That neighborhood is Brooklyn, across the narrow part of lower Manhattan and also across the East River from the WTC. I can't quite make out the street signs but it doesn't look like a bad neighborhood, simply big city working-class.
When the first plane hit, up until the moment this picture was taken, most people assumed the first collision had been caused by a small passenger plane that had gotten lost, like the plane that hit the Empire State Building. I was across the street from the WTC that day in the World Financial Center, which was often confused for the World Trade Center. Now several firms removed from my company in 2001, just yesterday I was just saying to a coworker how none of us felt any particular need to evacuate from the WFC after that first hit, and had I worked in the second WTC tower, I'm not sure I would have felt any differently.
The SECOND strike put absolutely everything in a different light. This picture exactly captures that inflection point.
It also demonstrates an ironic fact that JoeM mentioned and which kept going through my mind as I walked (and walked and walked) north out of lower Manhattan: September 11, 2001 was a beautiful fall day.