Existing studies on foreclosure externalities have largely focused on their impacts on nearby home values, but only a few have examined the association between foreclosures and property conditions and measures of social disorder that has implications for neighborhood stability beyond the impacts captured in house prices. In addition, studies have found that property maintenance and improvement associated with neighborhood quality varies by the type of purchaser of foreclosed properties (i.e., homeowner, small scale investor, institutional investor, or bank-owned) and that the type of purchaser itself varies by characteristics of the neighborhood in which the foreclosure takes place. To disentangle the process, we match a unique dataset from Boston, Massachusetts on building permit activity, crime, 911 calls, constituent service requests, and inspection violations to Boston foreclosure records from 2006-2011 and subsequent transactions for each foreclosed property in five of Boston’s hardest hit neighborhoods, which covers 80% of Boston’s foreclosures during the period.

We find that neighborhoods with foreclosed properties experience distinct pathways depending on their racial and ethnic composition, controlling for socioeconomic characteristics and homeownership rates. In block groups with higher shares of blacks, foreclosed properties tended to end up in the hands of banks and corporations, and bank and corporate ownership was associated with property maintenance service complaints and violations. In block groups with higher shares of Latinos, foreclosed properties tended to be purchased by individual investors, who often better maintained and rehabilitated their properties. Lastly, in block groups with higher shares of whites, foreclosed properties often ended up back with individual homeowners, who were not associated with any building or blight indicators. The results demonstrate that foreclosure recovery varies unevenly by neighborhood race and ethnicity, reproducing patterns of neighborhood racial inequality.