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Autonomous vehicles, aka self-driving cars, are coming. And the world is going to change because of them.

A lot has been written about the “first order” effects of autonomous vehicles (AVs): How they will reduce traffic fatalities, make rides more comfortable, or put truck drivers out of work. But the bigger story here is the “second order” effects — how improvements in mobility will cause us to reexamine fundamental assumptions of how we live.

Let’s start with real estate. Cars (the Henry Ford kind) completely reshaped the built environment of the United States — giving us the suburbs, shopping malls and pulling people out of cities. What will self-driving cars do to our cities and suburbs? Surely something equally as dramatic.

Levittown, PA circa 1959. Made possible by the car. What towns will self-driving cars make possible?

99mph was founded to take on difficult and uncertain questions like these. Our approach is rooted in hard data rather than armchair punditry. To examine the impact of AVs on real estate, we have built a proprietary model that draws in over 1 million data inputs and can yield predictions on how property will be impacted by changes in mobility at fine granularity. In this post, we will share some of our high-level findings.

Want to learn more about the methodology? Email hi@99-mph.com with “1 Trillion methodology” in the subject line and we’ll share more detail.

Punchline: A wild ride for property owners

We conservatively estimate that ~$1 trillion of residential property value is going to shift across 13 major US cities due to autonomous vehicles.

This value will shift from properties with a convenience premium reflected in their current price (e.g. near public transit, short commute) to properties that currently have an inconvenience penalty baked into their price(e.g. long commute, far from city center).

$1 trillion may seem excessive but keep in mind that the property market is enormous — Zillow estimates that residential property in the US is worth a cartoonishly large $29.6 trillion. For these 13 cities, the AV-driven shift represents 2% to 13% of total residential property value. The below chart shows which cities will be most heavily impacted on a percentage basis.

Let’s try to put $1 trillion into perspective: This is more than the market caps of ExxonMobil, Walmart, and JPMorgan combined. Many fortunes will be made (and maybe some lost) in this shift.

Why? AVs will impact where we choose to live

Let’s start with three simple consequences of AVs:

Autonomous vehicles make commutes more pleasant, so people will be willing to live further out: A 40 minute commute in traffic is a different animal if you are watching TV, napping or answering email instead of focused with hands on the wheel. I used to work at Facebook and did the daily 1–1.5 hour commute from San Francisco to their HQ in Menlo Park on one of their wifi-enabled “tech shuttles.” Everyone hated the commute — who wants to spend 1.5 hours in traffic? — but the difference between a) being driven vs. b) driving myself was the difference between a) moving to a less-desirable suburban location closer to work and b) staying in my beloved San Francisco. Slight changes in commute quality will alter the calculus for millions of individual decisions on where to live.

Look mom, no hands. Concept by IDEO

2) Autonomous vehicles may even shorten commutes: This one is hotly debated, but some believe AVs will reduce travel time by packing roadways with more cars per lane or increasing average speed through vehicle-to-vehicle communication. Others counter that the “induced demand” of more vehicle-miles traveled (“VMT” for the traffic wonks), created by better cheaper and more pleasant rides, will counteract these gains. How this will play out remains uncertain, but a reduction in actual travels times would allow for more sprawl.

The theory: AVs result in higher traffic flow than human-piloted vehicles (Friedrich 2016)

3) Autonomous vehicles will eat away at public transit: This will be true for even the most convenient transit corridors. Public transit, which already struggles fiscally in most major cities and is starting to lose share to Uber, simply won’t be able to compete with the combination of convenience, comfort and price offered by efficient on-demand autonomous vehicle fleets [Btw — We don’t have to like this conclusion for it to be true… it makes us at 99mph a little sad]. Expect a correction for anywhere that “public transit proximity” is baked favorably into property values.