The Right Price for Curb Parking

It is no doubt ironic that the motorcar, superstar of the capitalist system, expects to live rent-free.—Wolfgang Zuckerman

I agree with Cliff Winston’s call for more research on the effects of charging for parking, but I don’t worry that, without research, the discussion of parking prices will “degenerate into advocacy.” The discussion of parking prices degenerated into advocacy soon after the car was invented. Because all drivers want to park free, almost all the advocacy has been for free parking, and lots of it. Advocacy for market-priced parking has been almost absent and is usually ignored. Advocacy without research can, I agree, lead to a disaster, as with the disaster caused by off-street parking requirements. Research without advocacy, however, may have little effect on public policy.

There has been convincing research about the benefits of market-priced parking. William Vickrey, who won the Nobel Prize in Economics, recommended this market-price policy for curb parking as long ago as 1954. He proposed that parking meters should be interconnected, and that curb parking prices should be set

at a level so determined as to keep the amount of parking down sufficiently so that there will almost always be space available for those willing to pay the fee … the meters could be arranged so that whenever more than say 3 out of 20 spaces [15 percent] are vacant, there would be no charge; whenever only 3 spaces are unoccupied, a slight charge would be made; the charge would become higher as more spaces are occupied, and would be quite high if all of the spaces become occupied.

Parking should be free when occupancy is less than 85 percent at a zero price because it is then a public good in the sense that the marginal cost of adding another user is zero. But when demand increases, the public good becomes crowded, it takes time to find a vacant space, and the marginal cost of adding another user increases. Because curb parking is in fixed supply, the price must increase to keep spaces available. Curb parking is a congestible public good, with charges needed only when the occupancy would exceed 85 percent at a zero price. The price that achieves an 85-percent occupancy rate is not a “free market” price; it is a public price for a public service, and should be set to achieve the public goals of improving transportation, land use, and the environment. With this pricing policy, Vickrey noted that “there would be an incentive for each parker to park as far as possible in locations where the demand is light, and there will be a natural tendency for the long-term parkers to park somewhat further away from the areas of heaviest demand.” The goal of pricing is to manage parking efficiently, not to achieve a target revenue, but the city does receive whatever revenue results from efficient management.

Charging the right price for curb parking will let cities abandon time limits as a way to create parking turnover. Cities can rely on prices alone both to do this and to maintain a few curb vacancies. Prices cannot constantly fluctuate to maintain an occupancy rate of exactly 85 percent, of course, but they can vary sufficiently to avoid chronic overcrowding or underuse. If about 15 percent of spaces are vacant, the price is right.

The price of most commercial parking varies by time of day and day of the week. Parking lot operators instinctively raise prices when their occupancy rates regularly approach 100 percent, and some operators claim they do not own a “full” sign because they never need one. To set the prices for on-street parking, cities can use the traditional four-step process that commercial operators use to set prices for off-street parking:

  1. Look to see if your lot is full or empty.
  2. Check your competition.
  3. If you are full and they are empty, raise your price.
  4. If you are empty and they are full, lower your price.

Can Prices Manage Curb Parking?

If curb parking prices automatically adjust to achieve a target vacancy rate, drivers themselves will set parking prices through their own travel behavior. Curb parking can operate like a normal market—after elected officials have decided on the appropriate vacancy rate needed to make curb parking available without cruising.

Prices are a simple way to deliver a message about scarcity, but can they really manage curb parking efficiently? One well-designed and well-evaluated experiment showed that properly priced curb parking not only ensures vacancies but also improves the operation of the entire transportation system. This experiment is by far the most extensive research on the effects of parking prices ever undertaken. Conducted in central London in 1965, it showed the effects of curb parking price increases. The price of curb parking quadrupled in one area, doubled in the second, and remained unchanged in the third.

London Parking Price Map

Figure 1. Distribution of New Parking Meter Charges in the London Parking Zones, May 1965 (Source: Inwood 1965).

To study how the price changes affected travel times in London, Britain’s Road Research Laboratory conducted 620 park-and-visit tests before and after the price increases. Researchers drove to a chosen address and then recorded the time taken to find a vacant curb space. The driver also recorded the time taken to park the car at the curb, the time taken to walk to and from the address visited, and finally the time taken to unpark the car. The total park-and-visit time therefore measured the added travel time compared with the travel time experienced when drivers can park at the curb near the address they are visiting, without cruising. If at least one parking space remains vacant on every block, drivers do not need to cruise, and they can park close to their destinations. Not spending time cruising and/or walking a long way to the destination decreases the time price that drivers pay for a trip. The time price of travel in London fell when the money price of curb parking increased.

The Road Research Laboratory’s drivers visited each of 31 addresses, 10 times before and 10 times after parking prices changed. The addresses were not chosen randomly, but were instead important business and tourist destinations, such as the National Gallery. Fifteen addresses were in an area where the price of curb parking quadrupled to £0.10 an hour (£1.56 or $2.50 an hour in 2002 buying power). Eleven addresses were in the area where the price doubled to £0.05 an hour (£0.78 or $1.25 an hour in 2002), and five were in an area where the price remained unchanged at £0.025 an hour (£0.39 or $0.62 an hour in 2002).

Figure 2 shows the average park-and-visit times in the three areas before and after the parking price increases. Where prices quadrupled, the average park-and-visit time declined by 66 percent. Where prices doubled, the average park-and-visit time declined by 38 percent. And where prices did not change, the average park-and-visit time remained almost the same. The reductions in park-and-visit time saved drivers 8.35 minutes of travel time per trip where prices quadrupled, and 3.08 minutes where prices doubled.

