Uber and Lyft’s growth in New York City has mowed down the value of yellow taxi medallions — destroying an investment that cabbies and cab operators once saw as solid as a bar of gold.
The precipitous decline of the yellow cab business led to a record 510 foreclosures of taxi medallion-backed loans in 2019, a Daily News analysis of city data found.
The spike in foreclosures is more evidence of the devastation smartphone car-hailing apps have wrought on the once-thriving yellow taxi business.
In 2012, the year before Uber arrived in New York, money lenders foreclosed on just five yellow cab medallions, records show.
But as lightly-regulated app-based ride services grew, so did the number of taxi medallions seized by lenders.
Over the same time span, as a record number of cabbies lost their grip on their medallions, Uber and Lyft hollowed out the foundation of the yellow cab industry by siphoning off their riders.
In 2012, when taxi cabs ruled the streets, the daily ridership was nearly 500,00 trips per day. Each subsequent year, the ridership number fell further, while the number of foreclosed taxi medallions rose.
The steep drop in ridership also explains why medallion prices have plunged from around $1 million before Uber and Lyft arrived in 2013 and 2014 to between $120,000 and $130,000 today.
The yellow cab ridership plunge accelerated in 2015, when Mayor de Blasio gave in to intense lobbying by Uber and abandoned a plan to limit the number of app-based for-hire vehicles allowed to operate in the city.
The changes in the taxi market wiped out the business hopes of Rosinni Celestin, who bought a taxi medallion in 1983 for $74,000. He thought it was safe to borrow money against its growing value. He made money by leasing his medallion taxi to other drivers.
For years, Celestin’s business was good. “In 2012, one driver was paying me $3,000 a month,” he said.
“By 2015, after Uber, the last payment he gave me was about $1,200,” he said.
A similar fate befell Narinder Deol, who bought a yellow cab medallion for $418,000 in 2007.
Last October, a company that had loaned him money against his medallion’s value repossessed it. He figures the medallion was worth about a quarter of what he paid for it a dozen years ago.
“When Uber came in, the medallion price went down, simple enough,” said Deol. “It’s like a loaf of bread, and now that Uber and Lyft are eating it, there’s not much left for [yellow] taxis.”
City Council members on Friday are expected to release a plan to bail out cabbies who are in debt.
But transportation analyst Bruce Schaller says the city’s plan won’t solve the underlying problem faced by the yellow cab business — low ridership, driven by competition from Uber and Lyft.
“The customer has a preference here,” Schaller said.
The problem for the yellow cabs is that customers prefer the apps — so much so that the cost of a ride isn’t a factor, he noted.
“It’s not really a pricing issue because many of the ride hail trips in Manhattan are higher in fares than taxis,” said Schaller.
Through almost their entire history, taxi medallions were a sound investment that increased in value.
A medallion cost $10 when the city began selling them in 1937. They rose steadily in value — by 1950, the price of a medallion was around $5,000.
By the mid-2000s, medallions — which give yellow cabs the exclusive right to take street hails — sold for between $400,000 and $500,000. When medallion prices peaked at over $1 million before the dawn of the Uber and Lyft era, many cabbies hoped their high value would fund lush retirements.
“I think it would have gone on forever,” economist Michael Moebs said of the increasing medallion prices.
But the companies pushing the smartphone apps found a weakness in yellow cabs’ business model. Smartphones were an easy replacement for street hails. “When Uber and Lyft came in, they saw a vulnerable situation with the yellow cabs and took advantage of it,” Moebs said.
President Trump’s former attorney Michael Cohen — who’s now serving time on tax fraud and campaign finance law violations, among other charges — saw in 2014 the danger Uber and Lyft posed to the value of 32 yellow cab medallions he owned as an investment, a 2018 FBI search warrant states.
“The collateral backing Cohen’s loans (taxi medallions) lessened in value due to the rise in ride-sharing companies,” the warrant says.
Over the last several months, taxi advocates have worked with City Council members on the bailout plan. Bhairavi Desai, founder of the New York Taxi Workers Alliance, hopes the plan will bring relief to 3,000 to 4,000 deeply indebted medallion owners. But it still won’t solve the larger issue of how to compete against Uber and Lyft.
Schaller’s idea for fixing the problem is to make a yellow cab ride feel more like an Uber or Lyft ride. Yellow cabs would still be the only cars allowed to take street hails — but they’d also be available via smartphone apps. Yellow cabs would also have to be made more comfortable for riders, he says.
“The end game should be to get the apps in the cabs, and upgrade the taxis,” Schaller said. “If you can’t beat them, join them.”
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