is 720,000 m² s or 72 ha s.  (The meter-squared by second (or hectare second) is a new unit of measurement (a time-volume) that needs a catchier name).

It is the density that is the relevant number here, since vehicles are occupying space that we are charging rent for in this thought experiment. Though they are moving, and so the space they are occupying moves with them, there is always some space being occupied for the duration of their travel. Each of those vehicles per hour is occupying a moving window of space.

Roads are a Time Share

When roads are less congested, cars are consuming more space per vehicle. So uncongested urban are much more expensive per traveler than congested rural roads.  When traffic breaks down, they are consuming less space, but presumably are occupying that space for more time, since they are going slower. Induced demand [link] and travel time budgets [link] negate that to a significant extent.

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Illustration of space occupied by cars. Note that most cars do not have 2 occupants. This particular layout is, surprisingly, in somewhat congested conditions. Cars often take up more space at higher speeds. Screen still from a 2002 Saturn car company TV commercial. Image source:  The San Francisco ad agency Goodby, Silverstein & Partners.  Article: Raine, George ‘Goodby, Silverstein agency celebrates 25 years’ SF Chronicle.

George Raine https://www.sfgate.com/business/article/Goodby-Silverstein-agency-celebrates-25-years-3285120.php#photo-2434077

In this example, the hourly rent on 200 m² is what we are interested in. Though cars move, over the course of 1 hour of travel in these conditions, they are claiming that much space. The specific space they are claiming moves with the vehicles, but this all balances out as other cars claim the space they vacated.

Empty roads still have to be paid for, and paid for by actual road users. Even when a road is not being used, it is available to be used. Travelers have the option of traveling. Pavements cannot be easily be rolled up and allocated to other purposes on the fly, particularly purposes like buildings. (Roads can occasionally be closed for special events, but this is rare during business hours.)

 

Example

Consider a car trip that uses 3 roads:

  • Road section 1 (suburban residential): l=5 km, w=3.65, v=30 km/h, q=1000 veh/h, k=33.33 veh/km, AADT=10,000 vehicles/day/lane, p= $1000/m².
  • Road section 2 (motorway): l=10 km, w=3.65, v= 100 km/h, q=2000 veh/h, k= 20 veh/km, AADT = 20,000 vehicles/day/lane, p= $5000/m².
  • Road section 3 (downtown): l= 1 km, w=3.65,  v=40 km/h, q=1600, k =40 veh/km , AADT=16,000 vehicles/day/lane, p= $10000/m².

where: l = length (km), w= lane width (m), v=velocity (km/h), q=flow (veh/h), k=density (veh/km), AADT = Average Annual Daily Traffic, p= land value ($/m²), i=interest rate = 0.04, r= land rent ($/year/m²), d = days/year

Consider each road section to be a homogenous pipeline. (With heterogenous traffic, this is obviously far more complicated, and we would make use of the q, k, and v variables to compute an area-time.)

The annual rent (R) for  each road section is the R=p*i*l*w

  • Road 1: R=$1,000/m² y * 0.04 * 5,000 m * 3.65 m  = $730,000/y
  • Road 2: R=$5,000/m² y * 0.04 * 10,000 m * 3.65 m = $7,300,000/y
  • Road 3: R=$10,000/m² y * 0.04 * 1,000 m * 3.65 m = $1,460,000/y

This annual rent is paid by the road agency to the land owner for the use of land as a road. The road agency then wants to recover this cost from its customers, the travelers.

The question of how to allocate always has some subjectiveness to it. Another way of thinking about it is based on elasticity of demand. Peak hour work trips are perhaps the least elastic (least sensitive to price), and so from an economic efficiency perspective should bear the greater cost.

In this example, we take a simpler tack.

