Search results for: “road pricing”

• Rent control and road pricing — economics is the study of choice

  Yesterday’s post tried to pit politics against the realities of how we know cities and economics work. So today, I thought I would share a set of memos from Howard Marks (of Oaktree Capital) titled Economic Reality, Political Reality (which he refers to as an oxymoron), and Shall We Repeal the Laws of Economics?

  In this last one, he specifically talks about things like price gouging (starting with the grocery industry) and apartment rent controls. Each is worth a full read when you have the time, but here I’ll leave you all with a few city building-related thoughts.

  Marks describes economics as the study of choice. And within these choices, there are many complicated moving pieces and second-order consequences. Take, for example, rent control in New York City. What rent control does is stop the free market from being able to freely set rents. The result:

  A person in favor of this arrangement would argue that it maintains affordability and diversity. What it means in purely economic terms is that some people who couldn’t afford to live in New York City if rents were set by free-market forces are able to live there if they’re lucky enough to secure an apartment with regulated rent. But other people who would like to live in New York City and can afford higher rents can’t do so because there are no apartments for them. And lastly, landlords that have apartments that are somehow unregulated can command higher rents than would be the case if additions to the supply of apartments weren’t being discouraged. It’s a matter of personal philosophy whether this is good or bad. But clearly, the laws of economics and the actions of free markets aren’t at work in New York City. Someone in government is making the decisions.

  Much like inclusionary zoning in the case of new housing, the tradeoffs with regulated rents are that you get (1) less overall housing supply and (2) more expensive prices for the people that can pay market rents.

  You could argue, as Marks suggests, that these are acceptable outcomes; but regardless of your opinion, there are real consequences to this policy decision. There’s no such thing as a “free lunch” in economics, and consequently there’s no such thing as no-cost affordable housing. The question is: Who pays?

  Going back to the topic of traffic congestion from yesterday’s post, Toronto’s general reluctance to implement any form of road or congestion pricing is also an economic choice. We have priced our roads so cheaply that demand is always going to outstrip supply. And this is expected. What we are experiencing today is a natural market outcome.

  Targeting bike lanes as part of the problem is meant to counter this by increasing road supply. Less bike lanes means more space for cars, right? But the second-order consequence of this choice is that you push people off their bikes (which take up less road space) and into cars (which take up more road space). So demand is also likely to increase.

  The stark reality of solving traffic congestion is that it will require greater change. It will mean fewer people driving, more people taking transit and biking, and the people who do continue to drive will have to pay more for it.

  Of course, this is not what any politician wants to talk about. As Marks says: “In the world of politics, there can be limitless benefits and something for everyone. But in economics, there are only tradeoffs.” The tradeoff we have decided to make is cheap roads in exchange for crippling traffic congestion.

  2024.09.22

• The resilient city and road pricing

  Joe Berridge’s recent opinion piece in the Globe and Mail is a good reminder — in the face of a whole lot of uncertainty — about the resiliency of our cities.

  Those previous decades saw a surge of people and jobs locating downtown, with consequent escalation in rents and prices of offices and housing. Why? Partly demographic, as the well-educated children of the baby boom reached adulthood, and partly lifestyle and work style. Young people go to big cities not just to work and live, but for sex, style, money and power. For ambition and anonymity. And for risk. All in the petri dish of downtown density. These drives have always been as powerful as their subsequent search for suburban security and community.

  The structure of the modern megalopolis is not an accident – the dramatic rise of tech employment, two-earner families, the decline of manufacturing, the later date of marriage, smaller households, lifestyle consumerism, teamwork cultures, serial re-education and training – none of these societal trends looks to be diminished by COVID-19. All of them seem to prefer high-density, high-interaction environments.

  For those of us in Toronto, it’s also important to remember just how quickly this city region was growing pre-COVID-19. That is unlikely to change on the other side of this.

  

  But Berridge does also point out some of the potential fallouts from this pandemic. The economics of urban transit, for example, could remain a problem for quite some time. This will strain public purses. (Car usage rebounded quickly, but transit ridership has not.)

  We are also likely to see increased traffic congestion as a result of people eschewing transit (and probably a bunch of other factors). Like Berridge, I am a supporter of road/congestion pricing, and have been writing about that on this blog for many years.

  The best things to tax/price are things that are generally viewed as bad and where demand is largely inelastic. That is, even if you increase the price, many or most people will probably still do it anyway. Think of things like smoking.

  Up until now, Toronto hasn’t had the moxie to make difficult (political) decisions like this one. Perhaps this pandemic will leave us no other choice.

  2020.10.04

• How road pricing impacts income groups

  The Pembina Institute has just published this report looking at the impact that road pricing could have on the various income groups across the Greater Toronto and Hamilton Area. One of the common arguments against road pricing is that it disproportionately impacts lower income folks.

  The study specifically looks at the proposal that Toronto put forward in 2016 to apply a flat congestion charge of $2 on the two highways leading into downtown. The proposal was ultimately rejected by the province, but I thought it was a step in the right direction. In my opinion, a dynamic road pricing model, similar to what is used in Singapore, would be preferable.

