Pricing

Blame Cities for the Apps That Let You Sell Your Parking Space


Blame Cities for the Apps That Let You Sell Your Parking Space

Photograph by Getty Images

Parking drives people insane, which explains the reaction to a wave of smartphone apps that allow people to sell the rights to street parking spaces. Last month the city attorney of San Francisco told three such companies—MonkeyParking, Sweetch, and ParkModo—to stop operating. Haystack, a similar app in Boston, has drawn heat from the mayor, and a local lawmaker recently introduced a bill designed to shut down the street parking gray market. Journalists and social-media philosophers argued the apps embodied Silicon Valley tone-deafness.

The ethics of profiting by selling access to public property certainly seems problematic. Each app sets up a market in which a driver who is about to pull away from a spot can earn a few dollars by waiting around until someone who has paid for that information can pull in. The companies keep a commission. Critics say this could create an incentive for people to squat in parking spaces, cashing in by creating more congestion. None of this has happened, though, because it’s not yet clear that these apps would make a difference at all. “A lot of people started to theoretically talk about scenarios that didn’t actually happen and could be easily avoided,” says Paolo Dobrowolny, one of the founders of MonkeyParking.

If they do catch on, it will be the cities’ own faults. The reason that there’s an opportunity for parking arbitrage is that street parking in major American cities has been chronically underpriced. If people had to pay true value for those parking spots, they’d move their cars more. Because they stay put, urban planners say that as much as 30 percent of traffic in major cities is created by people circling the block, looking for clues that someone is vacating a space while cursing under their breath.

Don Shoup, a professor at UCLA and perhaps the world’s foremost authority on parking policy, says the apps serve an important purpose, but not the one the startups think they do. “What I like about them is they reveal the mispricing of public services. Places such as San Francisco and Boston are killing the messenger,” he says. “One of the questions is, do they work?”

10,000 people have signed up for Haystack in Baltimore and Boston

Shoup doesn’t think so. Even if the cities left these apps alone, they would likely fail or change into something else because it is really hard to get enough people to participate, he says. The startup landscape is already littered with the shells of ventures whose clever crowdsourcing ideas withered for lack of crowds.

Eric Meyer, who founded Haystack, says that 10,000 people have signed up for the app in Baltimore and Boston. The vast majority haven’t used it. About 1,000 parking spaces have changed hands since the app launched. A problem is that selling access to your parking space doesn’t bring much cash. The company sets a $3 price; while it allows people to offer more, they almost never do. “You need to provide enough of an incentive to change folks’ behavior. The $3 helps us to get there, but it isn’t getting us fully there,” says Meyer. He says the company is working on non-monetary incentives for people who offer up spaces. As it stands, seven times as many people use the app to seek parking spaces as use it to offer them.

One way these companies may drive adoption is by convincing antagonists in City Hall to cooperate with them. After the initial backlash, the companies all took to preaching the gospel of private-public partnerships. Sweetch has opened up its technology, theoretically allowing San Francisco (or Cleveland, or Chattanooga, Tenn.) to create its own version of the idea. ParkingMonkey and Haystack say they are willing to share revenue with local governments, but no such deals have been reached.

Cities have been focused on less labor-intensive ways to gather information about vacant parking spaces. Many urban areas, including both San Francisco and Boston, have begun to install networks of sensors in parking spaces. These can provide drivers with information about where to drive while giving cities data to develop pricing that takes demand into account.

Installing sensors isn’t cheap. A hole is drilled into each space to enable monitoring, and a small sensor is glued in at a price of $200 to $250 per sensor, according to Worldsensing, which has installed 12,000 parking sensors in Moscow. The company also charges $3 to $10 per sensor per month for the networking and data service. With 275,450 street parking spaces, San Francisco would face a capital investment of up to $69 million at these rates, with a monthly bill as high as $2.7 million if it wanted to cover the whole city.

Such companies as Worldsensing don’t propose putting sensors in every parking spot. They argue that strategic deployment in places where parking could fetch high prices will pay off relatively quickly while cutting down significantly on congestion. Streetline, a company that has installed parking sensors in a handful of American cities, is willing to install the hardware on spec, recouping its investment from increased parking revenue. The company declined to discuss specific rates. It is currently working with car companies to install applications in car dashboards that will pair with these sensors to direct drivers to open spots, according to Kelly Schwager, its chief marketing officer. She expects to have some applications in place by next year.

People who run sensor companies are skeptical of crowdsourced parking applications–and vice-versa. Meyer contends that there will always be space for crowdsourcing because the economics of sensors can’t work on unmetered spaces in residential neighborhoods. About 150,000 people in Boston live in neighborhoods with parking crises, he says.

Any city that wishes to threaten apps such as Haystack can simply start charging market rates for all street parking. According to UCLA’s Shoup, rational pricing would mean that about 15 percent to 20 percent of spaces would be available at any time; all that money would flow straight into city coffers. Higher pricing would almost certainly create an outcry, but Shoup says such cities as Pasadena have succeeded in raising prices by making a show of reinvesting the extra revenue in street maintenance. “I think cities have managed the politics very incompetently,” he says.

The bottom line: As much as 30 percent of traffic in major U.S. cities consists of drivers looking for a place to park.

Brustein is a writer for Businessweek.com in New York.

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