DoomDan515
Liberty Avenue in East New York.
“New people bought the building,” says a tenant in East New York, the first neighborhood slated for a rezoning under Mayor De Blasio’s housing plan. “Something I heard is they want to build up the building…Really I don’t know.”
For more than 40 years, the tenant, who asked to remain anonymous, has lived in Arlington Village, an apartment complex on a portion of Atlantic Avenue that may be rezoned to permit 10- to 12-story buildings. An investment firm called the Bluestone Group bought the property last March for $30 million. According to Maria Julia Echart, a tenant organizer at the Cypress Hills Local Development Corporation, in this past month two residents in the complex received eviction notices, and residents are worried they will be removed so that the buildings can be demolished. The Bluestone Group did not respond to press inquiries.
“The plan the city is proposing is displacing more people than they are going to be covering,” says Echart. She says talk of a rezoning is leading to increased tenant harassment and evictions within the rezoning area.
The De Blasio administration doesn’t deny that the real-estate market is getting hotter in East New York, but says these trends proceeded the announcement of a rezoning—and that the plan will help stem displacement by bringing more affordable units to East New York.
Is the specter of a rezoning innocent or to blame for increased speculation and rising rents?
On the one hand, the city’s Environmental Impact Statement for the plan shows that demand for housing in East New York did start to accelerate prior to the mayor’s announcement of the pending rezoning in 2014. From 2000 to 2010, as residents from other neighborhoods moved eastward to escape rising rents, the rezoning area’s population grew more than 11 percent, compared to the city as a whole, which grew 2.1 percent. As more renters moved to the area, they increased competition for a limited stock of housing. Median rents rose 26 percent from 2009 to 2013, while Brooklyn’s rents rose only 16 percent.
Median home values in the rezoning area also grew by over 100 percent from 2000 to 2009-2013, and for partly the same reason: East New York is one of the last parts of the city with good transit access where home prices are still low, creating an “outward radius push from the core as consumers seek affordability,” says real-estate appraiser and consultant Jonathan Miller.
Part of that growth must be attributed to recovery from the mortgage crisis, which devastated East New York long after most city neighborhoods had recovered, setting up a more recent recovery. According to RealtyTrac.com, median home-sale prices in East New York zipcodes increased 28 percent from 2012 to 2013 as the neighborhood bounced back from the recession, then 14 percent from 2013 to 2015—which suggests that the growth actually slowed after the rezoning was announced.
Other data suggest that the prospect of a rezoning might be exacerbating these existing trends. According to the Environmental Impact Statement, the average sales price for homes in East New York grew 15.5 percent from 2011 to 2015, but by nearly as much( 13.7 percent) in the one year since the rezoning was announced.
Bill Wilkins of the Local Development Corporation of East New York said that retail rent rates have been escalating faster since the rezoning was announced. On Pitkin Avenue, commercial rents increased by about $1,100 to $1,300 in 2014, then to $1,600 this past year; on Atlantic Avenue, they increased from about $1,500 per month in 2014 to $2000 in 2015. Today, rental leases are emerging at a rate of $3,000 to $3,500 per month.
“Usually you would see an increase of 3 to 7 percent [in one year]—You [were] not going to see a 50 percent increase,” he says, adding that commercial transactions are also on the rise since the rezoning. “Speculators are feeling that they’re shrewd and timely and they’re going to make purchases, which they have. … Within a two-year period, there’s been a lot of real-estate transactions, a great many transactions, within the rezone area.”
Another study takes a different approach, comparing the price-rise in the entire East New York community district to price behavior within the perimeters of the rezoning area before and after the announcement. The study, conducted by Rose Martinez, an Association for Neighborhood and Housing Development fellow working for the Cypress Hills Local Development Corporation, found that for most land-uses, the average sales price per square foot of land increased at faster rates within the rezoning area. For instance, the average land price of 4- to 10-unit rentals increased by 26 percent within the community district and by 63 percent within the rezoning area.
In general, experts said the rezoning might be one trigger, but was certainly not the main or only cause of the upward trend.
“It’s probably a little bit of both,” says Edward Gevinski, the East Brooklyn expert at the real-estate services firm Cushman and Wakefield.
“It’s highly speculative to say [a rezoning proposal] is causing…sales price growth in East Brooklyn, which has really been the case for some time,” says Alan Lightfeldt, a data scientist at StreetEasy. But he added that he can understand the concern. “The specter of a rezoning can certainly create some incentive for landlords to increase the rent or increasing their asking prices and put upward pressure on asking prices.”
As the City Council figures out the details of the rezoning plan, they should keep this in mind: The city is right to insist the pressure proceeds the rezoning—but it’s true the proposal may also be exacerbating the hype.
Take Charles Pastore, whose new LCC Bluefish NYC bought a property in East New York a few weeks ago. His listing on Streeteasy advertises a two-bedroom apartment for $1,800 a month, but tenants must have an annual income of at least $72,000.
“I’ve been following the De Blasio rezoning carefully,” says Pastore, who said this is his first property purchase in East New York. “When the people come, the retail follows and that’s when you start to establish a real market. “
2 thoughts on “Some Suspect East New York Rezoning has Triggered Speculation”
I worked in East New York with United Community Centers from 2003 to 2013, and have stayed involved as a volunteer and board member. Through my work with hundreds of dedicated gardeners, teenage interns, entrepreneurs, and health advocates, I developed a love for this community, such that when my husband and I considered buying a home this year, we looked first in East New York, specifically in Cypress Hills. It’s also a reality we could never afford to buy any property in the other neighborhood where might have liked to buy a place – Prospect Heights where I’ve rented for 12 years.
Our search has been disheartening. Of the dozens of properties we looked into, almost all had been “flipped.” People who’ve made their homes in this community, and likely contributed to it in a number of ways, walked away from their properties bankrupt and possibly homeless, while investors who barely know where East New York is stand to make two, or three, or possibly four hundred thousand dollars almost overnight. Realtors who showed us two-family homes suggested we could get $2,200 rent for a three-bedroom apartment, some of them specifically mentioning the proposed rezoning. Given the average income in East New York, that would constitute 76% of the median family income. We watched these same realtors hand their cards to homeowners sitting on their stoops, telling them that they could pay all cash, encouraging them to consider selling.
And this is the situation that has emerged just from the suggestion of a rezoning.
“The De Blasio administration doesn’t deny that the real-estate market is getting hotter in East New York, but says these trends proceeded the announcement of a rezoning”
Did you mean “preceded”?