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Wednesday, September 15, 2010

Puzzling policy: price controls on private-sector parking

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.

Monday, September 13, 2010

Hospital parking charges - a learning moment?

It looks like English hospitals will keep charging fees for parking after all.

The United Kingdom's new Conservative-Liberal Democrat coalition government has announced a probable reversal of the plan (by the previous Labour government) to stop hospitals in England charging for car parking:
In 2009 Labour Health Secretary Andy Burnham promised to scrap the fees, which raise about £110m a year. But the Department of Health has now said the idea to scrap car parking charges was not properly funded. A Department of Health source said it was not a U-turn, because the current government had never committed itself. Health minister Simon Burns said: "For a long time we have been unconvinced that Labour's car parking idea was properly funded and practical.
This seems a good decision to me. But it isn't a popular one. The public reaction so far in England has been hostile.

Will the Coalition government explain persuasively why this is a good policy? If it can, then this could be a good learning moment in parking policy. I don't have high hopes on that but let me explain why I think this is a good decision. I am refining and building on my earlier comment on this (in August).

Hospitals and the UK's National Health Service have a clear mission - health, not parking.  I don't see how this mission can be stretched far enough to justify using the health budget to subsidize all hospital parking.

However, some might say, 'but hospitals can't properly fulfill their mission if getting to them is a hardship for too many people!' It is not a bad point. NewsTechnica, gets at this with a (spoof!) quote in a funny post, "NHS budget in parking-led recovery":
“The NHS remains free at the point of contact,” said health minister Simon Burns. “But we didn’t say anything about getting to the point of contact.”

But I would argue that wanting free parking for everyone who visits a hospital is stretching this logic too far!
  • It DOES make sense for access to hospitals to be a central issue in hospital location decisions. But since it is impossible to have a hospital on every corner, there will always be some costs involved in getting to them. Parking is just one of those costs.

  • Does it make sense for the health budget to pay for ALL transport costs in accessing a hospital? Obviously not.

  • On the other hand, it does seem reasonable to help some people with some of their transport costs to hospitals. Using health funding for the hospital transport costs of people who really need it could be seen as serving a health objective more than a transport objective. There is no clear cut line between the two but a line has to be drawn.

  • So, by all means do give a reasonable travel allowance to those who really need it, such as long-term or needy patients and their families who visit them.
  • If such an allowance is well-targetted and if the sum given in each case is about the same as the parking charges that would be incurred, then this should be much cheaper than free parking for all.

  • It should also be consistent and mode-neutral. Don't just give free parking to the needy ones who have cars and give nothing to other needy folk who don't drive! Better to give all the deserving cases a travel allowance, which can be used towards any transport costs, not just parking charges. What is so special about parking that it must be subsidized when other transport costs are not. 

Have I convinced you? Or do you still think hospital parking should just be free?

Don't forget that this is a government that is committed to deep spending cuts. Adding some new poorly-targetted subsidies for parking would be a weird thing for such a government to do, while simultaneously cutting important public services?  

Parking is never 'free'. The only question is who faces the costs.