The City of Yarra has about 47,000 on-street car parking bays, which are offered at a subsidised price that is below the market rate. The total annual subsidy can be estimated by comparing council’s income from parking (meters and permits) with the revenue that would have been obtained if council had matched the pricing of commercial off-street parking. We estimate that the subsidy is $127 million each year, which is similar to the $125 million that Yarra collects in rates.
Market price
The market price for parking varies between neighbourhoods, and can be estimated by examining the websites of Ace Parking, Care Park, Wilson Parking, and Parkhound. Note that on-street parking is more valuable than off-street parking, because it is easier to access and closer to shops and services.
Community benefit
Council (representing residents and ratepayers) is not required to charge market rates for on-street parking. Council can decide to offer on-street parking at below market rates, if it determines that the subsidy delivers a community benefit. The challenge is to identify what level of pricing delivers the maximum community benefit.
Counterfactual
One way of examining the issue is to consider a counterfactual. If the City of Yarra had an established policy of charging market rates for on-street parking, would it decide to introduce $100 million worth of subsidies? If council was spending an extra $100 million each year for services or capital expenditure, would it cut these so it could offer subsidies for parking? We don’t believe that council would. As context, the Bargoonga Nganjin library in North Fitzroy cost about $20 million; if parking wasn’t subsidised we could pay off all our debt and also build a similar community asset each year.
Way forward
A way forward is to quarantine existing parking permits from any changes to pricing, and to focus instead on asking commuters to pay for parking. This can be done by converting all parking bays in Yarra (except for disabled, loading, or car share) to ‘permit zone’ and selling digital daily permits (or e-permits) via an app. If 20,000 out of Yarra’s 47,000 on-street car parking bays raised $10 per day for 250 days out of 365, this would raise $50 million per year. This revenue can be achieved with:
- no change to the price for residential permits, and
- no change to the price for business permits.
Published 13th July 2022