It is mixed housing. There are no legal restrictions stopping Arabs from living in largely Jewish areas (in fact thousands do http://abcnews.go.com/print?id=8502320) or Jews from living in largely Arab areas. The trouble is that there tend to be poor relations between the different communities in some of the places where the communities are mixed.
Gunmen in Egypt kill guard outside Niger embassy (Reuters)
from the article: Jerusalem puts two construction plans on hold in wake of U.S. row