My job allows me to see a lot of bad behaviors. While working in downtown Denver, I’ve recently been witnessing a lot of illegal parking. This particular neighborhood is all 2 hour parking, which seems odd considering it is strictly residential. Being an urban area, there has also been an influx of rental car services like Car2Go. Despite attempts by these services to make the storage of these short-term rental vehicles as easy as possible, short-term parking and short-term car rentals just don’t seem to play well together.
How does car-sharing work? You sign up for the service, use an app to find a car near you and pay by the minute or hour to drive it one way the local area and lock the car behind you at your destination. There are some restrictions as to where you can park it, but they will pay for metered parking. They also work out deals with cities for dedicated spots, and to make the cars exempt from 2 hour parking limitations.
The problem with Car-Sharing and 2 hour parking
But I think that is a problem. There is a reason cities limit parking with 2 hour time limits and parking meters. Contrary to popular belief, it isn’t to increase revenues. Judging by the number of times I saw the local parking authority drive by in downtown Denver last week, and the number of tickets I saw written, I’m sure that parking enforcement is a net expense. Instead, the reason is to increase available parking.
There is 2 hour parking all around the Old Town section of Fort Collins. The area is almost entirely retail shops, bars, and restaurants. But less than half a mile away is the Colorado State University Campus. Parking for commuters is over $200 per year. If a student can find off-campus parking, they do so. Without time limits on the parking in Old Town, students would quickly overrun all of the available parking, leaving none available for patrons of all those tax-generating businesses. As it is, parking is tough enough!
But when a short-term rental company moves into town and gets those concessions, they are basically taking parking spaces away from others. Back in Denver again, there was a Car2Go car parked in a two hour spot when I got to work one day last week. Not a problem, the restriction doesn’t start until 8am. But that car sat there and wasn’t picked up again until 5. So for 9 hours of time-restricted parking, this spot was taken. People who are responsible for their own vehicles had one less spot available to them.
The problem withCar-Sharing and dedicated parking spots
In some areas, it is possible to find spots that are reserved for these cars. But again, parking spots are a finite resource. Every one dedicated to a car-sharing car is one less available for general parking.
On the flip side, there is the argument that car-sharing means less cars on the road that need parking and every time somebody gets into one of these cars, that is one less car parked somewhere. The net impact would seem to be more parking spots available for everyone. However, some areas are going to wind up as losers as well.
What happens if somebody takes a car to an area with less demand? It sits. Like that Car2Go car that sat all day long. Tuesday, as I was leaving, I saw another one being parking in roughly the same spot. I wasn’t back Wednesday, but I bet it was there for a good portion of the day again. Meanwhile, other drivers who were home for the day were forced to scramble for parking and somebody extra had to pay for the garage because the only Car2Go member in the neighborhood left the car where no other members were going to come out and get it.
Car Sharing and Moral Hazard
When economists talk about a moral hazard, they are talking about the idea that when you create a safety net against failure, it takes away the disincentive to work towards success. In essence, it creates an incentive to take on bigger risks. Because if the risk pans out, you win. And if it doesn’t, you don’t loose.
In the recent recession, there were plenty of this as many “too big to fail” banks were propped up when all of their sub-prime “NINJA” (no income, no job, no assets) mortgages went belly up. For years, they raked in the cash selling loans to people who could barely afford them. And when rates rose, then borrows couldn’t afford them and defaulted. By the thousands. The entire system collapsed. And the government stepped in to prop them up. While new banking rules are supposed to stop this from happening again, large banks are out to make a profit and have been shown that following the minimum rules and taking on huge amounts of risks is a good investment.
What does this have to do with car sharing? If you rent one of these cars, when you park it, you are done with it. So long as you meet the company’s minimum rules for parking, like not parking in a spot that says “No Parking” then you take none of the risk of parking in a spot and leaving it there for hours. Normally, you would risk getting a ticket, getting towed, or even having your car keyed. But why should car-sharing renters care? They don’t pay for any of that! So they get the reward without the risk.
Have you ever rented a car-sharing car? Do you think they potentially create a moral hazard by taking away the responsibility to the driver after they are parked?
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