  The report concludes by arguing that road/mobility pricing is destined to become a tool in this region if we are serious about managing congestion. However, they also note that it must coincide with a strong and sustained investment in transit. And I would agree with that. That’s one of the reasons why you do this – to fund transit.

  To download a PDF of the report, click here.

  2018.11.29

• A picture of dynamic road pricing

  Below is a photo of Interstate 95 near Miami, which, for the record, I myself did not take while driving.

  

  The two empty lanes that you see are the “Express Lanes.” The price for using these lanes varies based on demand.

  During periods of low demand, the toll could be around $0.20 per mile. 

  During periods of high demand, such as during rush hour, it might be $1 per mile. 

  And during unusually heavy periods, like when there’s an accident, it could be more.

  We used these lanes while driving around the Miami area on this trip. The pricing always seemed reasonable and the lanes were never congested.

  I think the above picture is a good demonstration of how dynamic road pricing can be used alleviate traffic congestion.

  That’s why many cities, such as Portland, are exploring it as a solution. I wish Toronto would do the same.

  2018.08.08

• Road pricing for whom?

  

  New York City is considering a congestion charge for drivers entering Manhattan below 60th street. It is part of Governor Cuomo’s Fix NYC plan. But we all know how difficult these things are to implement.

  Last month, Felix Salmon wrote a piece in Wired where he argued that our cities are dying of traffic congestion and that the cause is ride-hailing services like Uber and Lyft. The solution: A tax on ride-hailing services.

  The article elicited a few reactions, including this one by Charles Komanoff over at Streetblogs and this one by Joe Cortright over at City Observatory. Joe’s message: “The problem isn’t the ride-hailed vehicles, it’s the under-priced street.” 

  Precisely.

  Felix later followed-up with a post on his blog where he clarified that the reason he loves this idea – of taxing ride-hailing companies, not riders – is that it’s far more politically palatable than a blanket tax on all cars. I don’t disagree.

  Which is why I think my idea is something which is eminently politically possible, in contrast to congestion pricing, which has been implemented exactly nowhere in the USA.

  Americans love their cars, and they love the freedom that cars represent, and they hate the idea that they should be taxed for driving their cars. Tolls on roads and bridges are bad enough, but a fee just to drive in to a city?

  That said, I’m with Charles and Joe. 

  Last year, it was reported that roughly 25% of all Uber trips in New York City were UberPool trips. I’m not sure what the number is today, but these are people who are car pooling to get around. That’s generally considered to be a positive thing.

  Are these really the trips we want to be discouraging (and singling out) with a charge simply because we don’t have the moxie to do what is right and makes rational sense?

  Photo by Austin Scherbarth on Unsplash

  2018.03.06

• Why dynamic road pricing is inevitable

  

  The Economist recently published an article called: How and why road-pricing will happen. If you’re a regular reader, you’ll know that there’s been lots of talk and support

  over the years

  on this blog for dynamic road pricing.

  It’s politically unpopular, but it’s an incredibly rationale way to deal with traffic congestion. 

  In Singapore – home of the world’s first congestion charge zone (1975) – they constantly monitor traffic congestion. As soon as average speeds drop over a three-month period, they simply raise the charge. Congestion gone.

  We know this works, but for many reasons road pricing is highly divisive. According to The Economist, there are a few reasons why this is going to become a bit more politically palatable.

  For one, the take from gas taxes and vehicle duties has been declining in Britain over the past couple of years. Electric vehicles will only exacerbate this trend. So governments are going to be forced to look elsewhere for money.

  Secondly, traditional tolls and congestion charges are becoming increasingly ineffective. Today in central London, private-hire vehicles are said to make up about 38% of all car traffic – almost double the share of traditional black taxis. 

  These are cars circling around the city, picking up passengers. Blunt charges based on suburbanites entering the city in the morning and leaving in the afternoon is simply not capturing the way that many of us move around our cities today.

  In other words, urban mobility is undergoing dramatic changes and the revenue and congestion management tools are going to need to adapt. If you’re interested in this topic, check out the full article here.

  Photo by chuttersnap on Unsplash

  2017.08.16

• Autonomous vehicles will strengthen the case for road pricing

  

  Joe Cortright of City Observatory recently published a post about the types of policies that cities should be looking to adopt in response to autonomous vehicles. It’s called: Pricing roads for autonomous vehicles.

  Many have argued, including urban economist Edward Glaeser, that autonomous vehicles are going to be positively disastrous for cities. Once you remove the labor costs associated with the driver and the overall price per kilometer plummets because of pooling/technological advances, we are going to see an huge surge in demand – well beyond the capacities of our roads.

  Of course, there are solutions. We can accurately price the roads, which is something that more cities should be doing today even before autonomous vehicles arrive. Here is an excerpt from Cortright’s article:

  “With modern electronics, and especially with autonomous vehicles, position and speed is monitored with great precision. There is no reason why they [drivers] should not pay for exactly the amount of roadway that they use. And we know that the cost of the city’s roadway varies substantially across space and over time. Use of road capacity in less dense neighborhoods at off-peak hours imposes nominal costs on the city’s road budget. In contrast, peak hour use of city streets and arterials, particularly in and near the city center, imposes huge costs on the city and its residents. Those who use the system at peak hours in congested locations should pay the costs associated with creating, maintaining, and where necessary expanding that infrastructure.”

