Paved paradise & put up a parking lot

Melbourne's new parking levies scheme is evaluated over at David Jeffery's Oikos. Some points:

• Melbourne has introduced a levy on all commercial car parking spaces in the city centre involving a flat fee of $400 per space per year, doubling to $800 next year and then indexed to the CPI.
• The aims include reducing peak hour traffic congestion, pollution and greenhouse gas emissions in Melbourne’s CBD and encouraging the use of public transport.

David asks whether parking levies really work? Three points:

• A Vancouver study (PDF here) suggests each $3 increase in parking fee reduces the probability of driving to work alone by about 10%.
• A study from the University of California (Berkely) (PDF here) suggests an average price elasticity of demand for parking of –0.32. Fairly low.
• In Sydney, according to some figures, 7.7% of vehicles travelling through the City of Sydney each day use off-street parking (affected by a levy), 7.5% use on-street parking and 85% is through-traffic though this might be reduced by the tunnel. This suggests this type of levy imposed in Sydney would have only a small impact on congestion. Is Melbourne data comparable? My guess there is less through traffic in Melbourne.

The revenues from such levies could be channelled into public transport which would reduce congestion (indeed this is the claim of Environment Victoria see here) but these effects will be small because of low direct and low cross price elasticities. The Parking Association of Australia (an industry group) provide further evidence that parking charges will have small effects on congestion here.

Parking policies are at best only a very 'second-best measure'. A better proposal for dealing with Melbourne's inner city congestion is a pricing cordon as suggested here . Strict parking policies around the boundary of the cordon need to be in place (they often already are) to limit byproduct congestion externalities caused by people parking there, and walking to the CBD.

If one seeks efficiency-promoting parking policies then levy a surcharge on parking fees for vehicles leaving parking stations close to the morning or evening peak. The private sector's 'Early Bird' discounts have the effect of doing this to some extent already. It is important to remember when setting charges on motorists that the objective is to internalise externalities such as congestion and pollution - it is not to restrict travel per se.

By the way an important new book on how to efficiently manage parking facilities is 'Parking Management Best Practices'. Donald Shoup's massive book 'The High Cost of Free Parking' is reviewed here. Shoup is a very good urban economist.