More on Parking Prices

At Wabi-sabi, Sandy Ikeda (former Market Urbanism writer) has a great analysis of San Francisco’s pricing for parking. He points out that assigning prices to spots is not equivalent to allowing a market to determine a price. For a real price to emerge capital (the parking space) cannot be state-owned.

Sandy points out that the “shortage” of parking arises because no one owns street parking, so the appropriate incentives are not in place for someone to charge an equilibrium price for parking. While the San Francisco programmay be a step in the right direction, he explains that “more intervention usually doesn’t solve the problems that were themselves the result of a prior intervention.” In this case, the city is trying to set a price for something that it could instead auction off to eliminate the original intervention.

On yesterday’s post, two commenters pointed out other parking reforms in Austin and in Long Beach that go a step further than charging higher prices for parking. These cities have allowed businesses to lease parking spots for outdoor restaurant seating or retail. San Francisco has also tried turning parking spots into mini parks. This has several benefits, including allowing for land to be better-utilized by permitting a form of street narrowing. However, as long as curbside parking remains city-owned, prices for either parking or land leases will be determined arbitrarily, preventing the actual highest-value use from being discovered.

  • http://alexblock.net Alex Block

    Auctioning off on-street parking spaces, however, is not a realistic solution.  And the reason is because on-street spaces are on-street.  They can be parking spaces sometimes, or they can be other things at other times – like bus stops, loading zones, turn lanes, travel lanes, dedicated transit lanes, wider sidewalks, trees and grass, sidewalk cafes, or any other number of potential uses. 

    That idea of auctioning those spaces off might make sense if that’s all they were: parking spaces.  But the actual space is not about parking, it’s about the broader use of curbside space. 

    It’s true that Shoup-ian parking is not a free market solution, but it was never meant to be.  Instead, it looks to use market principles and market dynamics to more efficiently allocate that scarce resource (on-street parking), while it still preserves the ability for a city to change the allocation of that space from one use (parking) to another (say, an additional travel lane). 

    In short, private ownership of streets just isn’t going to happen, nor should it. 

  • Anon256

    Parking spaces could be auctioned off with the city retaining an option to buy them back at a low fixed price, or an easement to use them for public goods like sidewalks/travel lanes (as opposed to private uses like cafes/parking) if it should later choose to do so.  It is already often the case that sidewalks are built on easements on private property, rather than actually being city-owned.

  • Danny

    Government can still be an economic actor. Just because there is only one seller does not mean that it is not a “real price” (whatever that is supposed to mean). Their pricing mechanism is nothing more than an attempt to converge on a utility-maximizing equilibrium price…something any economic actor would do rationally. There is no fundamental economic difference between this and the San Francisco Giants using dynamic pricing to sell tickets to their games. 

  • Danny

    Government can still be an economic actor. Just because there is only one seller does not mean that it is not a “real price” (whatever that is supposed to mean). Their pricing mechanism is nothing more than an attempt to converge on a utility-maximizing equilibrium price…something any economic actor would do rationally. There is no fundamental economic difference between this and the San Francisco Giants using dynamic pricing to sell tickets to their games. 

  • http://pedestrianobservations.wordpress.com/ Alon Levy

    Anything that fits within one space could be done as part of the same system. For larger things, such as fire hydrants and bus stops, there’s a problem, you’re right. The easiest thing to do is to auction off spaces in blocks, so that a company operating buses could buy a block the size of a bus stop.

    Like everything else in capitalism, this is entirely in principle. In practice, expect anything like this to lead to profiteering off of e.g. bus agencies.

  • awp

    The argument is that there is no market mechanism to determine the quantity of on-street parking. 

    Once the government has provided a certain number of parking spaces there are rough approximations of market price, i.e. the prices that keeps XX% of the spots full in any given hour. 

    So the question is how many spots should the government have built.  One that they charge a super high price for, or a million that go at a super low price in any given hour? 

    So despite the second best attempt to “market” price the spots built, it is still not a “market equilibrium” since the number of spots is determined outside the market. 

    If you think the government is acting like a market participant show me one example where a govt. sold a lane of on-street parking because someone offered an amount that was higher than the NPV of the on-street parking revenues. Or, where the govt. has bot the edge of a property to convert to on-street parking because of the inverse.  As opposed to the more general rule, this road is downtown so the outside lane should have on-street parking, or this road is not downtown so the edge of the street should be free parking or no parking.  
     

  • Danny

    Your test criteria for acting like a market participant is flawed: private actors in perfectly competitive markets routinely fail the test.

    Sometimes people act like there is some supernatural difference between government and private actors in markets…that governments and markets are incompatible. This is entirely false. The reason why this misperception exists is that governments tend to have a bunch of attributes that make them act differently than private actors would. For example, they are monopolistic. They are political (ie. irrational with respect to monetary gain). They suffer from extreme diseconomies of scale. These tendencies are likely found in government, but they can occasionally be found in private actors as well.

