San Francisco: A Free Market in Parking Begins

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US parodies of San Francisco as leftist and socialist may soon need some revision.  San Francisco will soon have the most libertarian, free-market parking policy in the nation.  And it should become easier to find parking.

Conventional US policy says that parking should be made available at subsidized discounts or even for free.  The fact is, 12 square meters of real estate in a dense city has a land value, and that means it has a fair rental value.  What’s the value?  Easy.  Ask the market.

Under SF Park, the cost of parking on-street will vary by time of day based on observed demand.  As their website describes it:

To help achieve the right level of parking availability, SFpark will periodically adjust meter pricing up and down to match demand. Demand-responsive pricing encourages drivers to park in underused areas and garages, reducing demand in overused areas. With SFpark, real-time data and demand-responsive pricing work together to readjust parking patterns in the City so that parking is easier to find.

The goal is to ensure that there’s always a space available, so that people stop endlessly driving in circles looking for parking.  People will be able to check online to find out the current parking cost in the place they intend to visit.  Parking garages will have a better chance of undercutting on-street rates, so that those garages can fill.  If you’ve ever driven in San Francisco, you know that it’s hard to decide to use a garage because, well, if you just drive around the block once more, you might get lucky.  Under SF Park, if you just drive around the block once more, you’ll probably find a space, but it will cost more than a garage, especially if you’ll be there for a while.  So drivers are more likely to fill up the garages.

If the program fails, which I hope it doesn’t, it will be as a result of being too timid.  There will inevitably be pressure to set a maximum parking price, at which prices will stop rising, which means that space will fill up, which means that everyone will be driving around the block again.  Andrew Price at Good asks:  Could parking costs reach $10/hour?  Conceivably yes, for a few high-demand hours, which are almost certainly also hours when transit is abundant.  What’s wrong with that?

The current plan is for parking rates at a particular time of day to be adjusted only monthly.  This is a crude approximation of the actual volatility of demand, which reflects many factors other than time of day and day of week.  In a complete free-market system, parking costs would change more dynamically based on actual utilization at the time.

But there’s a problem with pure dynamic charging, of course: the decision to use parking happens when we leave home in our car, so we really need to know then what the parking cost will be.  The crude monthly adjustment system will ensure that you can always find that information online, but of course, you could adjust every two days and that would still be true.

I hope San Francisco will use their new occupancy data to figure out how to predict demand more precisely, incorporating variables other than time of day.  In Hayes Valley, for example, street parking demand is almost certainly going to be affected by events in the nearby Opera House and Symphony Hall, as well as other smaller events.  (Even if on-street parking limits are too short to use when attending the Opera, the parking garages that serve the Opera will be full, pushing others on-street who would otherwise park there.)  Weather may play a factor, though that one may cut both ways.  We’re more likely to make discretionary trips in sunny weather, but we’re more likely to choose driving over transit or cycling in cold and wet weather.  It will be interesting to see how weather affects the utilization profiles that SF Park observes.

In a recent post on congestion, I observed that current road-pricing policy requires us to save money, a renewable resource, by expending time, the least renewable resource of all.  If you’ve ever circled a block looking for parking, while missing or being late for something that’s important to you, you know that the same absurdity is true of our on-street parking policy.  SF Park deserves close watching.  If it doesn’t work well, ask yourself:  “Is it because it doesn’t make sense to charging for parking based on demand, or is it because they were too timid to do it completely?”  The answer will almost certainly be the latter.  The policy itself relies only on free-market principles that already govern many parts of our economies, because they work.

36 Responses to San Francisco: A Free Market in Parking Begins

  1. Danny August 10, 2010 at 11:56 am #

    It already has failed, for one reason alone: Their maximum rate of $6 per hour is already about half the going rate at garages in the downtown core during business hours.
    Too timid.

  2. Matt the Engineer August 10, 2010 at 1:18 pm #

    Yeah, nearly a decade ago when I lived there I found a few garages at a rate of close to $1 a minute. $6/hr is nothing for those areas.
    Monthly pricing is probably fine just to be predictable. The next step should be to regulate parking garage price structures. There’s always some little sign that tells you the emensely complex rules (ex: in before 10 $10, limit 8 hours), but it’s hardly something you can learn while driving by.

  3. David Sucher August 10, 2010 at 2:35 pm #

    Interesting indeed.
    But it is not a ‘free market,’ as I understand it since there is an external agency (doesn’t matter if it is private or public) to determine pricers…like the diamond market, in a way. The system may indeed be a good one but let’s not call it market pricing.
    “To help achieve the right level of parking availability, SFpark will periodically adjust meter pricing up and down to match demand.”
    The agency will use social criteria — “right level” — to adjust prices. Markets are amoral and this system has definite system goals. And since you can’t outsmart the market I believe that devices like congestion charging will be gamed and doomed to unknown unpredictable impacts.
    Try it but don’t be surprised if we are surprised by the results.

