7 September 2016

The Cost of Congestion

As we finally get the green light from the Government on motorway tolling, some Aucklanders are already asking how toll roads might impact inner city property prices.


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After decades of political bickering, rapid population growth and gridlock on Auckland roads, an interim report says sometime in the future, it is likely we’ll start paying ‘network pricing’ to use the roads to help tackle a situation that becomes worse every year.

Barney Irvine, principal advisor – Infrastructure for New Zealand Automobile Association, says where toll roads are in place, such as in central London, which has a cordon around it to manage traffic moving through the city centre, house values have been shown to rise. If you’re on the wrong side, they go down. However, Auckland homeowners need not worry for some time yet. It could be several decades before anything happens. It’s already taken years to get to the stage where the Government will even consider tolls – though the Auckland Council acknowledged the traffic problem and came up with the idea a while ago.

In August last year, the Auckland Council and the Government put together a joint evidence based plan to resolve Auckland’s congestion woes. They called this the Auckland Transport Alignment Project (ATAP). As well as looking at projects and when they might be needed, the terms of reference included they look at road pricing to “manage demand”.

Demand management is about using pricing to change behaviour to improve the use of a resource, in this case, the roads. The ATAP process doesn’t finish until the end of August but an interim report produced mid-June says some form of ‘congestion charging’ is essential in the future to manage demand. The report says, it has potential to make a major difference to Auckland’s congestion – much more so than just building more roads faster or changing the order of when things are built.

Barney Irvine says, this type of response makes sense. But the Government is a long way from outlining any definitive scheme on demand charging.

“At the moment, they are just running through a version of international models to get a sense of where they see people will change their behaviour. There are no concrete schemes. They are seeking to avoid this. It is just a version of how things could be.“

“They're looking at a network wide scheme to go across the whole network of roads. It’s very complex. People won’t be charged for every kilometre they drive on the network, but more on the congested areas. There would be an incentive to drive at different times of the day or to travel by different nodes.”

He explains, the network-wide scheme is being talked about all over the world and nowhere have they done it yet. Singapore, which is widely known for its tolling systems, has talked about it, but it is still the best part of a decade away from applying it. “It’s going to take a while and has to take a while because it’s so new. There are such complex technical issues around it and we have to move through those. It could be 20 years until we get a universal scheme. But we could see an interim scheme before that, one that doesn’t cover the whole network, something around the CBD.”

If we want to anticipate the impact on prices – Irvine points to what happened to property values inside and outside the London cordon, introduced to stem traffic flows in 2003. In central London’s Congestion Charge Zone, a fee is charged on most vehicles between 7am and 5pm Mondays to Fridays. In 2013, 10 years after the scheme was introduced, Transport for London reported a 10% reduction in traffic levels in the area and it had a significant impact on shifting people away from using cars. On the same day the scheme was introduced, an extra 300 buses were added to the roads, which is something Auckland will have to consider. 

City-Fringe suburbs such as Ponsonby and Grey Lynn are likely to see less congestion and parking issues as commuters who used to drive in will look to park in the outer suburbs and use public transport to avoid tolls.

City-Fringe suburbs such as Ponsonby and Grey Lynn are likely to see less congestion and parking issues as commuters who used to drive in will look to park in the outer suburbs and use public transport to avoid tolls.

“Motorway tolls add to the value of a house inside the cordon as does being in close proximity. Housing is either on the right side or the wrong side of the cordon.”

The congestion charge proved controversial in outer areas of London, where it encouraged commuters who previously drove into central London to instead park at suburban rail or underground stations.

“We’d have to assume a similar impact on housing prices in Auckland,” says Irvine. From this example, it would seem you’re fortunate if you live in areas where tolling is at its highest and unfortunate if you are located near transit modes where commuter traffic increases.

As to the numbers, for the first stage of analysis, ATAP looked at a variable charge of between 3 cents and 40 cents per kilometre depending on time of day, location and type of network travel occurs within. “But it is still completely hypothetical as working out suitable charges is very complex,” assures Irvine. When the final report comes out from ATAP, there will be a bit more firmness around it, says Irvine. It is only early days and a lot more work needs to be done to understand the impact of demand management and what prices might be.

 

 

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