Transmat World: Can Rideshare Change the Real Estate Market and the Economy?

There’s about 200 million cars in America. That’s a lot, but consider this. There are an estimated two billion parking spaces. In Los Angeles County, 14% of the land area is parking spots for automobiles. This is in a county that is hurting for lack of housing. For almost any city 50-60% of downtown real estate is parking. Here's some quantitative examples. Philadelphia has 2.2 million parking spaces. New York has 1.85 million. Seattle and Des Moines each have 1.6 million. Jackson, Wyoming has just over 100,000 parking places to accommodate its 10,000 residents. My question is this. What happens when those parking spots are no longer needed?

What if rideshare companies become more and more popular to the point that they are the major means of transportation? It’s a myth that Millennials don’t want cars, but it is not a myth that they are penny pinchers. If Lyft and Uber represent a better deal for transportation, Millennials are going to follow the path of least remittance. The retired crowd will be jumping on the rideshare bandwagon as well. Age related physical constraints and the hassle of car upkeep will herd a lot of oldsters into the rideshare camp. If rideshare is pervasive, convenient, and economic, it will appeal to anyone wanting to go from point A to point B. And you don't need a parking spot just to pick someone up or drop them off.

It may be a stretch to visualize rideshare dominating individual transport, but a recent claim by Tesla may light up your occipital lobe. Elon Musk claims to be able to put an autonomous vehicle on the road by 2020. If they are truly autonomous, it may mean thousands of people buying vehicles that can go out and make them money. If the autonomous software is truly back compatible, there will be a potential quarter million autonomous taxis on the road ready to go for the price of the chip. That's how many Teslas have been sold. The only parking space these vehicles will need is the owner’s driveway.

Then there are flying taxis. My bet is on Blackfly. It is coming out in 2020 and will cost about the same as an SUV. It will be more likely for companies rather than individuals to own Blackflies because they will be more likely to afford the insurance premiums. Once Uber and Lyft are entrenched and flying taxis are ubiquitous, parking spaces will be like appendixes, a useless thing from a bygone era.

What will cities do with all that land? The utopian answer would be small parks, pedestrian amenities, and low cost housing. Or they could sell or lease the land. You can’t blame them. They are going to be missing out on vehicle registration and licensing, gas tax, parking citations, traffic citations, ownership taxes, and parking fees. These are major sources of revenue for municipalities, particularly small ones. Utopia quickly turns dystopian as police and city employees are cut back along with city services. I can see a future in which cities have auctions for unused parking space land going to high bidders with prequalified, city-approved land use plans. That way, the city can have somewhat of a guarantee on future property taxes.

It is not just parking spots downtown that we are talking about. It will affect both urban and suburban housing markets. Construction of new single family dwellings may include the option of no driveway or garage. This should make housing more affordable. Real estate developers will be able to put the same living area in a smaller foundation footprint. With no driveway, they can reduce the size of the yard. Smaller lots, smaller price but more houses. A boon to the purchaser and the developer.

This brings us to another major economic sea change as a result of rideshare—the ownership of cars by individuals. Cars sit idle and unused 95% of the time. That is an amazing statistic. You know it’s true unless, of course, you’re a Lyft or Uber driver. According to U.S. Bureau of Labor Statistics, the average yearly cost to drive a vehicle is $9,576 per year. The car loan debt in the U.S. is 1.14 trillion dollars and rising. There are 276 million registered vehicles in America. Since the average car weighs 4,000 pounds there are 552 million tons of iron, steel, glass, aluminum, rubber, and plastic sitting in American driveways doing nothing but taking up space 95% of the time.

Imagine this. Imagine the 1.14 trillion dollars back in the pockets of American consumers. Imagine, going forward, they will not be on the hook for $9,576 per year on a vehicle. Imagine all the energy saved, pollution not created, and carbon dioxide not spewed into the atmosphere by manufacturing and driving all those cars. Imagine all that material available for other products. That will be the power of rideshare when it becomes the ubiquitous form of everyday travel. Rideshare will do the same thing with thousands of cars that used to be done with millions of cars.

Society as a whole will certainly reap benefits from this but what about the individual? At the current Uber and Lyft rates, no. If you take that 5% of the time (1.2 hours per day) a vehicle is used and assume rideshare is used instead, it will cost about $56 per day which is $20,440 per year, twice as much as owning a vehicle. Don’t forget, however, the convenience of letting someone else drive while you check your phone or write articles for Medium. Rideshare has the potential of making our economy more efficient and more egalitarian, but it's not there yet.

There are two things that could change the equation in the near
future—Elon coming out with his autonomous, robotic Tesla slave cars and Blackfly making a big splash with companies wanting to do with flying what Uber and Lyft have done with ground transportation. And don’t be surprised if it’s Uber and Lyft taking wing.

There is a general trend away from personal use of automobiles. Scooters and bikes are a thing in some inner cities. More people are getting their groceries and prepared food delivered, and there is a general tendency toward renting things rather than owning them so maybe there is hope for the continued growth of rideshare. The automobile industry may have something to say about all this since it will take away their customers. That may be why Ford and GM are cranking up their own autonomous car divisions. They figure a portion of a smaller market is better than nothing at all.

Don’t get me wrong. I love my car, but I love money more than my car. Once the economics are there, I will switch to a rideshare service. The garage will be converted to a man cave or a spare guest bedroom, depending on how the discussion goes with the wife. And that is a choice that will be made over and over across this great land.

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