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Is Uber—and the Entire Sharing Economy—at the End of the Open Road?

A first-of-its-kind cap on Uber vehicles in New York signals that local governments are no longer willing to let Silicon Valley dictate how America’s cities evolve. But is the change permanent?

Illustration of a hand holding scissors, cutting a green upward trend line Ringer illustration

In the fall of 2015, Travis Kalanick mused that the world would be a better place if every car were an Uber. Traffic would decrease. Parking shortages would disappear. Jobs would be be plucked from money trees at our leisure (after automation replaced human drivers, he said the unemployed would stumble upon new jobs because “technology finds a way”).

The then–Uber CEO had reason to be confident. That summer, his company faced down the biggest challenge to its rocket-like ascendance. New York Mayor Bill de Blasio and the City Council had proposed issuing a one-year cap on ride-hailing vehicles to study their impact on worsening traffic congestion, a move that would have stalled Uber’s growth in its largest and most profitable U.S. market. The company, at the peak of its “always be hustlin’” phase, launched a surgical campaign to demonize the cap, including television ads and a protest at city hall. A feature in the app called “de Blasio’s Uber” showed users a version of the service with 25-minute wait times and urged them to contact their City Council member. The bill never went to a vote and became a public embarrassment for the mayor.

Three years later, New York is closer to Kalanick’s vision of an all-Uber society, with the number of their cars on the road increasing from 14,000 to about 65,000 during that time period (yellow taxis in the city are already capped by law at about 13,500). But the promised utopian benefits have not followed. Multiple studies have found that Uber and Lyft increased traffic in New York and other cities because drivers spend so much time alone in their cars seeking new passengers. New York’s Metropolitan Transportation Authority claims ride-hailing is pulling people off public transit, depriving a strained infrastructure system of funding. And a spate of suicides in New York by cab drivers who’ve seen their livelihoods disrupted by ride-hailing apps has cast a dark shadow on the sunny optics of the sharing economy.

That’s why, when the City Council deliberated on a similar cap Wednesday, Uber was powerless to stop the initiative from becoming law. The council voted to stop issuing new licenses to Uber, Lyft, and other for-hire vehicles for a year, while local officials conduct a study on the impact of these app-based services. “We’re not taking cars off the road, and we’re not going after any company in particular,” Stephen Levin, a Brooklyn City Council member who cosponsored the cap legislation, said at a press conference. “We’re just saying that the exponential growth that we’re seeing has actually oversaturated the market. And the data shows that. So this is just providing a temporary cap so the problem doesn’t get any worse.”

Uber and Lyft predictably argued that the cap is a bad idea that will increase wait times and prices. But the new law has split opinion among New York’s residents. During the deliberations, Councilman Eric Ulrich said that the city might as well be trying to regulate Netflix to save Blockbuster. And on Tuesday, while taxi drivers and labor organizers held a rally at City Hall advocating for the cap, social justice activists in Harlem opposed it, arguing that it would deprive residents of New York’s outer boroughs and people of color from a vital form of transportation. Uber has indeed expanded far beyond its original tech-bro clientele. Last year The New York Times found that Uber trips in 50 residential areas outside Manhattan with little access to public transportation tripled between August 2016 and August 2017. Al Sharpton and Symone Sanders, the former press secretary for Bernie Sanders, both noted how difficult it can be for black New Yorkers to hail a traditional yellow cab.

Their concerns have been overshadowed by the impact Uber has had on drivers themselves. In February, a 61-year-old livery driver named Douglas Schifter shot and killed himself outside City Hall. He left behind a Facebook post declaring that the huge influx of ride-hailing cars in the city had made drivers “desperate” and forced professional drivers out of business. Since November, six New York drivers have taken their lives, galvanizing public pressure on the City Council to address the impact of Uber and Lyft.

Beyond the cap, the council is adopting less controversial measures that should benefit all drivers. With the council’s blessing, New York’s Taxi and Limousine Commission is expected to institute a minimum wage of $17.22 per hour for Uber and Lyft drivers, increasing their median pay by more than 20 percent. The council is also considering establishing a health benefits fund for taxi drivers and studying ways to help them alleviate excessive debt.

The sweeping regulations indicate just how much the political environment has changed for Silicon Valley’s most successful turn-of-the-decade startups. Uber rose to prominence both because it had a good idea—taxis via app—and because it was willing to implement the idea at scale without regard for existing laws. Last fall Bloomberg columnist Matt Levine posited that Uber was not a tech company but rather a “regulatory-evasion company” that derives its value from its ability to flout rules in a way that its old-school competitors cannot. Airbnb long functioned on a similar principle, offering convenient, cheap accommodations that undercut hotels on price by avoiding regulations and taxes, even though they were basically hotels.

But now both companies are being forced to account for the impact they’re having on cities. After being threatened with an outright ban in London last year, Uber was issued a probationary license in June that will subject it to independent audits every six months. Airbnb has been threatened with more stringent caps on short-term rentals everywhere from Paris to Nashville. The sharing-economy companies marketed a future of excess benevolence, in which people would help each other out and make money at the same time. Instead these companies are evolving into slightly more convenient versions of services that already exist, just with less oversight and more unforeseen consequences.

If that was the plan all along, it was an ingenious one. Uber and Airbnb, the yellow cab and Hilton Hotels of our time, will go public in the next couple of years and be showered in riches, whether or not they’ve made the world a better place. It will be left to city governments to try to harness Silicon Valley’s success in a way that works for everyone. “We’re trying to figure out a fair way to do things,” Corey Johnson, speaker of the New York City Council, said at the press conference. “Other cities around the world, good luck.”