Daily Archives: January 10, 2017

Do Park and Ride Lots Make Sense?

Park and ride lots for transit are common in the US, especially on commuter rail systems and outlying stations of rapid transit systems. Many urbanists do not like park and ride lots, seeing them as a waste of space that could be better used for housing, which would not only provide riders, but reduce car dependence and avoid the capital costs of parking. So, I thought a brief look at the economics of park and ride lots from an agency perspective might be interesting.

Suppose we have a site adjacent to a transit station. We could build a parking lot or garage, and let drivers park for free, in which case a portion of the transit fare is actually covering the cost of parking construction. We could build parking and charge enough for parking to cover the cost of parking construction, so none of the transit fare is subsidizing the parking. Finally, we could build housing, at some density – single-family houses, townhouses, podiums, or hi-rises. In that case, some of the residents would become riders, and the transit agency may be able to collect some profit on the housing.

The analysis below runs the numbers on 8 hypothetical scenarios for a 10 acre transit-adjacent site: free parking lot, $3.00 parking lot, $5.00 parking garage, $10.00 parking garage, single-family subdivision, townhouses, podium-style apartments, and hi-rise development. The assumptions are all laid out in the spreadsheet. Housing profit margin is based on what the National Association of Homebuilders reports. The equivalent zone is what the development would be per City of LA zoning. Transit fare and service cost are per LACMTA data for heavy rail.


As one might expect, free parking loses money for the agency. Since the service cost is greater than the fare, the cost of building the parking is entirely a loss. If the agency can charge a modest amount for parking, in this example $3, the surface lot turns into a little bit of a money-maker. $298k/year is not a huge amount of money, but it’s something, and this option actually performs better financially than the single-family housing or townhouse options.

Due to high capital costs, a parking garage can be either a big winner or a big loser. If the agency can charge $5 for garage parking, the result is a loss of over $8m/year, but if it can charge $10, the result is almost $4m/year in profit, by far the best option. Note, however, that this is dependent on the ability to consistently fill a nearly 1100-space parking garage at $10/day. There are some locations where this will pencil out, towards the edges of the city and some commuter rail stops. (People might pay $10 to park downtown, but then they won’t even bother to ride transit, which is sort of self-defeating from a transportation and land use policy perspective.)

All of the housing options are guaranteed to generate at least some money by virtue of the profit from selling the housing. Obviously, the podium and hi-rise options do best and beat surface parking in nearly any scenario. If you are in a neighborhood where podium or hi-rise development pencils out, you probably don’t want your transit agency to be in the business of building parking garages anyway.

One thing to note here is that the analysis is quite sensitive to the interest rate. This is because the parking options have large up-front costs, while the housing options have large up-front profits. An increase to 5% turns both garage options into big losses, with even a $10/day garage swinging from $3.8m gain to a $1.1m loss. In contrast, the financials of the housing options improve.


Lastly, please note that this is a very rudimentary analysis and does not account for benefits and impacts to other policy goals. For example, a 5445-space parking garage might be a winner for the agency, but if it’s not located close to a freeway, it may cause a lot of neighborhood congestion. Building housing creates the opportunity for more people to live in the city, while building parking only creates the opportunity to live somewhere else and drive. And of course, parking lots and garages create border vacuums and dead zones in the city fabric, which is undesirable.

Bottom line: park and ride lots may make sense in suburban and exurban areas if parking fees are enough to cover the cost of lot construction and help subsidize transit operations. Otherwise, build more housing.