THE leafy enclave on the edge of New York’s East Village was marketed originally as a “suburb within the city”.

Completed in 1947, the 80-acre complex of 110 red-brick apartment buildings separated by well-manicured lawns provided a welcome home for thousands of soldiers returning from the Second World War. Over the decades it became a haven for middle-income workers in the city’s schools, hospitals, police force and fire brigade.

Now the twin housing estates, known as Stuyvesant Town and Peter Cooper Village, totalling some 25,000 tenants, are up for auction in a sale that could change the face of Manhattan.

MetLife, the insurance company that bulldozed the old Gashouse District to build the complex along the East River between 14th Street and 23rd Street, is hoping to raise a record $5 billion (£2.6 billion).

That price would make the sale not just the largest property transaction in New York City, but the richest in modern American history. By comparison, the Rockefeller Center, the landmark 22-acre commercial complex in the heart of midtown Manhattan, fetched $1.85 billion when last sold, six years ago.

“It will have a very big impact,” said Andrew Beveridge, a sociology professor and demographer at Queens College in New York. “In time, everyone in Stuyvesant Town will be a rich yuppie. It will be another area where the middle class cannot live.”

“This is going on all over Manhattan. People who live in Manhattan will more and more be the wealthy,” he said. “I think it’s actually a bad thing. It’s like having a one-crop economy.”

The 11,200 flats in Stuyvesant Town and Peter Cooper Village were built as a response to the post-Second World War housing shortage. The crisis spurred the growth of the suburbs.

MetLife’s development on Manhattan’s East Side was conceived by the New York master-planner Robert Moses and the insurance company’s then-chief, Frederick Ecker, to keep working families in the city. “It was built as a haven from the city,” said Samuel Zipp, a visiting history professor at the University of California, who wrote his PhD on the complex. “It was advertised as a ‘ suburb in the city’, as a place with a suburban life.” The complex provided a prototype for the land clearances that gave birth to housing estates around the world in the 1950s and 1960s.

Even though Stuyvesant Town and Peter Cooper Village were built with public money on land partly acquired through compulsory purchase by the city, the complex was for whites only until the 1950s, and was not fully desegregated until a 1970s civil rights lawsuit.

New York’s rent-stabilisation laws kept rents at below market rates. But in recent years, MetLife has taken advantage of new laws to remove about a quarter of the units from control, rents rising to the legal threshold of $2,000 a month.

Tenants complain that MetLife has been trying to clear long-time tenants out of rent-stabilised flats and sprucing up lifts, lobbies and gardens to market the complex as luxury apartments. An influx of students paying market rents has provoked complaints by old-timers about increasing noise and drugs.

“They’re spending wasteful money putting in new flowers,” said Sheryl Schuster, a former nurse who has lived in the complex since 1989. “They are wasting millions making people think it’s a luxury place.”

Larry Sturchio, a history teacher, said that he pays $1,100-a-month for the one-bedroom flat he shares with his wife and ten-year-old son — about one third the likely market rate. “If we had to spend two to three [times] what we are spending now, there is no way we could stay here,” he said.

The proposed deal values the complex at about $450,000 an apartment — a price so high that it will all but force the buyer to make it a luxury enclave.

The New York Times reported yesterday that interest has come from dozens of prospective buyers, including top New York real estate families, pension funds, international investment banks and investors from Dubai. MetLife said it had yet to decide whether to sell.

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