Julian and Danielle Katz budgeted $1.5 million to buy a home in their popular Brooklyn, New York, neighborhood of Fort Greene. The only places they could afford were smaller than where they already lived.
The couple, who have three young daughters, instead bought a brick townhouse in nearby Crown Heights. They paid almost $1.2 million and are spending another $300,000 to renovate the previously vacant three-story home that’s a short walk to hipster hangouts cropping up on Franklin Avenue and a newly opened beer hall partly funded by Goldman Sachs Group Inc.
“We were priced out of a lot of Brooklyn neighborhoods,” said Julian Katz, a 41-year-old advertising producer who works in Manhattan. “We loved Fort Greene but we could only afford a modest apartment there. We could get a whole house in Crown Heights.”
A surge in Brooklyn home values is fueling rapid gentrification in Crown Heights, where apartment prices are up more than 50 percent from a year ago and rents are rising at the fastest pace in the borough. Growth in the neighborhood and adjacent Bedford-Stuyvesant, which were known for crime and racial tensions during the 1980s and 1990s, highlights an affordability squeeze for both relatively well-off New Yorkers and the poorer people being displaced.
Young buyers and renters who can no longer afford such established communities as Fort Greene, Park Slope and Williamsburg are moving to Crown Heights, Bedford-Stuyvesant and Bushwick, bidding against investors for townhomes that have been neglected for decades. Longtime tenants too poor to afford the new rents in the predominantly black districts are moving out to less-well connected, more dangerous places.
Ripple EffectRedevelopment of dilapidated neighborhoods in New York and other global cities is accelerating as the world’s wealthiest people seek places to park their money, said Jerome Krase, an emeritus professor of sociology at Brooklyn College who studies urban change. That’s causing a “ripple effect” of rising values in close-in communities with good transportation options and housing stock, he said.
“I have not seen such a quick changeover in my professional lifetime,” Brooklyn-born Krase, 71, said of Crown Heights and Bedford-Stuyvesant. “A great deal of it is being fueled by this sense of disappearing possibilities of these kinds of brownstone neighborhoods. And the feeling if we don’t get it now, they’re going to be gone.”
Rent SurgeMonthly rents for newly leased properties in Crown Heights averaged $2,110 in July, up 18 percent from a year earlier, data from brokerage MNS show. The median price of a home soared 58 percent to $600,000 in the first seven months of the year, according to StreetEasy, a New York real estate website.
Last month, Dixon Advisory, an Australian investment firm that has purchased 91 Brooklyn properties in the past two years, bought a fully renovated brownstone at 22 Arlington Place in Bedford-Stuyvesant for $2.25 million, a record for the neighborhood. A tenant this week agreed to pay the asking rent of $10,995 a month for the 3,000-square-foot (280-square-meter) 19th century house, said Josh Carney, Dixon’s leasing and marketing agent.
Central Brooklyn -- including Crown Heights, Bedford Stuyvesant and Bushwick -- is the most sought-after area for investors in the borough, said Jonathan Berman, vice president at Ariel Property Advisors. The price per square foot for multifamily buildings in Crown Heights has more than doubled to $241 this year from $102 in 2010, the brokerage’s data show.