  4. anonymouse August 10, 2010 at 3:23 pm #

    David: It’s not a free market, but at least it’s a market, with price signals serving to allocate a scarce resource. You can think of it as greatly reducing the distortion to the free market of private parking providers. It’s an interesting thought experiment to consider what it would take to bring about free market street parking. I imagine it would involve something like auctioning off street parking easements, possibly for a limited time. So, you can bid on the right to use a block of curb frontage for a year to park your own car(s), install meters and charge others for parking, or even install a roadside garden.

  5. Daniel Sparing August 10, 2010 at 3:59 pm #

    “Demand-responsive pricing encourages drivers to park in underused areas and garages, reducing demand in overused areas.” I thought it should rather encourage travelers to think twice using the car, reducing road traffic. Maybe that too.
    From Europe, it is fascinating to me that on one hand, the US is in love with free market (so a subsidized cycling or transit investment sounds like communism, even if those subsidies are justified because of positive externalities), _except_ that roads and parking should be provided by the government and for free. That is a big exception isn’t it?

  6. observer August 10, 2010 at 7:37 pm #

    While Chicago’s decision to “sell” parking on public streets to a private contractor can be rightfully criticized on financial grounds, my experience has been positive. I can now park near where I want to go for errands that only require 15 to 30 minutes.
    Here’s an example of why: my barber shop employs 5 people and when it cost only a quarter to park for an hour, the owner and the employees would take a few minutes between customers to “go feed the meter.” They could park in front, or nearby, for their entire work day for less than $3. That is now no longer possible and, guess what? Now I can park in front, or nearby, for a buck and get a hair cut too!
    Without putting a fine point on it, I expect the bitter comments that one reads on Chicago’s dastardly parking meter “scandal” come from such shop owners and their employees who have lost their privileges.

  7. Boris August 10, 2010 at 8:31 pm #

    There’s an implicit assumption here: that the parking space supply is fixed. But is that really true? Couldn’t parking-friendly politicians fight for more off-street parking to acommodate those no longer parked on the street, bringing down overall prices by increasing supply? This might solve the parking problem, but worsen congestion.

  8. Loosh August 10, 2010 at 9:07 pm #

    I’m not sure how this discredits SF’s reputation for being leftist or socialist. Which is just fine. I like it that way.

  9. David Sucher August 10, 2010 at 10:44 pm #

    Btw, I just read an interesting comment at Felix Salmon’s blog (and with comment similarly on my own) that it seems an assured supply of available parking — as Felix touts it — is a huge advantage of the plan. Yet that simply encourages people to drive more. No?
    I am happy to see experimentation and I hope they are able to monitor the results fairly and have the courage to adapt if they need to. Changing rates once a month seems like a problem for the managers at the get-go.

  10. J August 10, 2010 at 11:09 pm #

    I cant find information on pricing by area and by hour on the website.

  11. Joseph E August 11, 2010 at 12:24 am #

    $6 an hour max may be too low for the financial district, but should be high enough for most of the city. $48 for an 8-hour work-day should be pricy enough to encourage some people to park in a garage, or take the bus or bike instead. Also, that $6 max is for the pilot period only; if certain areas are still totally full at $6 an hour, perhaps the fees can increase after the pilot period ends.

  12. Aleks August 11, 2010 at 12:57 am #

    @David: Not quite. The converse is that, since parking is much more expensive, many people will decide to save money by not parking in the city (which probably means not driving). Almost by definition, raising the price of parking will decrease demand.
    @Boris: I would expect this plan to reduce congestion. Every minute that a car spends waiting to park is a minute that it’s taking up road space which would otherwise have been empty. If parking prices are set to ensure 90-95% utilization, then the average time to find a space should be just about 0, which is effectively the same as taking quite a few cars off the road.

  13. David Sucher August 11, 2010 at 9:21 am #

    @ Aleks:
    “…since parking is much more expensive…”
    Why is that?
    SFPark states that “Yes. Parking rates will be incrementally raised or lowered in SFpark pilot areas based on demand to help make parking easier to find on the street and at City garages.”
    SFPark will probably track prices with what private parking-lot owners already charge— their experience already maximize revenue and they know just how much to charge to fill up their garages but not to overpay to discourage drivers.
    So evening parking rates may actually go down– which is not a bad thing for overall urban livability and street life.
    But even rates go up, I just can’t connect with the idea that SFPark’s experiment will somehow decrease urban traffic congestion. Yes parking may become more efficient — but that will just mean that for example an outer-edge (of the city) resident like me will decide “Hey! It’s a short trip and I am likely to easily find a space. So why think about the bus?”

