Why Uber and Lyft Wouldn't Have Succeeded If They'd Tried to Follow the Law

If you can fly a school bus in space, why can't you drive it from Oakland to San Francisco?

Over at Pacific Standard there's a really interesting story about Night School, a San Francisco-based company that tried to improve evening transportation in the region by making use of school buses during after-school hours. It sounds like a great idea: on the one hand we'd be making more efficient use of our infrastructure and equipment, and on the other hand we'd be making life easier on people who want (or need) to get around without a car. And who knows, maybe the extra revenue for the school bus operator would have meant cheaper lease rates for school districts, too.

But as it turns out, we'll never know because the California Public Utilities Commission decided to step in and make life a living hell for the hopeful business owners. After trying to push their way through the bureaucratic morass for nearly a year, the founders threw in the towel and abandoned their innovative business idea. Call it a transportation own-goal on the part of California government.

As I read this, I kept thinking that this is exactly why Uber and Lyft probably wouldn't have been successful if they'd waited to work things out with the myriad regulatory regimes that might claim some authority over their operations. They'd have probably ended up in a similar position to Night School, beating their head against the wall for a few months or years, all the while giving regulators the time they need to prepare effective roadblocks to the new service model. Some people might dislike the way these businesses went about establishing themselves, but I suspect that most of them would prefer a little lawlessness to continued reliance on the old model of traditional taxi service. (And make no mistake, we'd still be stuck with 1980s-era taxi service if e-hailing companies hadn't entered the market.)

Although there are plenty of forward-looking governmental organizations out there, most are not looking to shake things up, especially groups like public utilities commissions which have little to gain personally from things like new transportation services. Uber and Lyft were successful because they built their support base first, by providing a service that consumers found useful and a source of income for a lot of drivers — then they leveraged that support to secure regulatory and political cover. Night School tried to address the regulatory issues up front, and they found that without a proven base of support, the utilities commission had little incentive to work with them in an accommodating, expedient manner. And here we are.

About 50 Percent of Major Roads Don't Even Produce Enough Revenue to Cover Maintenance

The High-Five Interchange in Dallas, TX.

By my estimation, most people in this country think that gas taxes and other vehicle-related user fees cover the cost of building and maintaining our nation's roadways.

Those people are wrong, unfortunately, to the great detriment of our national transportation policy. The belief that roads are self-supporting is a big part of the reason that we continue to build new capacity even as our roadways deteriorate, and fail to invest in more cost-effective and efficient forms of transportation such as: literally everything else.

The Center for American Progress has a new report out that takes a close look at exactly how wrong this self-sufficiency argument is, and what share of our nation's major roadways are bringing in less money than they cost to maintain. What they find is that, for the most heavily traveled roads (interstates and principal arterials), at least 48 percent don't even bring in enough revenue to cover basic maintenance. In urban areas with populations over one million, that number jumps to 64 percent. And that's just maintenance—if you're asking how many get enough drivers to pay off initial construction and maintenance, you can probably expect much larger numbers.

The "Loss" row shows the number of miles in each geographic area where interstates and principal arterials are bringing in less revenue than it takes to maintain them. The number that are able to pay for maintenance and up-front construction costs are probably even lower. Screenshot from CAP report.

There are several reasons this is probably a drastic under-estimate of the number of roads that can't cover basic repair costs. For one, this report assumes a cost inflation rate of just one-percent per year for the next 30 years, which is low even by the most conservative estimates. If the real inflation rate of construction work is closer to 3 or 4 percent, which is not an unrealistic expectation, the share of underfunded roads probably increases to around 60 or 70 percent.

The report also only looks at a small number of the total roads in the U.S. It makes the point that because interstates and principal arterial roads tend to get a disproportionate share of total vehicle miles driven (and therefore generate a disproportionate amount of gas tax revenue), local and other lower-trafficked roads are probably in even worse financial shape. A lot of roadway degradation is due to factors other than driving, like weather, so these roads still require ongoing maintenance, even if traffic is relatively light. With less users, and therefore revenue, than the already-underwater major roadways, governments are likely filling gaps with other funds for the large majority of local roads.

Total vehicle-miles traveled in the U.S. flat, and per-capita VMT on the decline, so this is unlikely to change any time soon, particularly if we can't increase the gas tax at the local and federal levels. For states that begin taking into account the externalities of driving, such as carbon emissions and other forms of pollution, health and safety impacts, and opportunity costs relative to more productive uses of land, the calculus will undoubtedly come out even less favorable to roads.

