Friday, July 16, 2010

Cap & Trade Parking Permits

Parking, like carbon and sulphur dioxide, is dramatically underpriced. And, just like CO2, the status quo is incredibly resistant to change, despite the many large environmental externalities. In Boston (and in Cambridge), residents can park for $0 (and $8) per year, while at the same time it costs as much as $3000 a year to rent off-street garage parking. One open air parking space in Boston sold for $250,000 a few years ago. That’s $2000 per square foot!

Every time these cities (and every city) talk about raising the price of residential permits, political firestorms ensue and we end up with no change. No change means as many as one-third of the cars parked on-street aren’t driven in any given week and residents happily drive within the city instead of walking, biking or taking transit because – well, they have a car! And can park it for free!

A friend has been thinking about this problem for years, trying to come up with a market mechanism that would fix the situation. And suddenly, my environmental brain crossed with my transportation policy brain and voila – cap & trade parking! What if:

Starting today, the city issues no more parking permits and those with parking permits were allowed to sell or trade them. Suddenly, the reality that those permits are worth a heck of a lot more than $8 a year is no longer contested. People who rarely drive will have to decide whether it is worth it to them to keep owning that car, or to sell the permit for wherever the market sets the price. Today in both Cambridge and Boston, parking permits allow parking only in certain specified zones. The parking permits would transfer along those same lines. In some neighborhoods, the permits would like fetch $500/year, in others, as much as $3000.

The city could decide to buy some of these permits themselves, and retire them, reducing the number of cars residing in Cambridge, or providing them at reduced cost to new-to-the-city low income families.

What would this plan accomplish? Two things:

It lets permits get to market rate without politicians having to cast votes. It lets every car-owning resident participate in this new market. It gives the city a way to cap and then reduce the number of parking permits issued in the city. Permit ownership could continue to have an annual price payable to the city. The price would cover street cleaning and road repair, as well as perhaps an annual incentive to residents who don’t own a car, or to buy residents turning 16 a bicycle for their birthday. In Cambridge, a $25 annual parking permit fee would result in about $1 million a year.

It would also reduce the number of cars parking in Cambridge, and therefore the amount of driving that gets done in Cambridge. It would or could turn Cambridge into a city of residents that would rather walk or bike for local trips (which is most of people’s trips) and provide the political demand for the bike, pedestrian, and transit infrastructure that supports this way of life.

What do you think? I need some economists to weigh in.


fpaynter said...

I'd look for substitution in the market. People with Cambridge houses would soon put a high value on renting their little lawns for parking. Say buh-bye to the koi and hello to the Kias.

Robin Chase said...

Good point, but in the places where the price of parking is really out of whack (dense metro areas), we've already seen lawns, backyards, and alleys converted to parking already. This is part of the problem. Off street parking is so pricey, that people flock to "free" on street parking.

And paradoxically, on-street parking, in front of where you want to go, should be the highest priced parking, not the lowest.

Essie said...

fpaynter: The residential permits are only used for city-owned curb parking, not private off-street parking.

Also, there's a parking cap on the number of commercial parking spaces (parking available to the general public for a fee) allowed in the city, so it would be illegal for people to rent out their front lawns as parking.

Dave said...

This is not quite what your post is about but certainly related: San Francisco is about to undertake (somewhat) dynamic pricing of on-street parking in order to minimize additional driving hunting for parking (following Donald Shoup's advice). It says that 30% of driving in SF is hunting for parking (hope they've got the documentation to prove that statement!)

Meanwhile in supposedly enlightened Portland merchants are fighting parking meters because they claim their upscale customers would rather hunt for free parking and walk 6 blocks than pay to park in front of the store. Go figure.

lord rigobon said...

in my sustainability class at mit, to resolve the issue of parking spaces in the houses, i discuss something similar to what you propose, although it is mostly a tax instead of a property right. the reason is that parking and congestion produce a significant externality that cannot be fully resolved with a property right.
in the end the idea is the same. if you have a parking in your house you pay to the city an amount that is related to its size. so, bigger cars using bigger parking lots pay more.
you have a great blog. continue with the great work.