  14. anonymouse August 11, 2010 at 9:27 am #

    David: You will think that, others will think about the price. And even if it doesn’t reduce total congestion, it will increase the general economic efficiency of the system, since more vehicle-miles will be devoted to going somewhere useful as opposed to endlessly circling the block endlessly. A study in Brooklyn showed that in some neighborhoods, 50-70% of traffic was just cars circling and looking for parking.

  15. CACuzcatlan August 11, 2010 at 10:23 am #

    Wouldn’t it still be a success even if congestion doesn’t go down or street parking is still full? The city will make a lot more money from parking meters. We all know how much governments like to jack up prices (such as on the bridges), so from there, the max prices will keep going up to eventually match (or surpass) garage rates and have the intended effect of lowering congestion. Maybe I’m too optimistic, but I think this will work in the long term.

  16. Dan August 11, 2010 at 6:04 pm #

    anonymouse: As a SF resident, this is almost always my experience. If I’m driving downtown or to North Beach, I budget ten minutes for the drive, and thirty for the circling to find a spot before giving up and paying garage rates. You get to know the other cars circling very well in those thirty minutes.

  17. David Sucher August 11, 2010 at 8:18 pm #

    If the flow of traffic in SF is improved, then more people will drive there — remember how widening freeways simply induces more traffic? — and congestion will remain at the same level as before.
    I am NOT against the plan just cautioning in case anyone thinks that the streets will be less congested.

  18. Tessa August 11, 2010 at 10:23 pm #

    All your posts on money being a renewable resource and time not being such a resource continue on major glaring problem with our society as a whole: we seem to forget that a lot of people don’t have money, and we seem to be far too okay with worsening inequality in our countries.

  19. anonymouse August 11, 2010 at 11:10 pm #

    Tessa: the time vs. money tradeoff can still be made. Those who can’t afford expensive parking have the option of parking further away in a cheaper area and walking longer. And this is much, much better than just circling the block creating air pollution and contributing to the probability of killing someone.
    David: widening freeways induces more traffic with a non-zero marginal cost of driving. The high parking rates ought to function as an effective toll on driving to the city, which would reduce total traffic somewhat. And even if it doesn’t, at least there will be more usefulness per vehicle mile traveled, since any given trip will be shorter what with the lack of having to circle looking for parking at the end.

  20. Katherine August 12, 2010 at 12:53 pm #

    If raising prices reduces demand for just about every other commodity, why wouldn’t it reduce demand for parking? Makes perfect sense to me.
    Widening freeways increases traffic only because driving on them is free. Toll roads both reduce traffic and (with congestion pricing) spread it out.

  21. Clint August 12, 2010 at 1:06 pm #

    As a San Francisco resident who street parks, I have a lot of problems with this. It sets up a have/have not dichotomy between those car owners who have garages vs. those who don’t. Yes, there are times where I have to circle the blocks a couple of times before I find parking. Big deal. 99% of the time, I find a space within 5-10 minutes. I much rather deal with that than shell out $8/hour (or whatever the rate would be) because I’m unlucky enough not to have a garage. That would be a substantial hit on my monthly expenses and the last thing I need during this economy.

  22. The Rock August 12, 2010 at 1:17 pm #

    Sell your car Clint

  23. EngineerScotty August 12, 2010 at 1:33 pm #

    Congrats, Jarrett!
    Andrew Sullivan at The Daily Dish just linked to you.. You’ve made the big time at last! 🙂

  24. Clint August 12, 2010 at 1:44 pm #

    Thanks for your “Let them eat cake” response, Rock. Assuming you have a car, do you pay for your daily parking?
    It’d be great to live in a society that invested hugely in mass transit over highways, thus making cars unnecessary. I don’t. San Francisco has an OK mass transit system, but my work requires a car outside of the city. Though I suppose your response would be that I should quit my job.

  25. Mark August 12, 2010 at 2:56 pm #

    So Clint, you want public policy to conform to your particular commuting preferences? If you go to an office, why can’t you carpool (even with some random dudes from craigslist) or use a vanpool?
    If you’re a sales guy and you’re on the road all day in your personal car, well, I’m afraid nobody’s ever going to make you happy. You’ll have to accept that you’re just getting a gas subsidy and a road-building subsidy and you’re not paying for your emissions, but your parking subsidy is being revoked.

