Free Parking? No Such Thing

Free Parking? No Such Thing

ESSA Writers
parkingfeesopportunity cost
January 3, 2014

Cost complaints about university parking systems typically stem from the misconception that university administrations exist to fulfil every need of students while little regard is given to the economic choices that the university must make. It is better to acknowledge that a university is primarily run as a business. In order to account for the varying demands of students, Monash must balance its costs and commitments while also making a return on investment in order to keep improving its learning environment.

In this context, it is more suitable to consider the opportunity cost of on-campus parking. What alternatives does Monash sacrifice when it dedicates resources to parking? In reality, parking spaces occupy precious real estate on university property, reducing the available land for other facilities and attracting ongoing maintenance costs, siphoning away funds that could be used on a fancy new library or computer lab. The university must seek compensation for parking services in order to offset its opportunity costs and balance its services. Rather than adding these costs to students’ fees, the university targets parking users by issuing permits.

A common grievance from students is that the price of purchasing a permit is too high. If we assess the value of a permit by considering the demand, we would find that a permit price set too low (or in extreme cases, free) would lead to a significant shortage of spaces and conversely, if set to high, would result in empty lots. Accordingly, Monash should aim to maximise the efficiency of the parking facilities by setting the price such that parking facilities are used efficiently. Due to fluctuating demand throughout the day, the university might choose to distribute more permits than spaces leading to severe shortages (and irate drivers) during study and exam periods.

As Monash develops its campuses, accepting greater numbers of students, it also must distribute the increased costs of expanding parking services. This means unavoidable permit price increases in the future. Revisiting the idea of opportunity cost, expanding parking facilities reduces the amount of land available for other amenities like sports areas and social facilities, driving up the economic cost. Additionally, more compact parking facilities will attract higher engineering costs and increasing the number of cars on-campus will add to maintenance and road management costs. The consequence – every new parking space is more expensive than the last.

Is it possible to create a fairer permit system? A single-price system doesn’t take into account a student’s financial situation nor does it account for a student’s level of need. For instance, students who live far from campus without any public transport options could still get bumped to a waiting queue if they fail to apply promptly. As a result, some universities have tried to devise elaborate means-based application procedures. However, one study found that means-tested application procedures were rife with cheating, demonstrating that good intentions can’t always produce fairer outcomes.[1]

Is there an economic solution that could reduce the price? One option is to incentivise carpooling through programs such as Monash Rideshare, reducing the number occupied spaces and on-road maintenance costs considerably, relieving demand. Another option is to convert all on-campus spaces to a metered system. Setting the price of spaces in relation to proximity, time of day or number of hours occupied would incentivise students to be more selective about scheduling classes and time spent on-campus, allowing the university to balance the demands of all students more efficiently.

While Monash could explore ways of making parking more efficient, the truth is that permits have remained relatively reasonable. So, next time you drive into a Monash University campus, think of the UCLA students paying $1669 per year to occupy a fifteen square metre box.

[1] Shoup, D. (2011). The Politics and Economics of Parking on Campus.

University of California Transportation Center, 121-149.