Housing Preference Doesn't Matter When You Can't Afford to Live Where You Prefer

Living in the suburbs vs the city isn't as simple as choosing which you prefer and moving there.

The Reason Foundation's Robert Poole has brought up the issue of housing choice in a transportation news update last week, arguing, yet again, that the media is exaggerating the Millennial preference for urban housing. His evidence includes an analysis by the notoriously biased (and regularly debunked) Wendell Cox in addition to data from a mysterious survey that I can't even track down, but since some people take these guys seriously, I'll take a little time to address the logical fallacy underlying their arguments: namely, that where people currently live is the best measure of where people actually prefer to live.

The way Mr. Poole sees things, because more Millennials live in suburban housing today than did 15 years ago, suburban housing is clearly their preferred housing type. There are a few problems with this view, and the most important is that it ignores the reality of prices and affordability — Millennials (and others) may prefer to live in urban communities, but if they can't afford to do so, their preferences are largely irrelevant.

And because the age group he's looking at is young and at the beginning their careers, many Millennials are especially sensitive to price beyond a relatively low threshold. In quite a few of the most thriving U.S. cities, housing in the urban core is affordable to only a very small subset of under-30 residents: those that earn much more than the average 20-something, and those that are willing to pile into small units with multiple roommates. The remainder of the Millennial cohort, many of whom might prefer a downtown loft to a suburban garden-style apartment or shared single-family home, if they could afford it, are not so much expressing their highest preference as being driven by the necessity to find a place they can afford. Price is a far better measure of the demand for urban housing, and it's price that explains why Millennials are so often unable to afford living in the city. Any assessment of preference that doesn't consider affordability is inherently flawed.

A site adjacent to Beacon Hill Station in Seattle left vacant due to poor planning following a major light rail investment.

Another important consideration is whether the housing that's built corresponds to the housing that's most desired. A big part of the problem is that, despite strong demand for more walkable, urban housing, that's not the type of housing being built: I estimate a shortage of at least 8 million walkable housing units in the U.S., a deficit that will take decades to cure at current multifamily construction rates.

This again comes back to affordability, as well as regulation: It's much easier and much cheaper to build low-density housing in areas where demand isn't quite as high, land costs are considerably lower, and regulations that limit development tend to be much more lax. Most people will settle for suburban housing when they can't afford the urban housing they prefer, so these non-ideal units still get snapped up. But that's not an expression of preference for suburban housing, that's an expression of preference for not being homeless.

I don't mean for this to be an excuse for the flawed system of development that typifies most coastal cities. Matthew Yglesias writes that housing affordability is Blue America's greatest failing, and I agree. This is simply an acknowledgement that people need a place to live, and when it's illegal or fiscally impractical to build homes for them in one place, developers will build those homes somewhere else — to the detriment of our overall quality of life, health, safety, and environment.

Poole, an unabashedly pro-oil, pro-car advocate, concludes his post lamenting the "wishful thinking" of urban planners who build extensive transit infrastructure even as people continue to choose suburban, car-dependent lifestyles. He's correct that urban planners and other city leaders have fallen prey to wishful thinking, but not in the way he implies. Their failing is in thinking that transit investments alone would create the multimodal, sustainable communities we seek — particularly when those investments continue to defer to cars at the expense of transit users.

Many cities, Los Angeles and Seattle included, have committed to massive expenditures on new bus and rail infrastructure, but few have been nearly so bold in regard to housing development. This has worked out nicely for the relatively few residents that are able to secure income-restricted housing near transit, those that can afford units in the small number of new transit-oriented developments, and especially for those that owned property near stations before they were built. For most everyone else the impact has been sadly limited, and it should be no surprise that as Millennials begin to form their own households, they're choosing to live where new homes are actually being built.

California Cap-and-Trade Drives Up Gas Prices... By About 3 Cents... Maybe...

California's cap-and-trade program now covers gasoline, and—surprise!—it looks like the doomsayers were wrong.

State Republican lawmakers (and even some Democrats) recently tried to delay or exempt gas from the cap-and-trade program, arguing that California residents can't afford more expensive fuel, but they couldn't have picked a worse time for the fight: the update to the law took effect on January 1st, after a six-month period in which national prices took a 50 percent nose dive. This chart sums up the new tax's impact nicely:

Fear the tail

Since the new year, prices have gone up by about 3 cents. Ahhh!!! This compares favorably to apocalyptic predictions from the California Driver's Alliance, which claimed that prices would increase from 16 to 76 cents a gallon. Actual experts have estimated that the cap-and-trade program will increase gas costs by about $0.10 per gallon in the long run, and it's still very early, so we'll see.