The allocation is R/AADT to get cost per year per daily tripmaker, and divide by 365 to get cost per trip, and by section length to get cost per km. In this example:

  • Road 1: $730,000/10000 = $73/y = $0.20/trip = $0.04/km
  • Road 2: $7,300,000/20000 = $365/y = $1/trip = $0.10/km
  • Road 3: $1,460,000/16000 = $91.25/y = $0.25/trip=$0.25/km

The total is thus $529.25/year or  $1.45/trip to cover land rent. `Your mileage may vary,’ as the saying goes.

Implications

The implications of this are several.

  • At an additional $1.45/trip, travel by car (and congestion) will diminish.
  • Road rent is essentially additive with annualized infrastructure costs, which generally does not consider the cost of land (rather, land is often implicitly considered `free’ or a sunk cost).
  • If travel by car diminishes sufficiently, road space can be clawed back and redeployed for other public purposes.
  • Narrower lanes impose less road rent. But not necessarily proportionately so, as the throughput on narrower lanes (with human drivers) may be lower as drivers are less keen to be immediately adjacent to nearby high-speed vehicles.
  • Slower moving vehicles take up less space, but take that space for longer.
  • While pedestrians and bicyclists use space as well, they use much less space. (See discussion of flux.) Sidewalks (footpaths) are often considered part of the adjacent private property, and are thus already paid for with property tax.
  • Land used for roads instead of development is not on the books for property taxes.
  • The revenue raised can be used for many transport purposes or redistributed back to taxpayers through some other means.
  • We expect the additional road rent reduces the effective land rent that landowners can charge. If people have to pay more for travel, they will pay less for real estate.
  • Rural areas have much lower, perhaps negligible, road rent. Though the number of users drops significantly (so there are fewer travelers who must pay the burden of road rent), the cost of land drops even more significantly.
  • Were there no (fewer) roads, land would also have very little (less) value, since it would be difficult to access and egress.
  • If roads were fully built on, views would be terrible and the existing buildings would diminish in value. But none of that is to say we have the correct amount of roads now. Clearly urban roads are undercharged in a real estate sense.

A clean well-lighted place for cars

I read there is a lack of parking in St. Paul, especially in the Midway area. Do my lying eyes deceive me? In the face of an obvious surplus of paved space, it makes me think the problem is not the lack of parking, but the lack of the right kind of parking. Some parking spaces are just no good, they are occupied by the wrong crowd, or unoccupied, or something, or cost too much, or are free, or are available only at certain times, or available at all times, or are secret, or are public, or are on-street, or off-street.

The scarcity of blacktop in the vicinity of Snelling and University Avenue is frightening. It will be even worse once a stadium used 20 days per year is built.
The scarcity of blacktop in the vicinity of Snelling and University Avenue is frightening. It will be even worse once a stadium used 20 days per year is built.

Perhaps an exclusive parking shoppe, where the spaces are carefully curated and staff can guide the parker with appropriate recommendations would be helpful.  We could call it `A clean well-lighted place for cars’. The cars would be well-treated, with their choice of asphalt, concrete, or brick pavement, their drivers catered to appropriately by stylish meter maids.

Most of the discussion in this arena is just complaining to get column inches in the local newspaper by driving up the blood pressure of rabid commenters who drive page views and thus ad sales. Yet, much of it is, I suspect, a perverse form of ODD, reflexively supporting on-street parking to oppose bikes and the people who ride them, who add stress to driving (cf: war on cars).

There are several things to remember:

  • There are at least 3 parking spaces in St. Paul for every car, just as in the rest of America.
  • Parking ramps are long-term multi-year investments. Cars that park themselves will be on the market shortly, and driverless cars (we can’t say that, since the cars are now legally drivers) er, self-driving cars will be able to park themselves without inconveniencing the passenger with a long walk to their destination. Robot cars parking themselves can park in less space, since they don’t need to open their doors.
  • The cheaper it is to drive, the more people will drive. More free parking induces demand, just like any transportation investment.
  • Parking is a private good, it is both rivalrous (If I park, you cannot) and excludable (I can keep you from parking if I charge for it and enforce it). It should be profitable to charge by the use. If it is not profitable, it is not needed.
  • If on-street parking were properly regulated and charged for, off-street parking minimums would be entirely unnecessary, the market could work out solutions.

