As competition from ride-hailing services such as Uber and Lyft grows, the Houston Department of Administration and Regulatory Affairs has determined Houston can no longer regulate taxicabs in a way that brings in significant revenue for the city.

Changes to Houston’s taxicab regulations approved by City Council on Sept. 4 will keep safety requirements in place but allow the city to divest from the industry.

“We're going to be out of [the] taxicab support business,” At-Large Council Member Mike Knox said. “Essentially, this is an opportunity to give some time to the taxicab companies to adjust their model so that they can compete more effectively.”

Council members approved loosened regulations and lower prices for taxi permits as well as a plan to sell off all remaining city-owned permits in three lottery style sales over the next 18 months. By December 2020, when the final permits are sold, the city will no longer be tasked with determining which providers to sell permits to or the optimal number of permits to sell, ARA Director Tina Paez said. The city will be able to revoke permits should a tax operator violate safety standards.

By selling off permits at reduced fees, Houston’s new safety-oriented approach to regulation may help keep the industry afloat, District G Council Member Greg Travis said.

“I hope that these people in the taxicab industry understand that the industry is dying by the [ride-hailing services], and it needs to innovate ... in other words, it doesn't have to come to pass," he said. “You're allowing them to do this by letting them set their rates lower than they used to be able to set.”

In 2018, 897 taxicab operators in Houston failed to pay permit fees, leaving $983,000 left uncollected by the city, according to the Houston ARA.

Changes to the ordinance regulating taxicabs include reductions in permit fees from $583 per vehicle to $450—and down to $100 for wheelchair accessible and electric vehicles. Other costly requirements, such as data reporting and expensive card reader technology, are no longer included in the city’s ordinance. Wheelchair-accessible taxis will still need to report ride data to the city, and all vehicles must provide card readers, but they will no longer have to provide the specific, costly readers the city used to require.

Several council members said keeping the taxi industry alive is still in the city’s best interest. The state of Texas controls ride-hailing service regulations, so taxicab regulations are the only vehicle-for-hire regulations Houston can create, Mayor Sylvester Turner said.

Some council members expressed reservations about the effectiveness of these changes.

“I believe this is going to oversaturate the market [and] kill the taxicab industry. Uber is going to do exactly what they want to do to kill off the taxicab industries in many cities across the United States,” District E Council Member Dave Martin said. “They're going to jack up prices. ... Look at their revenue stream. They're losing money every single year. There's a reason for that. And they're trying to kill the industry by taking down their prices and oversaturating the market, and we're playing right [into] their attempt.”

Ensuring accessibility

Some Houston City Council Members also want to keep the taxicab industry alive so they can impose specific safety regulations and ensure that wheelchair-accessible cars remain available.

Ride-hailing services do not have vehicle accessibility requirements. Instead, should a driver without an accessible car get asked to pick up a person in a wheelchair, that driver is required by law to call an accessible service, such as METROLift or a taxicab company with accessible vehicles in its fleet.

The city’s taxicab regulations include the same accessibility requirement as well as further reduced fees for wheelchair-accessible vehicles aimed at incentivizing their use. Council Members Brenda Stardig and Robert Gallegos expressed concern that if taxicab companies known to supply accessible vehicles fail because the city’s new approach to deregulation does not do enough to boost the industry, there will be even fewer options for people in wheelchairs.

“If one of these contractors goes out of business and now you rely on just one contract, there's [going to be a] gap in coverage out there,” Gallegos said. “If we don't have the service, it's not going to help anyone.”

As a compromise, the city ordinance was amended to include a provision stating that the ARA Department must provide a progress report within one month of the beginning of each permit sale period over the next 18 months. If the market for taxicabs continues to look dire, the city will change its approach, Turner said.