My Next Investment…Buying An NYC Taxi Medallion!!!

2 mins. to read

By Filipe R. Costa

In the long run, many of the best performing investments are outside of Wall Street’s grasp. While the DJIA has yielded 7.7% on average each year since 1975, there is another interesting New York investment that has performed much better than that over the same period. And that is even before taking into account any dividends.

So what could this wonder investment that I am talking about possibly be in?

Well, surprise, surprise, I am talking about New York City taxi permits.

Otherwise known as medallions, these have been one of the most consistent best performing asset classes for nearly forty years. According to the Wall Street Journal, the price of a medallion rose 2,706% between 1975 and today, yielding 8.9% per year:


Medallions are the right to operate a for-hail taxi in New York City and they currently sell for $1.3million, an all-time record. Why? The answer is very simple. Supply is very limited and demand is ever rising. There are only 13,336 medallions in New York, which has a population of 8.9million inhabitants.

To understand why this is the case, we need to go back to the Great Depression when the Haas Act limited the number of taxi permits available. In the face of such economic hardship, New York’s Mayor at the time, Fiorello La Guardia, signed this act into law, with a view to limiting the number of permits available to 16,900. The idea was to keep business regulations tight, so that there no excess licenses. Excess licenses could have caused even more bankruptcies. Later, the number of licenses was reduced to 11,800, but today stands at 13,336.

As the population of New York rose substantially and the use of transportation grew exponentially, the number of medallions remained constant. Individual medallions are less valuable than the corporate ones, but both have similar characteristics and can be sold freely, so long as there is a buyer.

With demand for taxi transportation still rising exponentially, the business has naturally become extremely attractive. This has led to an understandable increase in the demand for medallions. If the coffee shop near your work was making huge profits, it wouldn’t take someone long before they opened a rival. That is, of course, unless they needed to obtain a rare license to do so. Just imagine how much value would be added to the hugely profitable coffee house, if supply was limited by official decree!

So, it is with this in mind that a fixed supply of medallions and greatly rising demand that has led to a 2,700% return in just 39 years.

With such an increase in value, you would be forgiven for thinking that fares have risen in parallel. After all why would someone pay $1.3million for one medallion? Well, here is the interesting twist to this story. When taking into account the nominal prices paid for fares and the increase in oil prices, it has been demonstrated that the real value of medallions has eroded over time. It would now take much longer to recoup your investment on a medallion, as a working taxi driver.

Essentially, this is the same as saying that they are becoming increasingly overvalued. However, with a maid’s apartment selling for $4million at 432 Part Avenue, (, why wouldn’t a medallion sell for a fraction of that, or even for the same price?

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