Believe it or not, the cost of a New York City taxicab license has increased more than 1,000 percent since 1980. Bloomberg has done a great job of pointing out that even though the economy has had its ups and downs, the price of these medallions has gone up an average of 8% per year for over 30 years.
“The individual ‘medallion’ — the transferable aluminum plate found on the hood of all cabs — sold for $678,000 in July, according to data compiled from the New York City Taxi and Limousine Commission, up from $2,500 in 1947.
New York taxi medallion prices rose about eight percent annually between 1980 and 2011, outpacing inflation, gold ($GC_F), oil ($CL_F), and home prices. The price kept growing amid economic slumps and stock market declines, rising more than 30 percent between October 2007 and February 2009, when the U.S. economy fell into a recession and the S&P 500 ($SPX) index dropped more than 50 percent.
Supporting the price is a tightly controlled supply of medallions combined with demand from people who are driven to succeed, said Andrew Murstein, President of Medallion Financial Corp, a New York City-based company that provides loans to purchase taxi medallions. The price of a medallion has only declined significantly twice in the past 30 years, he said. “Once was right after 9/11 and the other time was the oil embargo of the 1970s.”
Medallions are divided into transferable individual and corporate licenses, with a corporate medallion selling for almost $1 million in June 2011, according to the commission. New York City taxis move about 240 million people each year, more than the population of Brazil.
“A guy comes to this country, drives a cab six days a week, 12 hours a day, after three years, takes his whole life savings and puts it down to buy a medallion,” Murstein said. “This is a way for him to get a piece of the American dream.”
Hat Tip Nick B