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The Bronx is Burning: Urban Disinvestment Effects of the Fair Access to Insurance Requirements

Author

Listed:
  • Ingrid Gould Ellen
  • Daniel Hartley
  • Jeffrey Lin
  • Wei You

Abstract

In response to private insurers’ postwar withdrawal from urban neighborhoods, roughly half of U.S. states developed programs in the late 1960s that offered residual property insurance to property owners denied in the private market. These plans, known as Fair Access to Insurance Requirements (FAIR) plans after 1968, inadvertently encouraged moral hazard through underwriting restrictions, risk pooling, and generous payouts. We use a triple-difference design to estimate FAIR’s impact, comparing: (1) pre- and post-FAIR participation periods, (2) neighborhoods likely offered FAIR plans versus those not, and (3) similar contrasts in non-participating states. FAIR plans led to significant housing disinvestment and declines in central neighborhood population and income in the late 1960s and 1970s.

Suggested Citation

  • Ingrid Gould Ellen & Daniel Hartley & Jeffrey Lin & Wei You, 2024. "The Bronx is Burning: Urban Disinvestment Effects of the Fair Access to Insurance Requirements," Working Paper Series WP 2024-25, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:99322
    DOI: 10.21033/wp-2024-25
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    More about this item

    Keywords

    Moral hazard; Neighborhoods;

    JEL classification:

    • G52 - Financial Economics - - Household Finance - - - Insurance
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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