Wouldn't you move it 1,000 feet up, 2,000 feet up, 3,000 feet up...
There's a lot more space in the air than on land.
Plus, in 3D you can make two non-intersecting non-parallel straight paths. Can't do that in 2D.
But that's mitigated by the fact that the failure modes and much, much worse.
I can drive safely at highway speeds with a couple hundred feet of separation between cars.
FAA rules on safe separation between planes laterally is about 3 miles, or about 50 times the distance, or 2500 times the surface area.
Plus planes compete with one another for access to airports, so you haven't actually solved any congestion issues -- the bottleneck is still near the ground.
At ordinary commercial airline speeds, it's the equivalent of a "20-second rule" (i.e. it's the distance covered in 20 seconds by a 500-600mph vehicle).
Flying cars won't use the same airspace as turbine powered airline planes, so a new airspace designation could exist just for cars. And drones. Because drones and flying cars will be competing for the same airspace so all of them will need to use the same system.
Added: Flying cars (and to some degree drones) do compete with the same airspace as existing general aviation flights. And that's a big problem. The legacy aircraft would have to avoid the new airspace, most won't ever get an upgrade to fly autonomously; alternatively, the flying cars will have to be programmed such that they can always yield right of way to legacy aircraft.
Gravitational potential energy is a little more reliable than aircraft engines. if you lose propulsion, you can convert altitude to airspeed at your leisure, subject to the glide ratio. But only if you have it :).
Whatever else goes wrong, being further away from the ground gives you more time to deal with it.
Shameless plug: my blog post from last year on this topic: https://pointersgonewild.com/2015/09/15/all-hope-is-not-lost...
So far. In a future where people commute in flying cars while delivery drones descend from some flying warehouse I'm not so sure this stays true.
The saving grace is probably that up there we don't have to accommodate legacy vehicles. We can just force all airborne vehicles to talk to each other with some universal collision avoidance/traffic routing protocol.
It's not exactly what you described, but in the US, the FAA already has a requirement for aircraft to broadcast their position and velocity in all but the least congested airspace by 2020 [1]. This has been in the works for over a decade [2], and among other things, the information provided by this system can be used to augment existing collision avoidance schemes [3].
[1] https://www.faa.gov/nextgen/programs/adsb/faq/#o2
[2] https://en.wikipedia.org/wiki/Automatic_dependent_surveillan...
[3] https://en.wikipedia.org/wiki/Traffic_collision_avoidance_sy...
As long as the flight software keeps the cars/planes a decent distance from each other traffic will never be an issue when flying.
A much bigger problem will be parking, since no traffic means everyone will fly everywhere all the time. Parking will be an extreme issue for city centers. The wait in traffic will probably turn into a wait to park
Parking shouldn't be an issue? We'll have vertical parking structures that can be entered/exited on every level.
airflow near walls is turbulent, and the funneling effect may suck the aircraft towards the wall.
Solvable problems - you just have to build a landing pad away from the side of the building.
And, if our flying cars are helicopters or multicopters, we've got more problems, because we can't actually stack that many helicopters over eachother, due to the interference of their air columns. :-/
Birds, hills, turbulence.
For fun take a lot at the outer trim tabs when flying in rough skies. The computer adjusts them like 20 times a second to keep the wings stable, kinda cool to see
As long as you have designated drop zones, everything else becomes mathematically simpler.
Since ground-based cars will in all probability continue to be a thing, roads are not guaranteed to be empty, but are guaranteed to be plentiful and nearly everywhere. Autonomous cars can be signaled as some road strip is reserved for emergency landing, and within seconds they can vacate the road strip and block it from conventional vehicles (assuming a sufficient portion of ground vehicles becomes autonomous).
Even if a flying car could fold up to be the size of a current car while parked (which is not at all an easy matter) it will not be that small in a landing configuration.