Essentially it applies to all commercial spaces. Residential spaces are exempt - as are visitor spaces, loading bays, disabled spaces, spaces provided free by bodies such as schools, hospitals and churches, and some others.
The stated aims of the levy include reducing peak hour traffic congestion, pollution and greenhouse gas emissions in Melbourne’s CBD and encouraging the use of public transport.
This got me thinking: Do car parking levies really work? Is this likely to make any real difference to Melbourne’s city traffic congestion?
It’s difficult to find any hard data on the effect of car parking levies – most of the information comes from self-serving submissions by car parking operators and property owners asserting that car parking fees make no difference to congestion and will make all businesses flee the city in terror, taking their jobs and money with them etc etc. I imagine it’s very hard to isolate the effect of car parking levies from the host of other influences on traffic in cities.
The relevant stats that I could uncover suggest the following:
- There is a response from commuters to higher car parking charges: a Vancouver study (PDF here) suggested that each $3 increase in parking fee reduced the probability of driving to work alone (as opposed to carpooling or using public transport) by about 10%. Another study from the University of California (Berkely) (PDF here) suggested an average price elasticity of demand for parking of –0.32 (which if my maths is right would suggest that a doubling in price would reduce demand by about a quarter). There must be some Australian studies on this surely?
- In Sydney, according to some figures, 7.7% of vehicles travelling through the City of Sydney each day use off-street parking (which would be affected by a levy - another 7.5% use on-street parking and 85% is through-traffic). This figure is probably higher now that the cross-city tunnel has diverted some of the through-traffic out of the city. Still, if we’re generous and say that parking levies are passed onto parking users and result in 25% of those users switching to other modes of transport, that still only reduces congestion by about 2% (although it might reduce peak hour congestion by substantially more than that because many more peak hour users are commuters who will require parking).
- Everyone agrees it’s a solid source of revenue. There’s some bickering about how fair it is, but taxing people who drive to work in the CBD of a large city seems intuitively a pretty progressive tax (many of my acquaintances work in the city and few of them drive to work – those who do are certainly the wealthier ones).
Here are my thoughts on its likely effects on congestion:
- Demand for parking is fairly inelastic – it will take a large increase to induce much change in behavour.
- A parking levy will mostly be passed through to consumers (because demand is inelastic).
- This increase in price will have a small impact on demand for parking, encouraging some drivers to use other modes of transport. (A very high fee would have a substaintially larger effect of course).
- If it is true that about 8% of city traffic uses off-street parking in the city (92% of city traffic is just through-traffic or uses on-street parking), a parking levy will have a very small impact on congestion overall. (We need other measures to catch these other drivers – tolls for driving through the city and obviously fees for on-street parking).
- However, it might have a higher impact on peak hour congestion, as a greater proportion of peak hour users are commuters who will park their cars all day in off-street parking.
- It is a solid source of revenue. It is progressive, targeting relatively wealthy individuals, it is relatively non-distorting (because it targets a product the demand for which is inelastic) and any ‘distortions’ probably act to counteract market failure due to the unpriced public good of driving in the city. It’s easy to administer. It also has a ‘polluter pays’ effect which gives me a nice warm feeling (though I acknowledge that there are probably better ways of targeting the polluters here).
- If car park levy revenues are used to improve public transport, that is something that could have a substantial effect on congestion. Part of the reason for the inelasticity of demand for parking is that public transport is not a perfect substitute for car travel but if its reliability, speed, comfort and convenience are improved, it becomes a better substitute.
In summary, car parking levies seem a good source of revenue to direct towards public transport but on their own are probably a relatively ineffective method of reducing inner city traffic congestion.