As an admitted amateur in the field of gas price prediction (though with a much better record than several former presidential nominees), I'm not going to pull a Reason and pretend that three days is enough time to fully adjust to this new reality. At the very least, though, it's reasonable to assume that the carbon tax is responsible for the small bump over the past few days.

...Right?

Well, I got a little curious and looked at the same chart for some other states, it turns out that California's not the only state with a slight bump since the new year. Here are a few other states (and D.C.) with similar increases:

Oklahoma gas prices.

Washington State gas prices.

New York gas prices.

Washington, D.C gas prices.

There were also many states whose gas prices continued to slide since the 1st of the month, and even more where prices held steady, so none of this is to say that the cap-and-trade program won't result in persistently higher prices, even if the impact is slight. Maybe it just means we shouldn't jump to conclusions too quickly. Gasoline is still essential for many, many Americans, and if oil companies want to pass along the increased cost to consumers there's very little to stop them—that is, until more viable alternatives to driving are available. 

It's also important to remember that, while driving remains non-negotiable for millions of Californians today, the proceeds of the cap-and-trade program are primarily dedicated to funding projects that reduce the need for car dependence and decrease carbon emissions in the process. More than half of revenues—which are expected to reach at least $3 billion annually—will be spent on clean, energy-efficient transportation and sustainable, affordable housing. Over time, the fortunes of far fewer residents will be tethered to the price of gas; by then, hopefully, I can start sharing charts about improving environmental quality rather than a three-cent bump in gas prices.

Maybe Uber Should Just Provide Its Own Insurance to Drivers

One of the criticisms of Uber and other ridesharing companies has been that part of the reason they've been so successful is that they've foisted the cost of insurance onto drivers. Insurance companies don't like it when you use your car as for-hire transportation unless you're insured to do so, and that insurance is considerably more expensive. As a result, many drivers have been driving with inadequate insurance, which puts both their passengers and themselves at risk. The "insurance gap"—the time between when a driver logs into Uber and when they actually are dispatched to a customer—has been especially problematic.

Part of the problem is that, thus far, there aren't really hybrid insurance policies that account for drivers who use their cars for-hire some times, and for personal use during other times. This is being worked out to some degree, at least in California and perhaps elsewhere, but it seems like a relatively simple solution would be for Uber to just offer the insurance product themselves. The market isn't supplying them with what they need, so maybe it's time to live up to their innovative name and fill the gap themselves.

Perhaps this is too much of a diversification of interests for Uber, but compared to all the other issues facing Uber right now, this seems like a relatively easy fix. They've already got many of the essential parts in place. For one, no one knows better than them how often their drivers are getting into accidents, so setting their premiums should be fairly simple. They also have direct access to the data on how many hours of the week their drivers are on the job, so the hybrid rate can be perfectly calibrated, individually, to the number of hours of regular driving versus for-hire driving. They can ensure that their drivers are always fully insured by having the premiums deducted from their drivers' paychecks. Last, and perhaps most importantly, Uber is so large that they probably have enough drivers to pool their risk safely.

Uber's too big at this point to be acting like the brash upstart. It's solved some serious problems for urban residents like myself, for which I'm extremely grateful, but it's time to grow up and start addressing some of the problems it's created as well. If Uber's really interested in having their employees and passengers fully covered and "In Good Hands™," as it were, and if the market isn't providing the coverage necessary to ensure that peace of mind, Uber should just go it on its own. With a recent valuation at $40 billion they can certainly afford it, and they could even earn a small additional profit in the process. Their public image is in tatters right now, and if this will help put them on better terms with their critics, it's probably worth the headache.

Hotels Make Los Angeles Way More Money Than New Housing, Even After Big Subsidies

I've got a new post up at the Urban One blog, this one addressing the controversial subsidies intended to attract more hotel development to the area around Downtown LA's convention center.

Click here to see the full post.

A lot of the arguments in favor of the subsidies have focused on the need for more hotel rooms in a downtown that is relatively hotel-poor — it has fewer than half as many rooms within walking distance of its convention center as competitive cities like San Diego, San Francisco, and Las Vegas.