 

The Museum of Surface Parking | streets.mn

The University of Minnesota, along with M-Health, are about to open a new branch of the Museum of Surface Parking (the MSP) on Oak Street at Fulton in southeast Minneapolis, in front of the new Ambulatory Care Center.

This is wonderful news for those in the local Museum-going community, the site will help 21st century college students in particular study the details associated with the storage of cars, as practiced in 20th century America, taking advantage of the University of Minnesota’s position as a great urban university. The site will be a living laboratory, not just for the observation of other people parking cars in the traditional mold, but also enabling students and visitors to park cars, by themselves, for a small fee. The value for transportation engineering courses is immeasurable.

While other nearby sites, similarly within walking distance of the East Bank LRT station, are being developed with “buildings”, this site preserves the historic open feel of the prairie landscape, while not reducing sunlight for its neighbors.

The Museum of Surface Parking - Minneapolis
The Museum of Surface Parking – Minneapolis

This is welcome addition to the collection of Living History sites in the Minneapolis–St. Paul area, such as the Streetcar MuseumFort SnellingGibbs Farm, and Kelly Farm. The parking lot will be open 24 hours a day.

Cross-posted from streets.mn

The hITE of absurdity: Minimum Parking in an era of Declining Traffic

The Institute of Transportation Engineers, founded in 1931, is the main professional association for traffic engineers in the United States. The ITE Trip Generation Manual (currently on the 9th Edition) aggregates a set of studies and outputs the expected number of trips coming or going to a site, by mode, as a function of the type of site. The book Parking Generation does something similar, and guides municipalities on the number of parking spaces a particular new development should have.

Municipalities generally adopt the rates (influenced by the ITE books) as a set of Minimum Parking Requirements, though there is great variation (aptly illustrated by the website Graphing Parking). New development must have parking spaces in excess of the minimum number in order to be approved. Most municipalities, using logic-copying, simply adopt the statues of neighboring jurisdictions without much deep thought. Some do customize them though. For instance, this is the code of the well-endowed (from a parking perspective), City of Maple Grove, Minnesota.

If the world remained the same, and operated at the average level it has for the past 10 or 20 or 30 or 40 years of data that are represented in the Manuals, the Manual might be producing the number that which presumably most municipalities seem to want … the number of parking spaces required so that no customer any day of the year would have to park off-site.

But this requirement itself is odd, and leads to the construction of excess off-street parking, since at least some of that parking is vacant 300, 350, 360, or even 364 days per year depending on how tight you set the threshold and how flat the peak demand is seasonally. Is it really worth vacant paved impervious surface 364 days so that 1 day there is no spillover to nearby streets?

Yet we know that the next 40 years will differ significant from the past 40, just as the past 40 differed from the 40 before that. Our best estimates are that traffic per capita (and perhaps overall) has peaked. This blog has discussed this issue multiple times.

More significantly, peak-season (Christmas) retail travel has fallen off a cliff, as shown in this Wall Street Journal article. Total retail foot traffic for November and December 2013 is at 17.6 billion trips, down from about 33 billion in 2010, just 4 years ago, according to data the WSJ obtained from ShopperTrak. Clearly the rise of the tablet has facilitated shopping via couch rather than car. Does anyone doubt this will continue to rise with tablet adoption?

Graphic from Wall Street Journal
We have further anecdotal evidence. On Black Friday, reportedly the busiest shopping day of the year, the community around Strong Towns went to major shopping areas and photographed mostly empty (over-built) parking lots. Photos were posted to Twitter using the hashtag #BlackFridayParking

Paved Surface Area in the US

To the best of my knowledge, no one really knows the answer to the question of how much total paved surface there is in the US. The best estimate I have seen is 43,000 mi^2 (111,369 km^2).

As a check, we can make some back of the envelope estimates. Feel free to improve these with data

2,605,331 miles (4,192,874 km) of paved roads in the US x 30 feet = 412684430400 ft^2 (38,259,975,250 m^2 or 38,359 km^2). This is about the size of Maryland plus Delaware.

