Costs and benefits of parking charges in residential suburbs

Abstract

We present a model for evaluating social costs and benefits of street parking charges, and apply it to parking charges recently introduced in suburban residential areas in Stockholm. We also report the charges’ effects on parking demand and occupancy rates. The analysis shows that the direct effect of the charges was a substantial welfare loss. If the revenues are used to lower distortionary taxes, however, the potential efficiency benefits of this second-order tax effect offsets the direct welfare loss, although treating parking as just another tax base may raise questions about fairness and equity. The model can also be used to calculate optimal parking charges and occupancy levels. Using parameters and demand functions estimated from the case study, we calculate optimal parking charges and occupancy levels, and show that the optimal charges are considerably lower than the introduced ones.