  This isn’t a novel concept, which is why when Toronto was looking at a flat road toll I argued here on the blog that it was a step in the right direction but that it was too blunt a tool. 

  It’s a moot point now because sadly the province ended up pandering and rejecting the plan, but we should have been considering something that could achieve the above objectives. It needed more finesse.

  But in all likelihood our cities will have to face that reality sooner rather than later.

  2017.06.18

• We’re still on road pricing

  

  The New York Times recently argued that self-driving cars can’t cure traffic, but that economics can. Here is the key soundbite:

  “Maybe autonomous cars will be different from other capacity expansions,” Mr. Turner said. “But of the things we have observed so far, the only thing that really drives down travel times is pricing.”

  The argument here is that capacity expansions – such as additional lanes – never solve the problem of gridlock. Yes lane widening projects increase capacity, but the latent demand is so strong that the problem never gets solved. Even in places like Houston.

  We talked a lot about this phenomenon on the blog a few years ago when Toronto was embroiled in debate over the Gardiner Expressway East. But it’s interesting to think about self-driving cars as simply another incremental capacity expansion.

  I have no doubt that this technology will make more efficient use of our roads. Carpooling will be a lot easier – as is already the case. Cars will be able to drive closer together. We’ll be able to stop abrupt breaking and swift land changes, which actually create systemic traffic problems for everybody else.  And the list goes on.

  But there will still be limits to how many people can be efficiently moved on a particular strip of road. Exactly how there are limits to how many people can be efficiently moved via a particular subway tunnel, streetcar line, and so on.

  So if latent demand continues to outstrip available capacity, which has historically been the case, then we are once again back to the politically unpopular idea of pricing away congestion. As much as people criticize it as regressive, I believe that’s where we’re headed.

  2017.03.11

• Revisiting road pricing

  Following the Toronto Transit Commission’s approval of a 10-cent fare hike, Cherise Burda of the Ryerson City Building Institute penned an article titled: It’s time for Toronto to consider road tolls.

  I am a big supporter of road pricing and I have written a lot on this topic over the years. There’s even a guest post by Darren Davis on this blog – he is a transport planner with Auckland Transport. 

  I don’t have much to add right now, but I did want to help promote Cherise’s post and I did want to link back to all of my previous posts (including Darren’s). Click here for a list of posts tagged with “road pricing.”

  There’s a mental model in Toronto, and many other cities, that remains centered around subsidized roads and artificially low residential property taxes. Because, well, that’s the dream.

  Nobody wants to pay more for anything – I get it. But I think we can all agree that this region has not solved the traffic/mobility problem. In fact, it’s one of our biggest weaknesses. 

  So what are we going to do about it? I reckon the answer is something other than the status quo.

  2016.11.23

• Toronto exploring road pricing on downtown highways

  Road pricing is on the table in Toronto. (Somebody has to fund the expensive Gardiner Expressway East rebuild.) On March 11, 2016, the City issued a Request for Proposal for: “Options for Establishment of Toll Facilities on F.G. Gardiner Expressway/Don Valley Parkway.”

  As a vocal supporter of road pricing, I am happy to see us headed in this direction. And I bet that today’s post will just be the beginning of my ruminations on this topic.

  Because naturally, it raises a lot of questions:

  Should the pricing be fixed or variable? Similar to how Uber’s surge pricing model is intended to ensure that there are always enough drivers on the road, should our road pricing model strive to eliminate traffic congestion by increasing the price of the road as demand rises beyond road capacity? I like the idea of a “congestion charge” rather than just a road toll. There’s something very efficient about it.

  Who should pay? Should anyone and everyone who uses the road pay? Or should it just be be non-Toronto residents who aren’t already paying property taxes in the city? I would imagine that this latter scenario would be easier for Toronto politicians to get behind, since there will obviously be a segment of people who flat out don’t want road tolls/pricing. But if we stick with the principle that it’s a “congestion charge”, then everyone should pay. It doesn’t matter where you live when you are demand trying to exceed the available supply of road.

  (I’m running a Twitter poll right now with this exact question. At the time of writing this post, “everyone should pay” is winning.)

  Should electric vehicles be exempt from the road tolls or congestion charges in order to help accelerate our transition away from fossil fuels? With Tesla getting ready to announce its mass market Model 3 (price $35,000), I’ve been thinking lately that the car I currently own may very well be the last gasoline car I ever own.

  It’s still early days for road pricing and our mayor doesn’t seem to be a fan. So who knows how far we’ll get with this RFP. But I for one hope that we find the courage to make the difficult decisions and that this new revenue stream is leveraged for the purpose of building more sustainable forms of urban transport in this city. 

  Let’s make a 50 year decision and not an election cycle decision.

  2016.03.16