This is back of the envelope. Most roads are 2 lanes (1 in each direction), some are wider. I am taking lane width as 12 feet, and assuming an additional 1/2 lane for each centerline mile to account for multiple lanes.

Parking is less well documented.
250,000,000 vehicles in the US x 3 spaces per vehicle x 180 ft^2 per space = 135,000,000,000 ft^2 (12,541,910,400 m^2 or 12,542 km^2).

As a point of comparison, Connecticut is 14,357 km^2, so we have almost paved over the equivalent of Connecticut to store vehicles off street in the US. This number is probably an underestimate, as some space must be allocated to accessing parking spaces.

Parking plus roads gives us an estimate (rounded to 2 significant digits) of 51,000 km^2, 80% of the size of West Virginia.

So my estimate of paved area is a smaller than above by a factor of 2. It is still quite large.

All else equal, we would definitely prefer to reduce this, as paved area has environmental implications (less pervious surface to filter water, more pavement to absorb heat), direct costs (paving roads and parking cost money – asphalt and concrete production and construction have further environmental costs), and opportunity costs (land that is paved for roads and parking cannot be easily used for something else, money spent paving that land cannot be used for something better).

Summary

Democratic municipalities should do what they want. They should want to reduce Minimum Parking Requirements, or instead impose Maximums where the Minimums used to be.

The reasons they don’t of course have something to do with just unthinkingly using Standard Operating Procedure and something to do with neighbors who do not want spillover parking in front of their own property. The mix of which depends on the location. The neighbor problem can be addressed with on-street parking enforcement and parking charges returned to the neighborhood, but is not the main problem in most of the US.

Unfortunately, these changes won’t affect much in the short run. Land owners are not going to suddenly roll up under-used parking like an old rug. There is not all that much new development taking place (especially retail) which can take advantage of the lessened requirements. Many land owners build in excess of the Minimum anyway.

However as opportunities for re-development arise, better laws will lead incrementally, to better land use.

Lots of Parking in Minneapolis

Why pay more to park on the road
Why pay more to park on the road

A reporter asked: How much parking is there in Minneapolis? This is not a question for which there is a well-sourced answer.

Downtown Parking: There are nearly 25,000 parking spaces in 38 parking lots and ramps throughout downtown,

In the City there are 7000 metered spaces:

Minneapolis Municipal Parking System has 17 parking ramps and 7 lots
These Ramps and Lots encompass over 20,000 parking spaces. (Subtracting this from the first estimate suggests only 5,000 parking spaces are private).

Elements of Access: Transport Planning for Engineers, Transport Engineering for Planners. By David M. Levinson, Wes Marshall, Kay Axhausen.

Outside of downtown requires estimating.

On street-unmetered parking? The City has 1100 miles of street . (I think this excludes state and county roads, I am not sure about park roads, but this is most of them). My guess is 200 spaces per mile (@ ~26 feet per car). If there were no “no parking restrictions” this gives 220,000 on-street spaces (The vast majority of which are unmetered).

Off-street private parking. There are 155,155 households. If each one has 1 off-street space (some have 2 or 3, some have 0), that would be 155,155 off-street spaces in residential areas. I would guess based on national data about twice as many in commercial areas. Roughly every car has to have a space at home, work, and shop.

In short there are lots of parking.

Does anyone have a better estimate?

 

Bloomberg does the hard sell

Mayor Bloomberg of New York is doing the hard sell to get congestion pricing approved, along with some help from FHWA (Mary Peters) Urban Partnership Agreement. The Selling of Congestion Pricing –
Everyone thinks the losers will be commuters priced off the roads. But consider the poor parking garage owner, who will now have to lower their rates to attract back customers. I wouldn’t be surprised to see parking prices drop almost as much as congestion charges rise, meaning only “through trips” (New Jersey to Brooklyn, Queens, or the rest of Long Island) would be truly priced off the road.