Wednesday, September 15, 2010

Puzzling policy: price controls on private-sector parking

Wednesday, September 15, 2010

Would it surprise you to know that some cities control the price of parking even for private-sector off-street parking operations? 

Beijing, Guangzhou, Hanoi and Jakarta do control parking prices, so I assume the practice is common throughout China, Indonesia and Vietnam.

The parking operator at this shopping centre in Jakarta was exceeding the regulated prices late in 2009. The official rates specified Rp2000 (US20c or so) for the first hour and Rp1000 for each subsequent hour.
Controlling private sector parking prices seems highly unusual to me. Surely most cities around the world allow such parking to have market prices? Am I wrong? Can you tell me of any other places that regulate parking fees charged by private-sector parking operators? Please use the comments to let me know.

Such a policy seems unwise.
  • The politics of parking pricing is difficult enough for public-sector parking. On-street parking pricing and state-run hospital parking prices seem especially controversial. Why add to your troubles by also trying to control private-sector parking?
  • The usual economists' arguments against price controls apply here. With regulated prices we inevitably suppress supply, inflate demand and throw away the information value of market prices.
  • In certain cases, such as airport parking, there may be a monopoly problem so that high parking prices are a sign of market failure, which could justify regulation. But within urban areas this is rarely the case. In neighbourhoods with commercial parking, there is usually competition.
  • Finally, in China, Vietnam and Indonesia, private car owners tend to be high-income people. Why does an elite group need to be protected from market prices?

I am assuming that the price controls keep the prices lower than the market would. But is it true? 
  • I am pretty sure of this for Hanoi, where there are many complaints of saturated parking and of high black-market parking prices, suggesting official prices are much too low.
  • In Jakarta in late 2009, many parking lots were charging slightly higher than the official rates. This actually prompted enforcement action in February 2010. Clearly, if parking prices were deregulated in Jakarta they would generally be higher than they are now under the strict price controls. There has recently been talk of a parking price revision in Jakarta but deregulation of parking prices is not yet on the radar.
  • In 2008 Guangzhou’s price controls become more restrictive than before, provoking complaints from the private parking industry. In Guangzhou our study found most prices were at the city-decreed price level but some were below it. So maybe the official rates in Guangzhou are not yet too different from market prices.

Officially sanctioned parking prices in Guangzhou.
Why do these cities control parking prices? I heard several different answers. None of them seemed persuasive to me but they are obviously carrying the day locally. They are interesting enough for some detailed discussion, which I will tackle some other time.
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1 comments :

  1. Surely, reason they control market prices is basically same as reason they provide car-parking on public land : they strongly believe car-based mobility in cities should be cheaper than it naturally is. The real question is this one - why do they think it should be cheaper. I guess that's because they do not understand value of the land inside the city, so they try to oppose its high market cost. But why's that so specially the case when thinking about car parking, I still can not understand.

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