The economics of vendor permits

July 1, 2009

Julia Moskin reports on Manhattan street vendors:

Of all the gray areas for food vendors — who are regulated by a cluster of agencies including the Department of Consumer Affairs, the Police Department and the New York State sales tax authority — permits are the murkiest. The Health Department set the number of full-time food vending permits at 3,100, in 1979. (In the fall, the City Council will vote on a proposal that would increase the number of permits to 25,000.)

The $200 permits are valid for two years and can be renewed indefinitely by mail. Their black-market value is tremendous: up to $15,000 for two years, according to a report released Tuesday by the city’s Department of Investigation. The new vendors are openly questioning the black holes of the system. “Every day, the city is leaving thousands of dollars on the table” by not taking control of the illegal trade in permits, said Mr. Yang, of the Cravings truck.

Yes, the permits are probably being priced too cheaply — there’s no reason why they shouldn’t move to a system closer to that of taxi medallions. But the other thing being priced far too cheaply here is prime midtown street-level real estate. Note what happens when the city does start auctioning off vendor permits: the food-vending rights to the north-side entrance of the Metropolitan museum sold for $362,201 per year, rising to $384,371 in the final year of the five-year contract.

The kind of fights detailed in Moskin’s article are inevitable when a highly-valuable resource — street parking — is massively underpriced or even free. The city should start making vendor permits location-specific, and then auctioning them off.


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