    These attributes do not disqualify them as market participants, they merely determine that they will act accordingly in a market. More importantly, these attributes are not determinate. Governments occasionally compete with other governments as well as private market participants. Governments occasionally change their scale, or through technology or operations improvements, change their diseconomies to that scale. And occasionally, governments act more rationally with respect to monetary gain. 

    This is one such case. The SF city government already was an economic actor…just an incredibly irrational, uncompetitive one. They now will compete better with their competitors, most of which are private parking garages, but also include no-parking solutions like choffeurs, transit or taxis. They now are acting more economically rational, by trying to optimize capacity utilization and maximize revenues. This change moves markets in the direction of equilibrium pricing, even if the conditions are still imperfect. This is no different than most markets we participate in. In fact, nearly all economists will admit that there is no such thing as perfect market conditions in real life…that the quality of market conditions is really a continuum as opposed to some imagined binary opposition. 

    Furthermore, in a case like this, many economists think that a completely privatized market would be a suboptimal solution, in spite of its better ability to achieve an equilibrium. The transaction costs of maintaining a completely privatized market may be much higher (in laymans terms, read the first paragraph of Alex Block’s post), meaning that the equilibrium that would be reached would result in higher total costs relative to total benefits. In other words, street parking is a Natural Monopoly. 

  • Danny

    “The argument is that there is no market mechanism to determine the quantity of on-street parking.”

    This argument is irrelevant. The quantity of on-street parking does not matter significantly. The quantity of parking in general only matters a little. 
    The quantity of on-street parking is not relevant because on-street parking is merely a subcategory of parking. The quantity of on-street parking only matters to people for whom other parking solutions are not substitutes. But for the vast majority of people, a parking space is a parking space, whether it is found in a garage, parking lot, or on the street. And guess what… there exist many market mechanisms for determining the total quantity of parking, and there are plenty of competing suppliers in this market.

    But even then, parking only matters a little, because parking is a cost, not an objective. People don’t search out parking spaces because they love parking spaces and just can’t help but consume them. Parking is nothing more than a cost of transportation…a cost that has many substitutes. Choffeurs, taxis, transit, bikes, and walking are completely viable transportation methods in San Francisco, all of which have costs that trade off with parking. Therefore, the quantity of parking in general only matters for those that do not see these options as substitutes. In a large, dense, city like SF, it would be a tough task to convince me that this demographic is significant. 

    The market equilibrium price for on-street parking spaces does not hinge significantly on the quantity of on-street parking spaces, because of its substitutable nature. 

  • http://twitter.com/HistorianInMe Juno-Jupiter

    Where I live, the city started charging for parking where people shopped at. The aim was to increase ridership on public transit, which is a massive failure around here due to the fact that you can’t get anywhere on transit in under an hour. The plane backfired. They had placed paid parking at the city mall and other shops (monuments and parks already had parking well before this) and people responded by going to malls out in the county. The one city mall we had became a dead mall…and ironically was turned into a parking garage instead. No one goes to the city except for work, sports games, parades, or visiting monuments.

    Its one thing to charge for parking but the idea of actually turning parking spots into something useless sounds dumb. I don’t like the idea of forcing people out of cars and onto terrible transit (which contrary to popular belief, will not improve service). In liberal cities like Austin, Portland, and NYC it may work but in most cities, alienating car drivers will only encourage people to just not bother going down to the city. Our city is not thriving, and a lot of it has to do with terrible choices that alienates people.

  • Anonymous

    The heart of SF’s plan is that if it should happen that people actually stay away from the area–leaving the parking spots empty– the parking rates will quickly drop, and keep dropping until the area is well-used again. As a result, it’s highly unlikely to result in significant numbers of people staying away from the city, which is easily demonstrated by the parking still being 80% occupied.

    As for turning parking spots over to other uses, well, that depends on whether it’s actually “something useless” or not. Certainly it’s possible to replace parking with plazas and pedestrian amenities that are underused. However, most of the plans actually involve the businesses or residents paying for the space– paying more than anyone did to park there. So it’s pretty clear that those people believe that it’s a valuable use of the space (or they wouldn’t pay for it); and they are, after all, in the best position to know, since they’re there all day. If it doesn’t work out, they’ll stop, and it’ll revert to parking.

    And there are still lots of parking spaces, on the street and in garages. No one is being alienated. Yes, it may result in parking rates rising modestly, but if they rose too much it would become more expensive to maintain the alternate uses as well, and they would back off.

    Ultimately, if the city isn’t thriving, the question is: is it because there’s not enough parking, or is it that there’s not enough of everything besides parking? The plan just makes it possible for interested parties to trade the one for the other.

