Tuesday, April 25, 2017

Fiduciary Landlords: Life Insurers and Large-Scale Housing in New York City

JCHS Meyer Fellow
For a brief window between the late 1930s and the late 1940s, life insurance companies built approximately 50,000 middle-income rental apartments across the United States. Most were racially-segregated, market-rate projects in semi-suburban locations. Others were central city redevelopment projects, built with the powers of eminent domain and offering below-market-rate rentals. Stuyvesant Town, an 8,755-unit apartment complex in New York City developed by Met Life, is perhaps the most famous of these projects (Figure 1) but there were many others, including Lake Meadows in Chicago (developed by New York Life), Hancock Village in Boston (developed by John Hancock Mutual Life), and the Chellis-Austin Homes in Newark (developed by Prudential).

As corporate entities with access to vast institutional funds, insurers achieved considerable economies of scale in construction, financing, and operation, and accepted longer, lower yields than conventional real estate developers. As such, policymakers hoped that life insurers and other fiduciary institutions, such as savings banks, would play a key role in building and operating large-scale, low-cost urban housing and in modernizing the postwar city more generally. By the early 1950s, however, a combination of disappointing financial returns and bruising controversies over discriminatory leasing drove insurers from the housing field.

The 789-unit Hancock Village, which straddles the Boston-Brookline border, was built in 1946 by the John Hancock Mutual Life Insurance Company. Source: “Greater Boston Housing Development Charted,” Christian Science Monitor, 01/05/1946.

While the volume of life insurance housing soon paled in the face of the postwar suburban boom — built for much the same demographic and often financed by life insurance dollars — insurers’ brief venture into multifamily development represents a significant and understudied episode in the history of affordable housing. With Stuyvesant Town currently enjoying an unexpected renaissance as both high-class investment and public policy touchstone, the time is ripe for a reevaluation of the substantial, if controversial, legacy of life insurance housing.

In a new Joint Center working paper, I provide an overview of the “rise and fall” of life insurance housing in the postwar period, with a focus on New York City, where the majority of insurance-sponsored apartments were located. The paper is part of my larger dissertation project, which examines the political and economic forces that drove various entities — including life insurance companies, labor unions, public authorities, and for-profit developers — to build some of the world’s largest middle-income housing projects in New York in the mid 20th century, as well as the factors that abruptly terminated this “large-scale approach” in the mid-1970s.

In the paper, I argue that when it came to middle-income urban housing, the 1940s represented a moment of unusual convergence between corporate need and municipal interest. While incentives were aligned, thousands of relatively low-cost apartments were built in America’s most expensive housing markets. These apartments proved a panacea for white families who earned too much for public housing but not enough to purchase suburban homes. As soon as civic and corporate needs began to diverge, however, insurance capital moved beyond city limits to suburban jurisdictions offering higher returns with fewer political obstacles. In the context of today’s continued shortage of affordable housing — particularly for middle-income renters in high-cost cities like Boston and New York — the story can be read as both missed opportunity and cautionary tale.

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