Feature
by Michael Yarne
While many people now accept the proposition that carsharing is beneficial for the environment, less has been said about why carsharing is also based on sound economics. As board chair of City CarShare and a developer of multifamily residential projects in San Francisco, I would like to offer my perspective on why carsharing is a win-win for the environment and for business.
What Is Carsharing?
In its most basic form, carsharing is a mobility enhancement service that provides an integrated, citywide network of neighborhood-based vehicles available to members using a reservation system. These reservations can be made on an hourly basis, or in smaller intervals, and at variable rates. In the case of City CarShare, once an individual has been accepted as a member, gaining access to cars on an as-needed basis is quite easy. Members use the internet or telephone to reserve vehicles anywhere from three months up to a few minutes in advance of a trip, and can choose from a range of vehicles located at reserved parking areas or “pods” (points of destination) within a short walking distance from their residences or workplaces. There is no paperwork involved.
Every City CarShare vehicle is equipped with an onboard computer that opens the car doors (and unlocks the ignition) when a member waves a small electronic key (called a “fob”) over a windshield-mounted sensor. Because the fob serves as an electronic gatekeeper to each car, the ignition keys never leave the interior of the car. Once inside, the same onboard computer that provides access to the car monitors each member’s mileage and time, and sends this information remotely to a central database. Members are billed for their vehicle usage on a monthly basis, based on a combination of hourly and mileage rates in a format resembling a monthly PG&E bill. Peak rates are $4 per hour and 44 cents per mile. Offpeak rates (from 10 p.m. to 10 a.m.) are $2 per hour and 44 cents per mile. These rates include the cost of gas, maintenance and insurance (each car is equipped with a gas card paid by City CarShare).
Cars must be returned to the same pod where they were originally picked up. Members are charged fines for late returns, but remarkably, in over five years of operation, only a small percentage of reservations end in late returns. In addition, recent advances in City CarShare’s onboard technology now allow our staff to open doors remotely, lock out nonpaying members or identify late reservations.
City CarShare
City CarShare is a San Francisco-based nonprofit carsharing business with 6,000 members, 90 pods and 165 vehicles. Our core mission is to provide convenient, affordable “on-demand” access to a neighborhood-based network of shared cars with the goal of reducing individual car ownership—and improving the environment and quality of life in our cities. 
As a customer-oriented business, we continually strive to make our service so convenient, reliable and affordable that some people prefer using our shared cars to owning their own. By using our service, our members are helping to reduce local traffic, parking shortages, air pollution and dependence on oil—with the potential long-term effect of promoting the more efficient use of limited urban space for nonauto-oriented uses, such as housing. As a nonprofit, City CarShare does not need to generate profits for outside investors, which allows us to reinvest in our company and keep our prices more affordable than our for-profit competitors.
Since its inception in 2001, City CarShare has partnered with researchers at the University of California at Berkeley to compare the driving habits of its members versus a control group of non-City CarShare members. The goal was to rigorously quantify the organization’s purported positive impact on the environment. As a mission-based nonprofit, these results were extremely important to us. The 2005 report showed that City CarShare members drive 45% less after joining than they did when they owned a car. Cumulatively, City CarShare is responsible for 20,000 fewer vehicles miles traveled per day in the Bay Area, an estimated 500,000 fewer gallons of gas consumed and 15 million fewer pounds of carbon dioxide emissions in the next year. The UC Berkeley study also suggests that for every City CarShare vehicle added to our fleet, between 7 and 20 private vehicles are removed from city streets.
While City CarShare’s positive environmental impact is central to our mission as an organization, our service would not have any impact if it did not also satisfy an untapped market demand. The market for carsharing is the real story driving City CarShare’s environmental success and the reason that carsharing is already attracting a larger demographic than committed environmental activists.
Enhancing Personal Choice
Carsharing challenges the conventional paradigm that improving the environment necessarily requires greater restrictions on personal freedom, and more specifically on consumer choice. On the contrary, carsharing improves the environment by increasing the range of consumer choice. Before City CarShare, there were no real market alternatives to car rental or car ownership. The high transaction costs of car rental—centralized locations, insurance, excessive paperwork and waiting in lines—combined with its “one-size-fits-all” daily pricing structure limited its attractiveness as a viable alternative to individual car ownership.
By distributing cars in decentralized, neighborhood-based locations, renting cars on a 15-minute interval basis, and providing a paper-free, highly efficient internet-based reservation system, City CarShare approximates car ownership without the hassles and expense of owning. For those urbanites who don’t commute to work by car or need to drive on a daily basis, carsharing makes great economic sense. The average City CarShare member pays only $35 a month, while the average cost of private car ownership is $500 a month when you include car payments, insurance, depreciation, gas, registration, parking, parking tickets, maintenance and repairs.
