Saving

The Solution to Your Parking Frustrations: Market-Rate Pricing?

photo: Nahh

Next month, Seattle will be raising rates at parking meters in several neighborhoods. No surprise there. But they’ll also be lowering rates in other neighborhoods—and in some parts of town, meters will be running until 8pm or later.

It’s called market-rate parking, and it’s the most exciting thing to happen to parking since self-parking cars.

Seattle joins Washington DC, San Francisco, and parts of New York City in thinking about parking in a new way. The prospect of higher prices and late nights at the meters drives people crazy, but there are good reasons for parkers to applaud this reform: if the city gets it right, you’ll be able to slide into a spot wherever and whenever you need one.

How it works

Market-rate parking is the brainchild of Donald Shoup, an urban planning professor at UCLA and author of The High Cost of Free Parking. Here’s the idea: parking works just like hotel rooms or any other scarce resource. Set the price too low, and there will be nowhere to park. Set it too high, and spaces will sit empty. But set the price just right, and something magical happens.

My aunt has long boasted that she has a “parking blessing,” and can cruise into an open spot whenever she arrives at her destination. Market-rate parking, implemented properly, can give everyone a parking blessing. Economists get all dreamy about the fact that when you go to the supermarket for a loaf of bread, it’s always waiting there for you – because the price is set according to supply and demand. Parking can work the same way. “There should be one or two open spaces on every block to making parking convenient,” says Shoup.

The idea of market-rate parking sat on the shelf for years because coin-op meters made it impossible to implement. That has changed. “Now we’re actually able to take the theory and put it into practice because technology has moved forward so quickly over the past ten years,” says Samuel Staley, a land use scholar at the Reason Foundation, a libertarian think tank.

This is one of the few policies that libertarian conservatives and city politicians can agree on. Tim Burgess of the Seattle city council is one of the key backers of market-rate parking. “The basic philosophy behind the proposal is to shift the city from a revenue-driven on-street parking strategy to a outcome-based policy that is designed to help retail businesses, reduce congestion, and make it easier for people to find a parking place at their destination,” says Burgess.

In Seattle, the city studied 22 neighborhoods to see where paid parking was over- and underused. The new prices start rolling out February 1. Prices are going up in nine neighborhoods and staying the same or going down in 13. In my neighborhood, Capitol Hill, rates are going up from $2/hour to $3/hour; other neighborhoods will pay between $1 and $4.

“We’re setting rates so that there are a few spaces available when people need them,” says Mary Catherine Snyder, parking strategist for the Seattle Department of Transportation. “We want to hit what we call the sweet spot.”

Seattle’s initial implementation of market-rate parking is crude: prices won’t vary according to the time of day, and the new prices will be in effect throughout 2011. The city will be doing a followup study this summer to see how well the new prices are working. They’re also investigating how to make prices much more nimble—maybe the block with that hip new restaurant will cost a little extra during dinnertime.

Debunking the myths

Let’s look at some common objections to market-rate parking.

This is a revenue grab. People will just be forced to park at higher prices. Shoup points out that Los Angeles recently doubled meter rates citywide—not a market-rate policy, just an arbitrary increase. “And now there are whole blocks with not a single car parked at a meter,” he says. “And there are businesses that are suffering, there are restaurants that are suffering.”

Wait, actually market-rate parking will hurt businesses because nobody wants to pay higher rates? When parking is underpriced, spaces sit occupied all day (often by employees of nearby businesses). Customers drive up, see that they can’t park near the store they want to visit, and drive on. “And who will leave a bigger tip at a restaurant?” asks Shoup. “Somebody who won’t come unless they can find a free space after driving around for ten minutes? Or somebody who is willing to pay for parking if they can easily find a space?”

Burgess met recently with local restaurateurs concerned about the new policy. “And what I say to them is: the current environment, where it’s difficult to find on-street parking in the downtown core, certainly is not helping them.”

If you raise prices, I’ll never come downtown again; everyone will just shop in the suburbs. Market-rate pricing gives you a choice: come downtown, find a spot easily without having to drive around for fifteen minutes, and pay a fair price for it. Or visit another neighborhood with cheaper parking. Or stay home. If the city sets a price for parking that turns curbs into tumbleweed-laced deserts, that’s not market-rate parking, that’s just a screwup.

Paved paradise

Market-rate parking is still more theory than practice. Producing the desired result—one or two free spaces per block—may turn out to be too complicated to achieve in practice. But it’s hard to see how you could do much worse than the current system, where drivers cruising for underpriced parking create traffic jams, pollution, and steering wheel-punching frustration. “Studies from other cities show that anywhere from 15 to 30 percent of drivers are parking-space hunting or cruising for spaces,” says Burgess. “So if we can help reduce that, that’s a good thing.”

We all know that paying the cheapest possible price for something—junk food, rickety furniture—is often a lousy way to save money. The same goes for parking. Nobody wants to pay more, but arbitrarily cheap parking is like bargain beer: it sounds like a great idea, but in the long run, it makes your life worse.

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.