Ride-hail apps fret over New York City’s new regulations

It’s a brave new regulatory world for ride-hailing companies in New York City, and a pair of new rules scheduled to be voted on this week by the city’s Taxi and Limousine Commission has companies like Uber and Lyft slightly spooked. The most recently proposed rules, first announced by Mayor Bill de Blasio in June, include an extension of the cap on new for-hire vehicle licenses, as well as a limit on how long app-based vehicles can cruise aimlessly in Manhattan below 96th Street. The latter rule is an attempt to cut down on high levels of congestion in central areas of Manhattan – a goal that the state is addressing through additional measures, including comprehensive congestion pricing in the central business district, and a congestion surcharge on for-hire vehicles south of 96th Street.

A study released by the city in June found that for-hire vehicles on average cruise without passengers 41% of the time that they are driving in the Manhattan congestion zone. Under the TLC’s proposed rules for this new cruising time regulation, starting next February, Uber, Lyft and other companies would be fined when their drivers spend more than 36% of their time in the congestion zone cruising. By August 2020, the limit will be reduced to 31%.

Over the past year, New York City has passed and implemented a number of regulations targeting the for-hire vehicle industry. Most notably, the City Council last August passed a one-year freeze on issuing new for-hire vehicle licenses in an effort to limit the number of app-based cars populating city streets and competing with the taxi industry. While efforts to regulate the ride-hail industry kicked into high gear in the past year, the city has long wanted to curb the proliferation of ride-hail apps like Uber. In 2015, de Blasio tried and failed to push through a similar cap on new for-hire vehicle licenses.

Along with a new driver minimum pay rule and a $2.75 congestion surcharge applied to most for-hire vehicles in Manhattan, the regulations passed since last summer have companies calling for a reprieve – or at least a little more analysis of the current rules before implementing any new ones. “We're still getting answers to questions about the last set of rules,” said Uber’s senior manager of public affairs, Josh Gold, referring to the congestion surcharge and minimum pay rule that went into effect earlier this year. “(The TLC) is obviously short staffed, having not received approval for a new commissioner. So we understand that, but that's just another reason for them to wait and see, to answer some of these questions on the old set of rules that just went into effect before promulgating a new set of rules.”

Uber has sued the city over the cap on new vehicles, and that litigation is still pending. Lyft, and another company, Juno, filed suits over the new minimum pay rule which ties wages to how often a driver has a passenger in their vehicle, arguing that it puts them at a competitive disadvantage against Uber, because Uber’s greater number of users means its drivers spend less time waiting for rides. A judge dismissed Lyft’s suit in May.

Despite the heavy pushback from companies on the existing regulations, the city has given no indication that it intends to let up on regulating the industry anytime soon. 

While the cruising time limitation is aimed at reducing congestion and pushing out drivers to underserved outer boroughs, details on how the rule will avoid unintended consequences are lacking. As the rule stands now, the time a driver spends going to pick up a fare in Manhattan would be counted toward the cruising limit. And if, for example, a driver was stuck in traffic in front of the Manhattan Bridge on their way to Brooklyn, it appears that that time would be counted, too. During the press conference announcing the rules in June, de Blasio suggested that these types of variables would be accounted for. “My understanding is the technology obviously allows the company to monitor each driver and they're going to train the drivers in how to conform with these rules,” he said. “So if you're going somewhere to pick up another fare, that's okay, that's part of the equation. But the goal and the requirement is to reduce the overall cruising time.” A TLC spokesman told City & State that the goal of the limit is to disincentivize the inefficient dispatch of trips into and out of the Manhattan congestion zone, and that the onus would be on the companies to factor in variables like traffic.

It’s easy to think of the city’s dominant ride-hail apps as a monolith. But between Uber, Lyft, Juno and Via, variations in their business models and in their presence in New York City, means that the regulations affect these companies differently. Via, for example, already boasts a cruising rate of just 13%, falling well below the current for-hire vehicle average and the future targets. “I don't see any real changes for us on the operational front, because our mission from day one in New York City has been to transport many passengers as possible in a few vehicles as possible,” said Andrei Greenawalt, head of public policy at Via. The company focuses primarily on shared rides in high-occupancy vehicles, like vans that might hold five or six people. Roughly 90% of Via’s trips in high occupancy vehicles during peak times are shared by at least three passengers, a spokeswoman for the company said.

Via may not be concerned about the new cruising time limit, but that doesn’t mean the company is unscathed by the city’s regulations. “We don't think the cap is the best approach,” Greenawalt said. “The problem with the cap is that it's done in such a blunt way that it doesn't, for example, distinguish between pooled rides and single passenger rides, which we think is a real problem.” The cap on new licenses provides exceptions for wheelchair-accessible vehicles and electric vehicles, and Greenawalt suggested that there should be similar flexibility for high-occupancy vehicles, since they are arguably reducing rather than worsening congestion. 

For other app companies, the cruising limit poses a concern about what the new rule may do to congestion just outside of the zone where cruising limits are in effect. “There may be, unfortunately, cars idling above 96th Street or right on the other side,” Gold said. “We are concerned with how those communities are going to react to that.” Gold confirmed that Uber has been weighing the possibility of acquiring a parking lot or garage where its drivers can wait to pick up fares, though he said he doesn’t know whether the company will actually do so.

Lyft is also getting creative to comply with new regulations, specifically the minimum pay rule. Because the pay formula is pegged to utilization rate, the more time a driver spends without a passenger, the more companies have to pay. Since June, Lyft has been kicking drivers off its app in areas and at times where demand is low, directing them to areas with more ride requests.

The app-based companies and advocates of the new regulations have been at odds over whether driver pay is improving. One driver argued in a Daily News op-ed that the cap on new licenses hurts drivers because of the high cost of renting a car that is already plated. Other drivers say that Lyft’s system of strategically taking drivers off the app hinders their ability to work. 

With companies still adjusting to regulations passed last summer, the onslaught of more rules has some asking why the city is in such a hurry. “There is no reason these so-called cruising cap rules need to be rushed through on such an accelerated time frame,” said Lyft spokeswoman Campbell Matthews. “It's critical that the TLC slow down so it can first understand how the many rules and regulations it has already enacted will impact New Yorkers.”

A spokesman for the mayor brushed off that criticism. “This is an absurd claim from multi-billion dollar corporations trying to get away with paying their workers as little as possible, and shirking any responsibility they have for the congestion choking our streets,” Seth Stein wrote in an email. “No matter their claims, our data-driven policies work, and hard-working drivers are seeing their wages go up, while we continue to pursue policies that will reduce congestion and get New Yorkers moving.”

Eric Goldwyn, a research scholar in the NYU Urban Expansion program at the Marron Institute, said that the city is at least moving in the right direction, but that there should be more clarity about the target it wants to hit in all of its regulations. “Right now, if you're the private sector, you don't know what the city is going to do. Every week, it seems very fickle and sort of arbitrary and capricious. So I get being sort of annoyed by that,” Goldwyn said. “But, by the same token, I think the city has the right to govern its streets and say that what's going on currently is unacceptable, and we need a better set of outcomes.”