  26. anonymouse August 12, 2010 at 3:20 pm #

    Clint: I highly suspect that the parking policy in question will only apply during the day and early evening hours in business districts. Overnight residential parking won’t be affected too much, and the areas in question have ample off-street parking in garages. In the extreme case, it might come down to having to sell your car, or move to a different neighborhood, or out of the city entirely. Living in a city inevitably involves tradeoffs like this, and presumably there are lots of good things in the city that keep you there. And besides, if my job required me to have a personal elephant, I wouldn’t think it reasonable to keep it in the city and park it on the street at night.

  27. Clint August 12, 2010 at 3:57 pm #

    This will be my last comment on this thread. This issue isn’t just about me, it’s about thousands of others in this city in the same situation. Like I said before, it would be wonderful to live in Ecotopia, but I (we) don’t, so I (we)have to make the best of the situation in hand. If you don’t own a car, then I suppose that gives a certain validity to your argument. However, if you do, please don’t preach to me about all my “subsidies”. They’re your subsidies to, and unless you bite the bullet as well, your suggestions that I move are glib at best. In fact, I would be willing to take on extra costs for owning a car if those costs were shared by all other car owners as well.

  28. Alan Robinson August 12, 2010 at 8:06 pm #

    @Clint: So NIMBY.

  29. Alan Robinson August 12, 2010 at 8:09 pm #

    Sorry. Wrong punctuation.
    So, NIMBY?

  30. Michael D August 12, 2010 at 8:17 pm #

    Clint – You believe garage owners will be better off. But that also means they’ll be paying for it with a higher property value. If it’s worth it to you to have your own off-street parking, then you can move to the more expensive housing that provides it.
    Off-street parking is not free in any sense – it costs money to build and it carries a high opportunity cost in the form of what could have been built in its place. If you want it, pay for it. But it is not good policy for the city to subsidize car owners choosing to avoid paying for off-street parking by providing them with underpriced parking on public streets. (It is also poor policy for the city to require off-street parking in the first place, which in many other cities prevent people from choosing whether to pay for that parking.)

  31. Jarrett at August 13, 2010 at 1:00 am #

    @ Clint
    You write:  "In fact, I would be willing to take on extra costs for owning a car if
    those costs were shared by all other car owners as well."
    As far as I'm concerned, this means you're in complete agreement with most of the people on this thread.  While people do get excitable sometimes, I doubt many commenters seriously meant that you and only you should be paying more subsidies.  Most are just saying that fair pricing needs to be applied to motorists in general, and you've just said you completely agree.
    So I'm not sure what you've all been arguing with Clint about here.

  32. James H August 13, 2010 at 1:11 pm #

    There’s something missing from the equation. Prices are still set by one monopolistic entity, and it’s goal won’t even be to maximize return on investment. The goal seems to be to create more available spaces. That can be accomplished by charging exhorbitant rates, and most spaces would be empty!
    Efficiency would be improved (more spaces available at better prices) if multiple suppliers competed for the driver’s parking business. They could bid on leases for the parking meters or lots and then operate them.

  33. James H August 13, 2010 at 1:16 pm #

    I meant to start my last post by saying that it’s not really a free market when a government monopoly is the supplier of the service. The same is true for a private monopoly, but the barrier to entry for the government monopoly is insurmountable (maintained by force of law), where barriers to entry in private monopolies can be overcome (e.g. patents expire, emergence of disruptive technology, erosion of competitive position, etc can weaken the strength of a private monopoly).

  34. anonymouse August 13, 2010 at 10:16 pm #

    James: we know. How else would you suggest doing this? What do you think of my proposal of auctioning off 1 year leases on streetside easements which could then be used for private parking, pay parking, or whatever other use that people can come up with within certain constraints (cafe seating, food carts, street gardens would be other potential options). Then you’re not artificially restricting the use of the land nearly as much.

  35. tomtakt August 17, 2010 at 9:03 am #

    The problem with privatizing parking is that you also would have to enforce so many rules on uniformity of parking payment interface or risk confusing the hell out of drivers who have to figure out a different payment machine from block to block. The fact that the parking payment logistics are almost entirely electronic and automated certainly removes a lot of the disadvantages of having parking spaces monopolized by government. But as mentioned, the rates should fluctuate more than monthly, and maybe private operators would find a more efficient way to price and communicate prices to drivers.
    The additional option for individuals to purchase or lease spaces at the “market” rate could also work–for use as parks, sidewalk cafes, or private parking spots. If it’s worth it to someone to pay the cost, let them have it! Although some spaces should be reserved for public parking, if only because people expect it.

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