Question: With all the yellow cabs in New York City, how could Uber possibly prosper and survive so well?
— Arm raised in Astoria
Dear Arm:
You’ve stepped in it now. Issues surrounding taxis and ride-hailing services like Uber or Lyft are major hot buttons right now in New York. In August, the City Council passed some historic new regulations limiting the number of Uber and other ride-hailing cars and establishing a minimum wage for drivers. Needless to say, the companies are up in arms about the new laws and are looking feverishly for loopholes.
To the specifics of your question, however, it’s really the other way around: How can tightly regulated yellow cabs prosper against underregulated Uber?
Here are some relevant facts:
- In the last few years, the number of for-hire vehicles operating in the city has grown from 63,000 to more than 100,000.
- Roughly 13,500 are yellow cabs while another 5,600 are so-called “green cabs” operating only in Upper Manhattan and the outer boroughs. The rest are traditional “black car” limousines and ride-hailing cars.
- While the number of trips in app-based vehicles has increased from 6 million to 17 million a year, taxi trips have fallen from 11 million to 8.5 million.
- And the value of a yellow cab medallion has collapsed from more than $1 million to less than $200,000.
- The average pay for a New York City driver is $42,000. But burdened with the cost of either renting or buying a devalued medallion amid declining ridership, yellow cab drivers are in great distress. Indeed, financial problems are believed to be the primary reason behind a suicide epidemic among New York’s immigrant cab drivers; six have killed themselves in the last year.
With every boom eventually there comes a bust. I’m not an economist, but this situation is quite typical for the early stages of an expanding market — a rush of new for-hire cars ushers in declining incomes for individual drivers. The city believes it needs to regulate the business in order to maintain a fleet of cars available to the public and to avoid a huge falloff in the future when drivers will simply quit rather than work for ever-shrinking paychecks.
Down the road (no pun intended), we may see more ride-hailing regulations, including some geographic limitations on Uber and other companies and limitations on cruising without passengers.
Regardless of the outcome, remember that the ease of living without a private automobile is one of the great advantages of life in New York. Indeed, if you factor housing and transportation costs together, New York City can be surprisingly affordable. You’ll spend a far smaller percentage of your income on those two budget-busting entries together than in car-dependent, sprawling American cities like Los Angeles, Dallas or Atlanta.
Like the old song says: “Hop a bus, take a car / Hail a cab and there you are….”
David Crook is a veteran journalist and author of The Complete Wall Street Journal Real-Estate Investing and Homeowner’s Guidebooks. Do you have a question about anything real estate-related in NYC? Write him at askus@streeteasy.com. For verification purposes, please include your name and a phone number; neither will be published. Note: Nothing in this column should be considered professional legal advice. If you have a legal issue, consult an attorney.
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