A service is subsidised if the price is kept lower than the market rate. This article compares the price charged by the City of Yarra for a residential annual parking permit with the market rate for parking in Yarra.
Price for a residential parking permit in Yarra
The City of Yarra charges $38 for an annual resident parking permit.
Market price for parking in Yarra
A price of ~ $3,000 is similar to the annual rental value (~ $3,300) of the public land occupied by an on-street parking bay.
- Land in Yarra has a value of ~ $7,900 per m²
- A parking spot is ~ 5.5 m x 2.5 m or ~ 14 m²
- Annual value is ~ 3% of land value, similar to that for rental properties: 3% of 14 m² times $7,900 per m² = 3% of $110,000 = $3,300
Yarra’s $60 million subsidy of residential parking
The $38 price for an annual resident parking permit is less than 2% of the ~ $3,000 market price. This is a 98% subsidy. Yarra is choosing to not collect the charges that it could easily collect, simply by charging the market rate.
If Yarra has ~ 90,000 residents, ~ 40,000 vehicles and ~ 30,000 permits, then Yarra is subsidising parking by ~ $88 million.
If we estimate that residents and ratepayers react to the increased pricing by purchasing ~ 30% fewer permits, then the subsidy reduces to ~ $61 million.
Yarra’s $18 million subsidy of metered parking
The City of Yarra does not charge any fee at all for the free 2-hour or 4-hour parking bays that are located throughout Yarra. This is a subsidy compared with the ~ $10 per day market price shown by parking apps. If Yarra has ~ 5,000 time-limited parking bays which could generate ~ $10 per day from meters, then Yarra is subsidising metered parking by an additional $18 million.
Yarra’s $79 million parking subsidy
Combining the $61m subsidy of residential parking with the $18m subsidy of metered parking results in a total subsidy of $79m. This is a significant value compared with Yarra’s annual budget of ~ $170m.
Combining economic rationalism with social equity
The City of Yarra can combine economic rationalism with social equity by gradually decreasing the subsidy for parking and using the revenue to invest in safe travel infrastructure. If Yarra charged a simple $1 per day for the first residential parking permit this would deliver an extra ~ $11 million per year.
As the subsidy for on-street parking decreases, some families will downsize from three on-street cars to two, or from two on-street cars to one. This will free up space for the first 5-10 spots on each side street (near shopping streets) to be allocated to metered parking to support traders. In turn, this will allow shopping streets to replace on-street parking with wider footpaths, protected bicycle lanes and level access tram stops; making our streets both better for children and better for business, i.e. attracting more regular patronage from local residents.
Further information on Yarra’s parking subsidy is available at: https://www.streets-alive-yarra.org/better-for-parking/
Originally published on 26th November 2018 as an article on LinkedIn.