UCLA urban planning teacher Donald Shoup's book The High Cost of Free Parking makes the case that urban parking has a high, hidden cost:
The free parking that Americans love isn't really 'free' at all. A recent parking garage project in New Haven, Conn., for example, cost more than $30 million for almost 1,200 spaces – that's more than $25,000 per space. If you were to finance it using a mortgage, the actual cost would be over $40,000 per space. This breaks down to roughly $135 a month, or $1,600 a year per space – not including externalities like the air pollution and congestion created by increased trips drawn by cheap parking. Even when garages and meters charge for parking, they rarely charge the real value of the parking space. (In Vauban, by contrast, drivers must purchase a parking space in the garages at $40,000 each.) All this amounts to a massive subsidy. Shoup calculates that in 2002 the total subsidy just for off-street parking was between $127 and $374 billion (for comparison, the budget for national defense that year was $349 billion).
Who pays for this? Everyone. The cost of building all that parking is reflected in higher rents, more expensive shopping and dining, and higher costs of home-ownership. Those who don't drive or own cars thus subsidize those who do.
Free parking can become a drain on city coffers. According to a study (PDF) by Bruce Schaller, deputy commissioner of planning and sustainability at the NYC Department of Transportation, the city was losing more than $45 million in parking meter revenue annually as a result of the free parking privileges commonly offered to city employees. But the costs are more than economic: free parking also changes behavior, encouraging us to take more trips and drive alone more often. According to the same study, without that free parking, 19,200 fewer vehicles would enter Manhattan every day, easing congestion.