But What About Traffic?

The Case for Road Pricing
May 6, 2019

Building more housing will inevitably cause more congestion. The answer is to price the space where the congestion occurs.

In my last Catalyst column, I wrote of the need for places like San Francisco to build more housing. Their shortages have created severe affordability problems, I wrote, and the answer is to relax zoning and allow more density. But these ideas often get blowback from people who live in the areas, and feel the impacts of the growth. They may be concerned about noise, crowding, and aesthetic changes, but above all, many are concerned about the added automobile congestion – hence their talking point “what about traffic?”

It’s a valid concern. Today, the densest cities  have America’s worst congestion and longest commutes, with metro San Francisco among the leaders in both. This makes sense: if more people jam into a space, and don’t significantly change their behavior (for example, by foregoing car ownership), things will naturally get more crowded. So wouldn’t increasing San Francisco’s density worsen the problem?

Well, yes – if certain policies don’t change. San Francisco and other dense cities feel crowded with cars, because the spaces where they’re stored and driven don’t require payment. As with many other “free” public goods, this has caused overuse – a tragedy of the commons. Basic economics would say that to prevent said overcrowding, the city should price these goods based on market demand, so that a scarce commodity is efficiently rationed. In San Francisco, this would mean market-based pricing for both parking spaces and roads. Let’s unpack both ideas.

First, a common complaint in San Francisco is that building more housing will worsen the on-street parking armageddon that already exists. But one reason San Francisco’s parking situation is a mess is that it’s under-priced. Most neighborhoods have no paid residential placard system – anyone can park anywhere. Even in neighborhoods that do, the placards cost a measly $136/year, and each address can purchase up to 4 placards. In both cases, this means too many people are searching for a small number of spots. When people can’t find parking in front of their homes, they waste time and add to congestion by circling to look for it.

Donald Shoup, a renowned parking guru, and professor in the Department of Public Planning at UCLA, has called for San Francisco “to charge drivers what parking is worth.” Residents would bid with each other for annual parking placards. Winning bidders would get the space; losing bidders would settle for cheaper, off-street parking (likely causing the construction of more lots or garages); while others who are priced out would forego car ownership, freeing up street space. Those non-owners could settle for alternative modes of transportation like transit and ridesharing, which would bolster the revenue for those services, improving their coverage. Shoup has even suggested using the proceeds from the parking placard system to fund transit.

San Francisco’s second congestion problem—crowded roads—could be fixed with a similar concept: congestion charging. While there are tolls at some entry points into the city, they are minor, and driving on city streets is free. This leads to the same tragedy-of-the-commons scenario. Drivers can’t move quickly, and their lingering further worsens pollution and gridlock.

In a congestion charging system, which has been widely lauded by economists from Paul Krugman to Murray Rothbard, road use is priced dynamically to be more expensive during peak hours and less expensive off-peak.

Installing this in San Francisco, via electronic tolls and transponders, would create behavioral shifts. Traffic would spread out more across the day, as some drivers amend their habits to avoid the premium rush hour fee. Some people would stop driving, instead taking transit that, because of the reduced congestion, would have lower headways and better on-time ratings. And interesting changes may even occur in the rideshare industry. With congestion charging, an Uber or Lyft ride would be more expensive. But that could impel the companies to scale up their services to carpool (as they already have to some degree), so the higher costs of movement are shared by multiple riders.

Cities that have tried congestion charging, including London and Singapore, have seen this increase in transit usage and reduction in gridlock. In March, lawmakers agreed to try the concept in New York City. And Scott Wiener, the California state senator of SB 50 fame, wants rush-hour pricing for San Francisco.

The benefits of doing this should be intuitive: competition for road space in San Francisco is fierce because of its density, and will get fiercer with more growth. But that doesn’t have to mean “more traffic.” If parking and driving is priced according to market demand, it will shift the behavior of users and the strategy of different industries, as they respond to the price signals. The outcome will be clearer roads for San Francisco.