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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.
Why are medallions even sold as an asset, instead of leased from the city government? It just creates a vehicle for private rent-seeking and speculation. Some Slashdot users have tried to answer this in comments to earlier stories about Uber by treating a medallion as a share of the city's curbside "real estate". I can sort of see this, but why isn't it taxed like any other commercial real estate?
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.
Demand for rides is highly variable depending on tourist season, holidays, weather and sports. Medallions can not scale to maximum demand while also allowing for affordable prices throughout the year. Everyone knows that trying to catch a taxi in NY is an unreliable nightmare and one should always have a backup transportation plan.
It's too bad really, as regulation is badly needed for companies like Lyft and Uber. Ideally, DMV would require a second, stricter written and road tests for people who are going to drive for money. Then points would be subtracted from driving record for both traffic violations and run ins with the law, including cheating on the fare. We need to try to prevent psycopaths from picking up passengers, but not with an an onerous system based on scarcity.
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!
It's hilarious that the summary of this story uncritically accepts that the origin of taxi medallions was about "public safety." This is a lie and it's always been a lie. The system was about limiting competition. Pure and simple. The people in the industry want fewer people competing, because there's more profit for them. They made friends with the right politicians, who then introduced the system and controlled how the industry was "regulated." I put that word in quotes because it wasn't regulated in the sense that people believe. It was regulated to avoid competitors hurting incumbents operators. This is the way pretty much all regulation really works. (Look up "regulatory capture" if you're interested in how it works.) There is no legitimate reason to control the number of taxis. Period. I don't even see a valid reason to license them, but if it were about safety, licenses would be available to anyone who could meet certain safety and insurance requirements. I don't have much sympathy for the owners of the current medallions. They've had a government-granted license to print money, which is why these medallions have had value. It's time to let the market take over. The medallion system needs to die.
Bull Crap! I don't taxi much, but I have on occassion when on vacation, and I don't think I've ever had a taxi ride under $15.
Let's see, I took a cab from my house to SF once, a total of about 12 miles and the ride cost me about $90 (plus I had to pay for the bridge fare).
I recently took a cab in the LA area from the Airport to a person's house only a couple miles away, and it was about $50 dollars. I was charged about $7 right off the top just for the fact that the ride started at the airport.
I took another cab in Seattle this past year, from our hotel near the airport to the cruise terminal and the fee was about $80 at least.
The closest I've come to getting charged what you said was in Las Vegas that was only a mile or two and it was $15. After finding out how short of drive it was, my wife and I walked back instead of catching the cab.
Don't know where the heck your riding cabs for $10 (with the tip included), but in my little cab'ing experience, I've never found one. I think they'd charge you that much for driving to the end of the block. Most cabs I've seen charge you a couple bucks before leaving the curb and to start the meter.
You know, people were panning germany for forbidding uber. But we do not have (as far as I can tell) a "medaillon" limit. All you need to be a legal taxi is :
* make a "taxischein" (driver license allowing you to transport people)
* Have insurance which allow commercial transportation of people
* Have a metered reader which the government checks ("geeicht")
None of which is an artificial scarcity like the medaillon mentionned.
And yet what do we see in the article here ? Artificial limitation in the country of the "free market" which are even worst than in Germany.
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