My interest, in comparison, was with the direct financial benefits, focusing on an often-overlooked (and huge) source of revenue known as the "transient occupancy tax," colloquially known as the hotel tax or bed tax. What I found is that, in lieu of public assistance, a hotel development that recently began construction is expected to produce more than five times as much city revenue over a 25-year period as a comparable condo project. Even after the subsidies used to encourage the developer to build a hotel instead of more residential, the city comes out ahead by about $70 million compared to the condo building.

See below for a few charts from the post, and be sure to follow the link to Urban One's blog to get the full story.

VIDEO: How to Maximize Parking Productivity in the City

Providing enough space for everyone who wants to park their cars in the city is expensive -- upwards of $50,000 per space for some underground garages. It drives up the cost of housing and commercial space, forces non-drivers to subsidize car owners, and results in ugly architecture that dedicates lots of space to parking that will probably go to waste in the coming decades.

To fix this, we could limit the amount of parking we build, encourage car- and ride-sharing technologies like Zipcar and Uber, and increase the convenience and safety of transit, walking, and bicycling.

Or we could all just learn to park like this guy, and cut our parking requirements in half by tomorrow:

Beyond Green Belts: Connecting Rather Than Containing Our Cities

In city planning there's a popular phrase: "Stop sprawl, preserve existing neighborhoods, maintain affordability. Pick two." It's a poignant observation of the relationship between these three goals and the tension between them — how in a place like Houston, homes remain affordable and neighborhoods maintain their character as long as sprawl can continue unabated; or how London can enforce an urban growth boundary to prevent sprawl, but without significant new construction in older neighborhoods its housing prices have reached astronomical heights.

The London green belt, one of the world's most famous. Image from cobhamgreenbelt.org.uk.

For the uninitiated, green belts — sometimes known as urban growth boundaries — are undeveloped regions that surround many cities and limit sprawl while preserving green space. And as the Guardian notes, "[a]lmost anyone you talk to on the subject agrees that the green belt is one of the great successes of planning, anywhere in the world." They encourage more efficient use of developed land, keep nature close to home for city residents, and prevent the interminable sprawl of low-density development that characterizes many U.S. metro areas, especially in the Southwest.

But green belts have a dark side. London, home to perhaps the best-known green belt in the world, also has the dubious distinction of being the most expensive rental market in the world, recently overtaking Hong Kong as the city with the highest residential and commercial rents. As with any other artificial limits on the supply of new housing in an ever-growing city, green belts are at least partially to blame for London's affordability crisis. Some have also claimed that Portland's rapid increase in housing prices is partly a result of their urban growth boundary. The question is, then, how can we maintain access to green space and limit sprawl, while still allowing cities to grow naturally, in sync with demand?

One potential answer is to discard the idea of green "belts" and to replace them with "webs" — green space spread throughout the city that connects rather than contains it.

The problem with green belts, aside from the supply restrictions they impose on new housing, is that they're not particularly accessible to a large number of residents. Using London as an example once more, it's clear that residents of Central London are too distant from the green belt to consider it valuable as an open space resource, and ideally they would have other parkland at a more accessible distance. Green belts are undoubtedly wonderful resources for those that live within a mile or two of them — those that can afford to, that is — but inner city residents don't typically get to enjoy them, and for those that live beyond the green belt they simply add more time to each day's commute. It may be prettier than the average commute, but there's very little "green" about it. It would be much better to have them living nearer their work, in denser, more energy-efficient housing.

For a great example of what a green web could look like, Amigos de los Rios have a proposal for us in, of all places, Los Angeles County. The project is called the Emerald Necklace Vision Plan, named in honor of Frederick Law Olmsted, Sr., who designed New York's Central Park and Boston's Emerald Necklace park system, and his son Frederick Jr., who helped create a vision for LA parks in 1930 that was, unfortunately, never realized. The Emerald Necklace Vision Plan is pictured in part below:

In the Emerald Necklace Vision Plan, green space connects residents throughout Los Angeles. Image from Amigos de los Rios.

Taking advantage of several existing LA initiatives, including the Army Corps of Engineers' billion-dollar LA River revitalization program, the Greenway 2020 Plan, and plans for a 38-acre park on top of the 101 freeway, the project would create a network of green space throughout the region and put parks within easy reach of millions of LA County residents. Just as importantly, it would provide safe, convenient routes for walking and bicycling throughout the city, and create value to promote the development of more homes and businesses near the trails, rather than in the suburban/exurban Orange, San Bernardino, and Riverside Counties.

