How New York City's Cap on Ubers Will Affect Riders

Earlier this month, Uber and other ride-hailing companies faced one of their biggest legislative blows when New York City capped the number of ride-hailing cars in the city.

It's the first major US city to impose such a cap in the largest market for the companies that have completely disrupted the taxi-cab industry. The law also established a minimum pay for drivers, similar to a minimum wage, which may be a model for other cities who may want to implement similar regulation and clamp down on an industry that they think is out of control.

The cap took effect two weeks ago after New York City Mayor Bill de Blasio signed the bill into law.

Proponents of the legislation wanted to improve driver working conditions after a string of suicides in the taxi industry. The near 100,000 ride-hailing vehicles were leading to historically bad traffic congestion, they argued, and would only get worse if they didn't cap the number of cars on the road.

"The market is in fact oversaturated, and drivers are struggling to make ends meet … the one-year cap prevents further saturation of the industry," Steve Levin, an New York City councilman said.

So, with all these changes, what does this mean for you, the consumer? Will you see higher costs and longer wait times while the law is implemented? Will the drivers' minimum pay be passed along to the riders in the form of higher fares? We asked a few experts to see what riders could deal with while the city implements the legislation.

"Uber and Lyft already have close to 100,000 cars on the road in NYC compared to just 13,000 taxis, so I don't think riders will notice any type of difference in the near future," Harry Campbell, author of The Rideshare Guide tells TPG. "The city is capping the number of new vehicles, but it's a cap on a very high number."

Experts seem to agree that there won't be a huge immediate change to getting a ride, but over the long term there could be, especially in the outer boroughs of New York like Brooklyn and Queens.

"The riders most likely to notice an immediate effect are those who live in the outer-boroughs and neighborhoods traditionally underserved by the taxi industry," Alison Griswold told TPG, a reporter at Quartz who runs Oversharing, a newsletter about the sharing economy. "They might have a harder time getting a ride if supply tightens, and drivers choose to work in denser areas like Manhattan."

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Campbell, who agreed with Griswold's take, noted that these boroughs have seen a huge growth in demand for ride-hailing services because of a lack of public transit options and traditional yellow cabs. Civil rights advocates like Al Sharpton denounced the legislation, saying minorities now rely on Uber because yellow cabs have historically denied service to people of color.

Campbell argues that riders will have to wait longer in these areas — adding that higher demand would lead to surge pricing, so riders could see inflated prices, too.

"Uber and Lyft have seen a big increase in demand in the outer boroughs, so that's where I'd expect to see higher prices and longer wait times," he said. "Riders shouldn't expect to pay higher prices in the near future, but since Uber and Lyft are steadily growing, it wouldn't surprise me to see the cap start to have an impact on prices in 6-9 months."

Still, someone will have to pay for the increased driver wages, although it's not clear who will bear the cost.

"Someone will have to pay for higher driver wages, and it's possible that could be riders," Griswold says. "Ideally, the pay formula the city will implement will get companies like Uber to use their drivers more efficiently—i.e., so that drivers have passengers in the car for more minutes every hour," she explains. "That would go a decent way toward raising their pay without the costs being passed along to the customer. But yes, it's certainly possible prices will rise."

Uber says the new law may lead to higher prices and longer wait times, but the company hopes it won't come to that. It's coming up with creative ways to add more drivers to its system despite the cap. However, this limit is only a cap on vehicles, not drivers — and it won't stop the company from growing.

There are currently 35,000 for-hire vehicles that are licensed in the industry but not driving on the Uber platform. As demand continues to grow, it will encourage these drivers to join Uber.

"The outcome of the legislation is largely dependent on yet-unmade decisions by TNCs (transportation network company) and TLC (Taxi & Limousine Commission)," said Bruce Schaller, author of The New Automobility: Lyft, Uber and the Future of American Cities. "I don't think there will be short-term changes, but could be big longer-term (6+ months in this context) if it proves to be a hard cap."

The cap is malleable, as the Taxi & Limousine Commission could increase it if it deems necessary during the year long freeze on new for-hire vehicles. Whether or not ride-hailing companies absorb the cost of higher driver wages was an open question, Schaller said. Uber now has an the incentive to increase driver utilization on the app and have less cars sitting around waiting for a ride.

Higher prices could push price-sensitive riders back toward public transit, Griswold added. However both Griswold, Campbell and Uber all pointed to New York City needing to fix its crumbling subway system, a very real reason why more people are choosing cars over public transit.

"The City's 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion," an Uber spokesperson told TPG. Everyone we spoke to and a myriad of editorial boards argued that congestion pricing, a system that taxes drivers who enter heavily-trafficked zones during the busiest times of the day, would be a real solution to New York's jam-packed streets.

"The problem is that [ride-hailing companies] are an easy scapegoat, but ultimately we'll need more drastic solutions like congestion pricing for all cars to actually solve congestion," Campbell said.