Slashdot Mirror
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?
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?
This. The taxi companies are all focused on the fact Uber and Lyft are working without regulations as if that was the reason for their success. Yes, having lower prices most certainly makes them more attractive, but that's not all of it. Getting a taxi is a terrible experience. If you're lucky, you can hail one, but if you need to call one up... Enjoy waiting for any amount of time between 30 seconds and an hour, the taxi never reaching you, you having no idea where they are, the taxi arriving as a tiny Yaris when you specifically asked for a large car because you have luggage, etc.
One of the big deals about Uber for me is that their app and infrastructure makes the taxi companies look like pathetic dinosaurs. Calling a lift is easy, you can track their position in real time, if something goes wrong or if they're not responsive you can deal with that, you can pay through the app... It's just a much better user experience. Taxi companies probably never even heard of the term, and they're looking extremely stupid for it.