LA is surrounded by water, mountains, and other cities, so it lacks a green belt, but the appeal of a "green web" is that it could have value in nearly any context. For Los Angeles, the number of properties that would need to be destroyed could be replaced 20 times over with new (re)development near green space — including affordable housing, which could be funded by (e.g.) a partial tax-increment on park-adjacent land. We'd have thousands of new, energy-efficient units near world-class active transportation corridors, and if there's one thing LA needs right now, it's more housing.

Rough example of a London green web, in which much of the outside green space could be opened up for development.

Cities like London and Portland have it easier, because they can build out their network by expanding development beyond their growth boundaries and leaving stretches of undeveloped space to create "strands" within the green web. The growth of the web into the existing urban fabric could then be funded by proceeds from selling off land and development rights in the green belt. The large majority of the green belt could be maintained while bringing much more accessible green space to residents nearer the core of their cities.

In cities with or without green belts, there are opportunities to use green webs to create value throughout a region, and unlike isolated park and infrastructure projects, they can cast a wide enough net to limit the impact of gentrification in individual neighborhoods. They can add desperately-needed housing in some of the least affordable regions, increasing density in some locations and spurring new investment in historically disinvested neighborhoods. They can provide residents with a wealth of green space that doubles as a transportation resource, and is, most importantly, actually accessible. Best of all, they can build off of existing plans, the Hollywood cap park being an excellent example.

[Feel free to comment if you can spot any weaknesses or opportunities for improvement, because this is very much an idea in progress. For example, how would this be funded in lieu of a tax-increment type funding source? Since full expansion would require condemnation of many homes and businesses, how do you go through that process in a fair, equitable manner (or is contrary to the whole idea of eminent domain)? If this sounds totally politically or physically impossible, can you suggest what might make it more plausible? Any ideas for names that are better than "green web"? Thanks!]

How to Be Prepared For the Inevitable Takeover of Autonomous Vehicles: A Letter to Jeff Brandes

"I sure hope no one else gets in here." Photo from Car and Driver.

In Florida, Republican state senator Jeff Brandes is making the case that Pinellas County—home of the last metro area in the U.S. to develop a regional transit network—shouldn't invest in light rail because autonomous vehicles will make mass transit pointless. Self-driving cars will eliminate congestion, increase safety, and cut down on travel times, and we need to be prepared for that eventuality and ensure that we don't waste any money in the mean time.

In that spirit, I've put together a list of recommendations that Mr. Brandes can use in developing policy to prepare for this brave new world of robotic transportation. It's one thing not to waste money on a boondoggle technology like light rail that's faithfully served people for barely even 100 years –if we're serious about autonomous vehicles and their guaranteed ability to solve all of our problems, we need to be more proactive:

  • First, driverless cars can drive much closer together than human-operated vehicles. This will significantly increase roadway capacity and throughput, so we should start eliminating roads and replacing them with bike lanes, sidewalks, parks, and housing. Since self-driving cars are so efficient, we can repurpose all that road space for more productive uses. At the very least we should impose an immediate moratorium on all new road construction, because fiscal conservatism.

  • Second, driverless cars don't need to be stored near our destinations because they can just operate as inexpensive taxis all day long, so we should immediately eliminate all parking minimums, requirements for garage construction, and probably disallow curb cuts as well. All that parking we build today is going to be wasted in just a few short years! (What isn't already being wasted, that is.)

  • With driverless cars available at our beck and call there will no longer be a need to own your own car, so we should prepare our citizens for this new transportation regime by aggressively promoting car-share services like Zipcar and Car2Go. To make sure they catch on, we may want to ban the use of curbside parking for everyone except car-share users, and give them priority on our highway carpool/toll lanes.

  • If someone buys a car a decade from now it might have to be junked five years later, once driverless cars take over and become mandatory. We don't want people to waste their money on such a poor investment, so we should probably just ban cars entirely until scientists get the autonomous vehicle technology locked down. Everyone will have saved so much money that they'll be able to buy new cars as fast as the factories can churn them out.

As you can see, there's so much more to do than prevent people from having an inexpensive, sustainable, efficient mode of travel for the next 15-20 years. As Senator Brandes will no doubt agree, these are policies that complement a pro-driverless vehicle agenda perfectly, and will even serve people well if his predictions don't come to fruition, which they most certainly will.

Listen Jeff: I know that some Republicans have a reputation for being shills for the highway industry, but I can tell that you take the future of transportation seriously and that you won't let anyone stand in the way of progress and good financial stewardship. I look forward to your upcoming bills, Senator.