  • http://twitter.com/HistorianInMe Juno-Jupiter

    Yeah but San Fran is a liberal city that is why they can do this without anyone really putting up a fuss (with exception to a controversy over putting meters in front of people’s houses which I think those people had every right to be upset over). What I am saying is that anywhere else, this would not be realistic and would completely backfire. In any other city, it would discourage people from going downtown as it considered yet another assault on the car driver and just another way for cities to take advantage of people. It backfired where I live because the city did not take into consideration that the county had much of the same things to offer (with exception to monuments and museums which is why they can get away with paid parking) and plenty of parking space to handle it. People who hate cars are going about it the wrong way. Being anti-car alienates people, only in liberal cities where cars are not valued as much are things seen differently.

    As for our city not thriving, it had a lot of businesses, but they started gouging people. Like I said, there used to be this mall but they charged people to park there. They had nothing in the mall that was any different than any of the county malls. So who in their right mind would pay? Even stores that can be found outside of the mall but located downtown was not enough for people to pay to park.

    People only pay to park to visit tourist attractions or to go to sports games. Everything else about downtown can be beaten by the county. I mean even the county library system is larger and better than the city. The city is in such bad shape at this point that it has to rely on the county for taxes to maintain the transit system and the tourist attractions.

    Our city (its in the Midwest) is a good example of what happens when you take advantage of people. They in essence rebuild “downtown” elsewhere. At least that is how its done in the less liberal more moderate to conservative cities (the town across the river from us is even more conservative and won’t even allow public transit period and so far, not having it has worked out for them).

  • http://www.facebook.com/profile.php?id=696099824 Jeff Jacobberger

    Our streets are a publicly-owned public resource.  Cities can use the 8 feet or so near the curb for many things:  travel lane for cars; bus-only lane; bike lane; parking; bus stops; taxi zones; valet zones; pedestrian loading; commercial loading; handicap loading; wider sidewalks; parklets, etc.  Some of those things have enormous public benefit, but are not the use that would exist if our streets were simply sold or leased to the highest bidder  Cities can allow a mix of uses–commercial zone during the day and public parking at night; peak-hour travel lanes, etc.  They can change the allocation of curb space over time.

    The notion that curb zones should simply be sold to the highest bidder reflects a profound misunderstanding of the legitimate role of government in allocating a public good that has an essentially fixed and limited supply.  

    San Francisco is not seeking to price parking to maximize profit, as the free market would do.  Variable pricing starts from the presumption that there is a public benefit to a determined level of vacancy in on-street parking, and prices are adjusted to meet that target.

    In short, the criticism of SF’s parking policy stems from a misunderstanding of what the policy is intended to do.        

  • Eric

     SF is a dense and geographically limited city where transit is convenient and private cars already inconvenient. I think that is more relevant than its political inclination.

  • http://twitter.com/HistorianInMe Juno-Jupiter

     From the many articles I have read and people I know, I would not say transit is convenient. If it were, there would be no controversy.

  • Anonymous

    Charging for parking is a reaction to a situation where it’s impossible to find parking– and it works. So the city mall charged for parking. I’m assuming they had a problem with people staying away because of a lack of parking before then, because otherwise it would be foolish.

    Of course there’s an alternative, which is to add parking. That’s also been tried by many cities, which knocked down buildings to make parking lots, and built parking structures. But that may not be any better. Building parking structures is expensive, and knocking down buildings– which once housed jobs and residents– removes the very things people are coming for. Once you’re done, the additional traffic comes with its own costs. The decreased density makes transit and walking less pleasant and less effective, reducing what was once the city’s greatest advantage. And so on.

    In that sense, it’s a no-win situation for the city. If you expect people to drive everywhere, the sort of density which once existed in cities is a liability. Suburban boosters will say that the city form is obsolete; that the mall you wrote about was doomed regardless of whether they tried to charge for parking or not, and that it was inevitable that the downtown would move elsewhere.

    I don’t agree. It would be one thing if the people who rebuilt downtown elsewhere had done it all on their own dime, and simply out-competed the existing city. But they didn’t– it required, generally speaking, a lot of government investment in infrastructure– roads, sewers, etc. Often they got tax breaks. All of it was justified by the promise of future economic growth. Unfortunately, much of that growth was realized by draining it from the existing city. Now, the government has to maintain both the new infrastructure and the old, and finds that it has a problem. See here, eg: http://www.businessinsider.com/strong-towns-growth-ponzi-scheme-suburbs-2011-10

  • Anonymous

     It’s probably better than most systems– lots of frequent buses, few places inaccessible, a basic level of 24 hour service. It has problems with speed, reliability, crime and vandalism, and finances. I think there are reasons to be somewhat optimistic that things will improve, but time will tell.

    What we do have is a general consensus that improving the traffic and parking situation is likely to be hopeless and staggeringly expensive, but that improving other modes is very doable, so we’re seeing steady improvement there. Sometimes that improvement even comes at the expense of cars. So far, it seems to be working well.

    In the past, projects which improved auto access at the expense of every other type were standard all over the country. San Francisco can’t afford that, because the other types are too valuable, and we’ve finally realized this and made it official policy.

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