Why we were happy when our bosses raised employee parking rates... Or how parking requirements drive modal choice

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Recently, as part of a broader cost cutting initiative, World Bank management decided to do away with a long standing policy of subsidizing parking for its employees. Those of us who work on the Bank’s transport projects and help cities develop more sustainable mobility systems saw this is as a welcome development… losing some friends in the process. 
This personal example, along with a recently completed pilot we conducted on corporate mobility programs, inspired us to share some insights on the dramatic role parking-related regulations and incentives can play in influencing the decisions made by all stakeholders with regard to modal choice –whether it be private developers, property managers, employers or employees:
  • Property developers and managers: In many cities, real estate developers have to comply with minimum parking requirements to ensure that there will be sufficient off-street parking capacity to meet the demand a new building will generate. In places like Mexico and Sao Paulo, those ‘parking minimums’ range from 1 parking spot for every 30 m2 of new office space to 1 parking spot for every 10 m2 for restaurants. But parking space is expensive to build. Therefore, when developers are forced to build a certain amount of parking to meet legal minimums, they need to make sure that their investment generates substantial revenue, and parking then becomes an essential and critical element of the business viability of their buildings (unless it can be repurposed into other revenue generating uses).
    That probably explains property managers’ reaction to our corporate mobility program: overall, they were extremely supportive of the pilot, which they saw as a great opportunity to enhance accessibility to their properties… as long as it didn’t involve restraining parking. In our pilot, property managers were important stakeholders who saw a competitive edge in enhancing accessibility to their properties and were strong supporters of the pilot – unless it required them to constrain their parking.
    In that context, it is apparent that parking minimums create a perverse incentive for property managers to maximize the use of their parking spots, with a direct impact on traffic congestion (see Eric Jaffe’s blog posts for London and New York). 

  • Employers: Employer incentives depend on whether they are charged explicitly for parking in their lease, and on the manner in which parking is taxed.  If parking is included in their rent, and/or if they can write off parking costs as a tax-deductible expense, then subsidizing employee parking becomes an appealing option for employers, not to mention an inexpensive way to make themselves more attractive in tight labor markets.  Conversely, when parking offered by the property manager is limited or pricey, there is a strong motivation for employers to deploy corporate mobility programs and avoid institutionalizing the culture of ‘free parking’.

  • Employees: The pilot confirmed that, for employees who have access to a car, the availability of free or subsidized parking more or less trumps other factors in choosing modal alternatives. Providing quality, convenient alternatives to driving is important, but unless employees have to pay the market cost of parking, traction will be limited – and single-occupant trips are likely to remain the norm. These findings are in line with this recent blog post regarding free parking in DC.
The way forward
Overall, “parking minimums” regulations seem to be driving a vicious cycle of decisions by property managers, employers and individuals when it comes to car use. The tax code can codify this set of perverse incentives if it provides employers tax breaks. On the other hand, restricting parking or pricing it appropriately can create a significant incentive not to drive in dense urban settings.
This insight has been broadly recognized by the transport planning community, in recent years, paving the way for experiments across the world to move away from parking minimums.  London, is widely considered good practice in this context: in 2004, the city abolished parking minimums for all boroughs and imposed maximums more uniformly.  Fei Li and Zhan Guo found that this changed allowed a 45% reduction in the number of parking spots built in new developments, and 60% of new developments in Inner London were car-free.
Sao Paulo followed suit just a few weeks ago with a new master plan that abolishes parking minimums for the whole city. This is a huge step forward, and a clear indication of the Brazilian city’s willingness to move toward a more sustainable transport vision.

What does this mean for the World Bank?

  • Clearly parking policy is a critical issue to discuss as part of engagement with a city – either in the context of a mass transit investment (where parking policy would be an important complement to the overall design) or as a policy loan for a particular city.  The key here is to ensure that parking is priced appropriately, that there are no perverse incentives in the tax and urban planning policies that create a vicious cycle where availability of parking drives cities towards automobility; and that cities consider alternatives to parking minimums (such as better public transport, employer mobility programs, and support for cycle-commuting) in their building codes.

  • Reconsider more broadly the role of parking in places such as park and ride at transit stations. Rezoning the land used for park-and-ride lots to support high-density development could attract more transit riders and create a more transit-friendly, more compact form of development with a lower transport footprint altogether (see Atlanta’s recent decision to retrofit housing at some of its park and ride lots).

  • As far as employee policy is concerned, budget considerations aside, funds that were used to subsidize employee parking could be realigned to support cycling and transit choices for employees, in an effort to better align internal policy with the Bank’s goals and objectives.


Shomik Mehndiratta

Practice Manager for Transport in Europe and Central Asia, World Bank

Diego Canales

Sustainable urban transport specialist, Latin America and the Caribbean

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