The view from the Altamonte Springs SunRail station. Credit: Google Maps
In a January 2015 paper, the Yale Law professor David Schleicher and Yale Law student Daniel Rauch published a paper on how local governments might regulate “sharing economy” companies, such as Uber, in the future.
Among their more startling predictions, perhaps, was that the very cities that have been battling to regulate startups like Uber — which have been accused of ignoring laws requiring their competitors to, for example, license their drivers or ensure a certain proportion of their fleet is accessible to people with physical disabilities — would soon spend public money subsidizing Uber trips.
Why would they do such a thing?
Well, we might ask the Orlando suburb of Altamonte Springs, which this month became the first US city to fulfill Schleicher and Rauch’s predictions by announcing that it would begin subsidizing Uber trips within its borders. The city will cover 25 percent of the cost of trips that begin or end at the city’s SunRail commuter station, and 20 percent of other trips. The idea is to make help solve the “first/last mile problem” with the rail station, since there are few homes, jobs, or stores close enough to the station to make walking reasonable, and even the city admits that bus service is too spare to be relied on.
The Yale paper makes the case that there are good economic reasons for this kind of subsidy. In particular, they argue that low-cost Uber trips might create a “public goods” surplus by, among other things, allowing residents to make trips — and potentially buy more goods and services, or reach more jobs, or even just visit more people — that they otherwise wouldn’t be able to, ultimately improving on the “agglomeration effects” that are the economic basis of city living to begin with. Subsidizing ride-hailing services might also have a decongesting effect, by allowing a smaller number of vehicles to be used more intensively, and reducing the need for each household to keep one or more cars sitting idle for 23 hours a day. That would also reduce the need for homes, stores, and offices to hold large amounts of land for peak-use parking capacity, which also sits idle outside of work hours, or on low-shopping days.
Finally, they point out that there is a strong redistributive angle to this: Uber as a sort of public transportation. While the Altamonte Springs policy is not explicitly aimed at redistribution, it might conceivably be disproportionately used by lower-income people with limited car access. Other cities might attempt to target their subsidies more carefully, either by directly subsidizing trips for people below a certain income threshold — think of the reduced-fare transit cards that many agencies provide for low-income riders — or by simply requiring that ride-hailing companies provide a certain amount of reduced-fare rides in exchange for permission to operate. Think of it as inclusionary Uber.
But if this is going to become a broader trend, there are still a lot of questions to resolve.