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Taxi Medallion Prices Plummet Under Pressure From Uber
HughPickens.com writes Most major American cities have long used a system to limit the number of operating taxicabs, typically a medallion system: Drivers must own or rent a medallion to operate a taxi, and the city issues a fixed number of them. Now Josh Barro reports at the NYT that in major cities throughout the United States, taxi medallion prices are tumbling as taxis face competition from car-service apps like Uber and Lyft. The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. "I'm already at peace with the idea that I'm going to go bankrupt," said Larry Ionescu, who owns 98 Chicago taxi medallions. As recently as April, Boston taxi medallions were selling for $700,000. The last sale, in October, was for $561,000. "Right now Uber has a strong presence here in Boston, and that's having a dramatic impact on the taxi industry and the medallion values," says Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers' Association. "We hear that there's a couple of medallion owners that have offered to sell at 425 and nobody's touched them."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
Don't invest in and artificially scarce commodity.
It sounds to me that even without Uber, the taxi system was poised on the point of a precipice. The Taxi industry is not a stock market and treating it like one is not sustainable.
Also for a long time this system has be renowned for only attracting the sketchiest drivers, so it obviously was not working at all.
Troll is not a replacement for I disagree.
Yup. Its a little like being a landlord (which is probably your example, I didn't see it).
There's statistics depending on the city, where renting out a place is always 10-15% profit over the expenses of owning and maintaining a property. Also, if you go to a bank with a reasonable income and buy a property that already has a tenant, getting financing is reasonably easy.
That basically means that theoretically, over a reasonable period of time, you could buy an infinite amount of small properties, use the money from one to fund the next, quickly make enough to hire a super to maintain the properties for you, and basically have free, infinite income.
But the world doesn't work that way, does it? Anything easy is a race to zero. Yet there's still a 10-15% profit on being a landlord (not even counting the property value going up by the time you sell) Why?
Oh right, the "work" here is the risk taking. You could be getting a tenant that doesn't pay and be stuck trying to evict them (extremely hard in some states) and foreclose on the spot. A street gang could open up shop next door and the police has trouble getting them out and your neighborhood goes to hell. A contractor could get a permit to build a high-rise across the the street. City taxes could go up faster than rent does.
And thus, I know a lot of people who tried to become landlords and ended up in financial trouble. That risk is what you accept to get an easy real estate profit.
This is the same thing. Medallions were easy profit because not everyone thought so, else they'd have been a race to zero too. And thus, the risk manifested itself.
I'm at a loss to understand why the taxi companies don't come up with their own app. They could legitimately claim that their drivers are not crazy wackos that drive run-down Chevy Vegas or something. I mean, the slogan for Uber and Lyft is "normal people in their crappy cars swinging by if they can", right? I rarely take cabs, and don't think I'd ever call Uber. It seems to me taxi regulation is a good thing. We don't let just any joker with a subway train to ride down the rails picking people up when he feels like it. Don't you want to be sure that the car you get it is maintained, driver vouched for and accountable to someone, the cost calculated and constant? It's all bizarre to me.
Now you kids over there, off my lawn!
Everything you know is wrong, Just forget the words and sing along.
that a fundamentally corrupt system is taking a little pain? They aren't even close to the woodshed yet.
There is no reason for medallions to exist any longer. The very easy solution to this is a) require a different class license for hired (hailed or called) car drivers and b) require the use of special plates (many already require a TX- type plate). I'm not even sure a uniform color is really "required" given the presense of the "taxi (un)occupied" roof top display though at this point I think yellow (at least in NYC) is so ingrained it may be a disadvantage to differentiate a hailed car.
Shockingly, the first two of my requirements already exist in most places. So again, why are we still dealing in the corrupt medallion business?
The medallion owners, and they show their appreciation to the city government in an appropriate fashion.
Same reason they don't allow some stores (in the US, typically liquor stores or car dealers) to open on Sundays. It's all about protecting the incumbents from a new entrant who wants to increase their market share and doesn't mind that the existing businesses would have to start caring about their customers.
cities could just stop going after Uber and make them pay a "medallion tax"
Except then Uber drivers wouldn't be part time, "picking people up whenever they happen to be going that way" type service. They would have to work and earn enough for the medallion mortgage/rental. And as they become ful time drivers, the service will become indestinguishable from a taxi service.
Better solution: Do away with medallions as a tradable asset and move to a permit system. Have insurance, maintain your car and not have a criminal record and for a fee sufficient only to cover the program cost, you get your permit.
The medallion system was intended to limit the number of cabs on the road. Before it was put into place, everyone with an old beater could hire out as a taxi service. The roads were jammed and the prices were cutthroat (and some drivers as well). A permit system won't fix this problem directly. But by holding minimum standards up, it can serve to keep some of the low budget/low quality cabs off the road.
Have gnu, will travel.
It seems the summary is a lost art here. At near 450 words, this is no longer a summary. Please /. if you cannot summarize the subject within a single paragraph with a few links forget it. There is no need to make the summary a thesis.
Achille Talon
Hop!
Nice try, but you don't get to call something socialism just because the outcome is something that you don't like. Capitalism is always, 100% of the time, about trying to restrict or eliminate competition if it is in any way possible to do so. If the resource in question is not scarce, a capitalist will try to make it scarce. That's what is going on here.
I concur that this particular sort of thing is not free market behavior. But it is not socialism. This is crony capitalism. It is regulatory capture. The elimination of competition by any means necessary, including government regulation done against the interest of the people the government is supposed to work for is the ultimate goal of a capitalist.