The Real Deal

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Watching for broken windows

Though many said it wouldn't happen, it has taken New York City about nine months to catch up to the rest of the country with regard to the foreclosure crisis. Certainly, the numbers are lower here than in other cities, but there is no longer any denying it: Foreclosures are on the rise in New York City. The question now becomes: Will what is happening elsewhere in the country — where increasing foreclosures have resulted in jumps in crime — be part of New York's future?

At present, the answer is no, but the possibility does exist, especially in emerging neighborhoods where foreclosures are high. There is one telling sign that is cause for concern in these areas: Buyers are already tuned in to the perception of rising crime, regardless of the reality.

One area to watch is Brooklyn, with its many up-and-coming neighborhoods. Next to Queens, Brooklyn has been the hardest hit, with 4,895 foreclosure actions initiated in 2007, according to the Neighborhood Economic Development Advocacy Project (NEDAP).

And this year is likely going to be slightly worse. Based on the first quarter of 2008, when Brooklyn saw 1,273 foreclosure actions, NEDAP projects that Brooklyn as a whole could see as many as 5,092 foreclosures by the end of the year.

Aside from the burden foreclosure puts on the local economy — according to a study done this year by NYU's Furman Center for Real Estate and Urban Policy, foreclosures reduce the value of surrounding properties — and the stress they put on the very real individuals who default on their mortgages, foreclosures can lead to other collateral damage, such as the sudden appearance of vacant buildings.

"[Foreclosures] lead to an increased likelihood of vacancy," said Ingrid Gould Ellen, co-director of the Furman Center. "But in New York, the market has been relatively robust. Unlike Cleveland, where homes are vacant because no one can sell them, here there have been willing buyers around."

New York City has so far been lucky in that respect: While cities like Cleveland and Atlanta have watched their suburbs turn into ghost towns, New York City has been able to mostly avoid an onslaught of vacancies.

"There are vacancies, but they don't last too long," said Robert Matthews, chairman of Brooklyn's Community Board 8, which oversees parts of Crown Heights, Prospect Heights and Weeksville. Foreclosure rates in Crown Heights are the 13th worst in the city, with 756 over the last four years. "It's not as bad as I had anticipated."

But with foreclosures on the rise and loans harder and harder to come by, the possibility that vacant buildings will start cropping up — especially in emerging neighborhoods like Bed-Stuy, Bushwick and Crown Heights, where foreclosure rates are high — is a real one.

"Foreclosure is a lengthy process. When the house is empty and supposedly secured, people go in there and they use it illegally," said Nadine Whitted, district manager for Brooklyn's Community Board 4, which operates in Bushwick. The neighborhood was the ninth-most affected with regard to foreclosure actions from 2004 through 2007, according to NEDAP; it had 890.

"We have problems with stable blocks being now not so stable. It has an effect on the economy, the community, and if you're the next-door neighbor, you better keep your eyes open," Whitted added.

What she is describing is what's known as the "broken windows" theory, which posits that crime is more likely to occur in neighborhoods where there are visible signs of disorder, such as abandoned cars or buildings, or even broken windows. These conditions, the theory goes, act as signals to criminals that society simply isn't paying attention.

Some Brooklyn neighborhoods certainly have more signs of that than others.

"Bushwick is a block-by-block situation now," said David Maundrell, president of the Brooklyn brokerage aptsandlofts.com. "Some are great and transformed, and on some there is a lot of drug and crime activity."

However, though there is a certain intuitive appeal to the broken windows theory, it is just that: a theory. In fact, anecdotally, the opposite is also true: Crime also tends to occur in neighborhoods that are emerging or on the upswing.

"In certain evolving neighborhoods that have an influx of new residents, I'm sure there are increased break-ins and muggings, because [with] the people who live in these neighborhoods, there is an element there that is prone to resorting to crime. If they see people that have money, they break into their apartment," said Maundrell.

Letitia James, a City Council member representing Clinton Hill, Fort Greene and parts of Crown Heights, Prospect Heights and Bed-Stuy — agreed: "Increases in robbery and burglary, part of it has to do with this phenomenon of technology, people walking the streets texting, playing video games with this very expensive electronic equipment, being victimized." In response to a recent rash of muggings in Clinton Hill, James helped initiate a neighborhood awareness map on the Society for Clinton Hill Web site in order to bring attention to that and other crime in the area.

Despite the reality of crime, Maundrell noted that the perception of crime has a direct relationship to pricing, at least when it comes to new real estate.

"The price levels change as [notions] of crime go down," Maundrell said, addressing Bushwick in particular. "You can have one block where the apartment is $300,000 and around the corner that same apartment is 20 percent discounted."

Maundrell also cited a new building in Crown Heights that is two blocks from the Brooklyn Armory on Atlantic Avenue. The Armory houses a homeless shelter, and prices at the nearby building were deliberately discounted because of the perceived impact of the population that congregates outside the Armory.

"Three blocks up on Washington they're $625 a square foot, while by the Armory they're $525 a square foot," Maundrell said, noting that he grew up in Brooklyn and that today "it's a better, safer place than ever before."

That may be true. But that doesn't make safety any less of a factor for buyers.

"Crime and safety has always been a big concern for buyers, if they're not familiar with a neighborhood," said Tom Le, an associate vice president at Corcoran, who said he even helps buyers get in touch with the local precinct. "I always recommend that they look at the police precinct and check it out for themselves … But I will not discuss it."

Le explained that he leaves questions to the police because people have different comfort levels depending on their experience. Le said he felt that his weighing in on crime in a given neighborhood could be misconstrued as either trying to steer a buyer into, or out of, a neighborhood.

Along similar lines, just talking about crime or foreclosures, which happens frequently on real estate blogs and in the press, can have an effect on the perceptions of buyers.

In a sign of the times, Jonathan Butler, creator of Brooklyn-based real estate blog Brownstoner.com, began posting a regular item called Foreclosure of the Week. The properties featured are subjectively chosen from a list of foreclosures provided by the real estate research site Property Shark.

The idea came to him back in April of 2007, "when the word [foreclosure] began showing up in the press," he said. Though the feature flagged during the fall of last year, he said, "Now I'm posting them pretty consistently from early this year, as the number of foreclosures rises."

"I do think that [attention] about foreclosures in Bed-Stuy has definitely negatively impacted the psychology for potential buyers," Butler added. Bed-Stuy has the second-highest foreclosure rate in the city, with 2,030 actions filed from 2004 to 2007.

"Bed-Stuy, it's really like several different neighborhoods. It's huge and different block by block. I don't think this is happening in Stuyvesant Heights, for example. But for a block that already has empty lots on it and a handful of nice houses, those kind of blocks that were already a tougher sell are having a very hard time psychologically," Butler said.

Roslyn Huebener, of Brooklyn-based Aguayo and Huebener Realty, disagreed: "People who are willing to pioneer, to push into emerging neighborhoods, are making tradeoffs for conveniences. They recognize there are safety issues, but they're going for the ultimate goal: to own or rent a space large enough to accommodate their needs."

And as far as the foreclosures?

"Vacant buildings do invite intruders and squatters," she admitted, but then continued, "It's something that will pass. It happened only because of the reckless lending."