You will find taxis waiting at the bus station __ you can hire to reach your host family
Which one is correct? I think (2), but the answer is (1): why is that?
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You can hire requires an object, beause you can hire to reach your family is not grammatical without one; hire is not an intransitive verb.
The sentence already mentions the taxis at the bus station, so you need to refer to those. The way to do that is with which.
which pronoun & determiner
used referring to something previously mentioned when introducing a clause giving further information [ODO]
You will find taxis waiting at the bus station which you can hire to reach your family.
Where is principally concerned with place (either literal or metaphorical). If you used where, it would refer to the bus station and you would still have the above ungrammatical fragment. You would need to add an object explicitly, such as them:
You will find taxis waiting at the bus station where you can hire them to reach your host family.
That sentence is awkward. You don’t need to use where to specify the location because it’s understood from the context. The sentence can only apply to the bus station. It’s also not an option for you because you can’t add the word them.
Note that which could refer to either of the preceding nouns: the taxis or the bus station. Context makes clear which is meant. You can’t hire a bus station to reach your family, but a sentence like
You will find taxis waiting at the bus station which is in the centre of town.
obviously refers to the bus station (because of the singular verb is which can’t refer to the plural taxis). Many would add a comma before which in that second sentence, as that also makes that meaning clear.