London Parking Prices

Figure 2: Park-and-Visit Times before and after Parking Prices Increased in London (minutes per trip).

Where parking prices increased, the park-and-visit time fell because all three of its components—cruising, parking, and walking—declined. The reduced search time accounts for most of the reduction in the park-and-visit time. The average search time declined by 83 percent where parking prices quadrupled (see Figure 3), and by 60 percent where parking prices doubled. The elasticity of search time with respect to the price of curb parking was –1.26 where prices quadrupled and –1.18 where prices doubled. These results suggest that, where all curb spaces were occupied, a 10-percent increase in the price of curb parking reduced the average search time necessary to find a parking space by about 12 percent.

London Parking and Visiting Times

Figure 3: Park-and-Visit Times before and after Parking Prices Quadrupled in London (minutes per trip).

Pricing curb parking to ensure a few vacancies and reduce cruising does not mean that travel will become unaffordable. As drivers adapt to the higher money cost of parking and lower time cost of driving, they can employ several strategies to economize on parking:

  1. They can reduce their parking durations.
  2. They can carpool and split the cost of parking.
  3. They can park off-street.
  4. They can divert some trips to off-peak hours when parking is cheaper.
  5. They can make more trips by public transit, cycling, and walking.

Each strategy reduces peak-hour parking use. Note especially that diverting trips to walking, cycling, high-occupancy vehicles, and public transit reduces vehicle travel without reducing human travel, and all real travel is by people, not cars.

Conclusion: Charge the Right Price for Curb Parking

Cruising is not the only form of queuing, of course. When going to a movie you may search for a parking space, wait in line to buy a ticket, wait in another line to gain admission, and then in yet another line to buy popcorn before the movie begins. But these other forms of queuing are different from cruising because they only waste your time. Cruising also congests traffic, wastes fuel, and pollutes the air. Cities thus create serious problems when they underprice curb parking.

If cities charge the right price for curb parking, drivers will always be able to find a convenient place to park at their destination, without cruising. “Get the prices right” is an axiom in public economics, and the right price for curb parking is the lowest price that will keep a few spaces vacant everywhere. But if cities charge the wrong price for curb parking, drivers waste an astonishing amount of time and fuel in cruising, and create a catastrophic amount of traffic congestion and air pollution.

References

Inwood, J. 1966. Some Effects of Increased Parking Meter Charges in London, Harmondsworth: Road Research Laboratory.

Vickrey, William. 1954. “The Economizing of Curb Parking Space,” Traffic Engineering, November, pp. 62-67. Later incorporated in testimony to the Joint Committee on Washington, DC, Metropolitan Problems in 1959, which was republished in the Journal of Urban Economics, Vol. 36, 1994, 42-65.

Vickrey, William. 1993. “My Innovative Failures in Economics,” Atlantic Economic Journal, Vol. 21, No. 1, March, pp. 1-9.

Also from This Issue

Lead Essay

  • Free Parking or Free Markets by Donald Shoup

    America’s supposed love affair with the automobile is more like an arranged marriage, says Donald Shoup. Car and parking policies make cities and suburbs less livable for human beings. He recommends three reforms: First, adjust parking meter prices according to supply and demand. Second, return parking revenue to local communities for civic improvement. And third, remove minimum parking requirements that lock up useful land, lengthen commute times, and contribute to urban and suburban sprawl. These policies, he argues, are good for the community, good for the environment, and represent sound, market-based urban planning.

    America’s supposed love affair with the automobile is more like an arranged marriage, says Donald Shoup. Car and parking policies make cities and suburbs less livable for human beings. He recommends three reforms: First, adjust parking meter prices according to supply and demand. Second, return parking revenue to local communities for civic improvement. And third, remove minimum parking requirements that lock up useful land, lengthen commute times, and contribute to urban and suburban sprawl. These policies, he argues, are good for the community, good for the environment, and represent sound, market-based urban planning.

Response Essays

  • Using Markets to Enhance Mobility by Randal O'Toole

    Randal O’Toole argues that the automobile brings mobility to the common people in a way they could never have otherwise. As such, it is a great social good, and those who criticize urban sprawl are neglecting the many good things about our highly mobile contemporary lifestyle—among them better housing, higher labor productivity, and better access to consumer goods. These may well be worth the commute.

    Some parking subsidies, such as minimum parking requirements and cheap on-street parking, should indeed be removed. But using parking fees to subsidize local public works projects simply redistributes the automobile subsidy to local landowners. O’Toole proposes to privatize parking; private entities would then use the money they collected to build additional parking in response to consumer demand.

  • Zero Price Parking and Nickel Beer by Sanford Ikeda

    Sanford Ikeda calls Shoup’s proposal “an important, and presently… politically feasible step in the right direction.” He contrasts it favorably to congestion pricing, which represents, to him, a needless added layer of regulation. He recommends several refinements to Shoup’s thesis and situates it in a larger constellation of free-market transit policies, including especially deregulated private conveyances. Moving toward these policies, Ikeda argues, should be the ultimate goal.

  • Efficient Road Pricing for Stationary Vehicles: The Case for Curb Parking Charges by Clifford Winston

    Clifford Winston offers a variety of suggestions for further research and implementation of optimal parking charges. What are the current shares of various types of parking capacity? How much of it actually is free right now? How would congestion fees on roads interact with efforts to price parking efficiently? What can new information technologies offer us in this area? Although Winston is clearly sympathetic to Shoup’s thesis, his essay points to the magnitude of work yet to be done.

The Conversation