As both the De Blasio administration and those betting on real estate turn their sights to the neighborhoods beyond Bushwick, Bed Stuy, and Crown Heights, prices have already begun to rise in East New York. The neighborhood has been getting attention from the De Blasio administration, which has made it clear through a looming rezoning that the impoverished neighborhood is being seriously eyed as a location for the administration's affordable housing initiative. The neighborhood has also attracted the attention of real estate speculators who are betting that the saturation of nearby neighborhoods like Bed Stuy, where median home prices have doubled since 2010, will course "the wave" of gentrification to the neighborhood. Andrew Rice's NY Mag article "The Red Hot Rubble of East New York" explores the area's shifting market, and what it means for the people who already live in the last-stop neighborhood. Here now, the most illuminating tidbits about the changing 'hood from the thought-provoking feature.
1) "On the psychographic map of a historically segregated city, the sprawling slums of eastern Brooklyn have long been considered too impoverished, crime-ridden, and hazardous for investment. But today, in an economically transformed New York, the territory represents some of the city's most importantand contestedreal estate. Speculators seek profit where others fear to venture. They are rushing toward the margins ahead of an economic upheaval that people in Brooklyn real estate call 'the wave.' But the area is equally valuable to Mayor Bill de Blasio, who is eyeing it for affordable housing...To both investors and public-policy-makers, the decrepitude of these neighborhoods represents a rare, and perhaps perishing, opportunity. They're priced for the poorat least for now."
2) Rice on the effect of de Blasio's affordable housing initiative: "In East New York, the promise of investment has had a perverse effect, pushing land and housing costs higher as speculators try to get in ahead of the redevelopment. According to RealtyTrac, home prices in the redevelopment area's Zip Codes have risen by 30 to 45 percent over the past two years, and developers say local landowners have recently doubled or tripled asking prices."
3) Throughout the article, Rice shadows a man who is working for a speculator, "McLaurin, an electrician who lives in Brooklyn, moonlights at a firm called Exit All Seasons Realty. He specializes in situations of distress. Before making the house call [to a lived-in home his firm wants to obtain], he had told me that he works to match homeowners facing foreclosure with private investors who are searching for deals. 'They hire me to come in and find these properties,' McLaurin said. 'And they're willing to pay me handsomely to do this.'"
4) "This is the last chance for the city to get it right," McLaurin said of the mayor's initiative. "Because you can't go any further east in Brooklyn."
5) "A few weeks before McLaurin took me out on his house call, he and I watched as City Planning officials publicly presented their vision for revitalization, displaying watercolor renderings of glass apartment buildings, public plazas, and 'Under the Elevated,' a proposed space for fairs and art shows beneath a rail line. The 50 or so citizens present...were most interested in plans for residential buildings rising eight to 14 stories along four major avenues...The conversation got heated, however, when city officials were unable to answer a key question. 'New homes for who?' asked resident Stephanie Reeder, a schoolteacher. 'New housing for who?' According to a citywide policy de Blasio released earlier this year, the vast majority of the 200,000 affordable-housing units will go to households making between $42,000 and $67,000 a year. In East New York, the median income is just $34,000."
6) "But anyone can see change is comingif the city doesn't bring in a richer population, the market-place will...According to market analyst Jonathan Miller, house flipping has accounted for nearly 10 percent of all sale activity in East New York and Cypress Hills over the last two years, with prices more than doubling on average."
7) "Who are all these investors? In Bushwick and Bed-Stuy, there are a few high-profile players, like Dixon Advisory, an Australian retirement fund that has recently been buying up dozens of propertiesmany of them former SROsfor conversion to high-end rentals. But most investors are locally based and stealthy. Several told me off the record that firms like Dixon are latecomers. 'There are not any deals in Bed-Stuy,' said one. 'I think suckers are buying at $1.2 million thinking they will get $2 million.'"
8) "Brooklyn's speculators have developed sophisticated systems for securing inventory. The door-knockers and the short-sale brokers concentrate on finding sellers. They feed houses to deed investors, who front the cash necessary to get a property into contract. The contract itself can be flipped before closing. Often it ends up with another speculator who specializes in renovating...In the background, there are hard-money lenders who finance the kind of risky deals banks won't touch, charging high interest rates. The hard-money lender may actually be hoping for a default so that he ends up owning the property himself."
9) "Cheap land is the precondition that is supposed to make East New York's affordable redevelopment possible. As costs rise, developers will have to maintain their profit margins by demanding either higher rents or larger city subsidies. But spending more on each project will make it harder for de Blasio to get to that big round number he has promised: 200,000 units. Thus, the city has an incentive to target households that can contribute decent rent. A million households make below $42,000 a year, and 575,000 of them lack affordable housing, according to city estimates. Yet they stand to receive only 40,000 units, fewer than will go to households earning between $67,000 and $138,000."
10) After years of praying for housing, prosperity, and attention, local leaders are now resisting the idea of a revival imposed from above. But their wariness becomes more understandable once you realize that the bars, bikes, and bohemians are really lagging indicators of a more brutal market phenomenon. As the rich push the middle class out of brownstone Brooklyn, the middle class has been left with an unenviable choice: leave or compete with the truly poor."
· The Red Hot Rubble of East New York [NYM]
· De Blasio Administration Unveils Details of East New York Plan [YIMBY]
· All East New York coverage [Curbed]