These substantial savings translate into higher disposable income for urban consumers and, in the case of apartment dwellers, more disposable income that might instead be dedicated to rent. Regardless of where the savings are spent, be it rent, restaurants or retail, the results are a potential boon for the local economy (with commensurate economic multiplier effects), since the majority of the fixed costs of car ownership are not reinvested in the local economy, but are instead directly transferred to out-of-town finance, insurance and oil companies.
The Hidden Logic of Marginal Versus Fixed Costs
Another not-so-obvious benefit to substituting carsharing for car ownership is that it aligns economic incentives in a way that optimizes personal decision making to the benefit of the environment. When someone buys or leases a car, they are committing to substantial fixed costs in the form of large monthly finance, parking and insurance payments. Once a person has committed to these substantial fixed costs, they have little financial incentive to economize their driving habits because the marginal cost of driving (primarily the cost of gas) is relatively small compared to the fixed cost of car ownership.
Carsharing eliminates the fixed costs of driving and replaces them with pure marginal pricing. This subtle change has significant implications for driving habits because, unlike car ownership, where people pay roughly the same amount each month no matter how much they drive, marginal pricing means that their monthly bills correlate directly with their driving habits. In this way, people start to appreciate the “true” costs of driving and tend to economize on trips. This has the indirect effect of reducing excessive driving, which in turn reduces fuel consumption, air pollution and traffic congestion. And so long as the cumulative monthly marginal cost of carsharing is lower than the monthly fixed costs of car ownership, the consumer wins.
Carsharing and Smart Growth
While most environmentalists pay lip service to the “Smart Growth” agenda of directing new housing growth towards existing, walkable urban centers near transit instead of sprawling subdivisions in the greenbelt, many advocates balk at welcoming new housing in their own backyard. One of the primary reasons for opposing new “infill” housing in San Francisco and other densely populated urban areas is the increase in individually-owned cars that such development inevitably brings into already congested neighborhoods. Growth in the number of individually owned cars, in turn, increases demands on our limited parking supply and often contributes to localized traffic congestion, transit delays, pollution and noise.
As the UC Berkeley studies have confirmed, integrating the right kind of carsharing into new multifamily housing projects can help mitigate the localized impacts of new development by reducing the rate of individual car ownership per household, the average number of vehicle miles driven per household and the amount of automobile-generated pollution per household. City CarShare’s current pricing structure, which includes a combined mileage and hourly rate, is one key factor in achieving these environmental benefits. As a general rule, CarShare pricing should be affordable enough to provide an attractive alternative to individual ownership while also discouraging excessive driving. When the price is right, the environment improves as carsharing membership and revenue grow.
Carsharing as Building Amenity
Not enough has been said about the simple business benefits of offering City CarShare as an amenity. While I cannot (yet) offer comparable sales or rental statistics, it’s a fact that a growing number of new multifamily residential developments in San Francisco are incorporating City CarShare directly into their designs and advertising onsite carsharing as an important amenity. My own firm, Martin Building Company, plans to subsidize the provision of carsharing at three of our future multifamily developments. In at least one case, we plan to incorporate the monthly costs of membership directly into the future condo-association fees. In another project, a 180-unit rental apartment in the Dogpatch neighborhood, we plan to provide a City CarShare pod onsite and offer “automatic enrollment” as an option in all of our residential leases.
As a developer, Martin Building Company has embraced carsharing for business, environmental and civic reasons. From a business perspective, we feel that a substantial number of future renters and homeowners will genuinely consider forgoing individual car ownership so long as carsharing is provided onsite and the building is located in a relatively transit-rich location. In other cases, onsite carsharing may permit one spouse or partner to give up a second car. In both circumstances, the monthly savings associated with giving up a car may provide enough new cash flow to permit a household to own or rent in one of our buildings. In addition, we view onsite carsharing as just another value-added building amenity, similar to workout rooms, lap pools, cable, internet and concierge service. Similar to these amenities, providing onsite carsharing is just another means of distinguishing our properties from other comparable projects. Finally, we see the promotion of carsharing as part of our civic (and environmental) duty to give back to the neighborhoods and the city in which we live and develop. For us, the fact that neighbors who don’t live in our buildings will one day use the City CarShare pods subsidized by our projects, is the essence of responsible development and the difference between building a neighborhood, not just another “project.”
Looking Ahead
As a developer and committed environmentalist, I believe that carsharing, and City CarShare in particular, is an important model showing that what’s good for business can also serve the environment. My firm looks forward to growing its business in a way that enhances the urban environment of San Francisco and increases the range of choices available to its residents and property owners. Carsharing is an essential part of that strategy.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. Michael Yarne is the board chair of City CarShare and the director of development for the Martin Building Company. For more information about City CarShare, please visit www.citycarshare.org or call 415-995-8588. Copyright © 2006 by SF Apartment Magazine. All rights reserved.