Faith Communities and Affordable Housing: Challenges and Opportunities

Across the country, churches that once attracted hundreds of parishioners are now facing declining congregations and near-empty buildings.

Like the proverbial blind men describing an elephant, understanding the issue of underutilized church properties depends on where you touch it (or where it touches you).

Data analysts say: Accelerating church closures are evidence that US Christianity is dying.

Commercial real estate asks: What opportunities do these thousands of properties present?

Policymakers and advocates say: Government must expedite the redevelopment of underutilized church property for affordable housing. Churches should partner with developers and repurpose these properties.  

Society says: The housing problem could be solved! Look at the money that could be made!

Local churches and other faith institutions quietly observe the frenetic public debate and, at a pace seemingly slower than J.R.R. Tolkien’s Ents, deliberate on the future of their extensive, most valuable assets.

Mapping the Opportunity

In New York City…a proposed municipal housing plan is seeking the help of religious property owners to create 500,000 new homes in the next decade.

The abundance of available properties in cities across America presents a problem-solving opportunity for the economy and a missional opportunity for faith leaders and their congregations. Limited housing stock impacts families by raising their housing costs to unaffordable levels, forcing people to move or face homelessness. This unaffordability has broad national implications because it limits labor mobility, productivity, and economic growth. These issues are acute in two of the most populous US states—New York and California—which has led to recent legislative action related to religious property in both places. In New York City, a proposed municipal housing plan is seeking the help of religious property owners to create 500,000 new homes in the next decade.

The recently passed California legislation, SB 4, the “Yes In God’s Backyard” bill, empowers churches, faith institutions, and nonprofit colleges to erect affordable housing on their lands. The bill allows these developments to bypass cumbersome rezoning and (provided certain conditions are met) waives applicable California Environmental Quality Act (CEQA) laws. To qualify, however, properties must maintain California state affordability standards for 55 years for rentals and 45 years for owned homes. An estimated 171,000 acres of land owned by religious institutions could be used for affordable housing under the bill.

For congregations, redevelopment of underutilized properties can unlock value and create measurable social and economic impact, especially in distressed communities. Building affordable housing on religiously held properties presents an opportunity for faith institutions to “love thy neighbor” on a massive scale.

What Are the Risks?

Despite these upsides, faith leaders are wise to deliberate in their own time because the risks and challenges are formidable. First, no matter how intense the need, not every congregation-held property is a candidate for housing. Like every property owner in the United States considering redevelopment, faith leaders must answer the question: What is the highest and best use of our property?¹

And since religious institutions do not exist to generate profits, determining “highest and best use” requires first answering the question: What use(s) of religiously held property will best advance the mission of the church?”

Building affordable housing on religiously held properties presents an opportunity for faith institutions to “love thy neighbor” on a massive scale.

In many cases the answer could be affordable housing. However, given the range of possible mission-advancing uses, multiple community needs, project feasibility, and site limitations, many productive reuses of church property will not be housing.

Second, selling off property, even if it creates homes for families, is not necessarily the best way forward. For most faith-based institutions, land is their primary asset. When a religious institution sells its property to a developer to build housing or for any other new use, the congregation can realize an immediate, significant financial gain. However, once sold, the land and its value will be forever lost to the church. It should also be noted that in high-value real estate markets the gain from selling a property may not be enough to buy another property if the church needs one.

Other risks include unscrupulous real estate professionals who take advantage of churches, church leaders who underestimate the complexity of real estate projects, and limited capacity and technical assistance within religious denominations.

A Slow Awakening

Nerve-racking as some churches’ watching-the-grass-grow deliberative process may be, there has been progress. Over the past decade, both secular building interests and dozens of churches and religious organizations have planned, financed, and constructed affordable housing and community development projects across the United States and Canada.

National housing and community development nonprofits like Enterprise Community Partners, Grow America, Nonprofit Finance Fund, and Local Initiatives Support Corporation (LISC) have either launched or are planning to launch faith-based property development initiatives.

The opportunity facing religious congregations is both practical and prophetic.

Relèven (formerly the Trinity Centres Foundation) is taking a city-by-city approach to redeveloping church properties in Canada, with a team of “50+ architects, planners, finance specialists, faith, community and government leaders.”

In 2019, the Catholic Church—the world’s largest private property owner—established the Fitzgerald Institute for Real Estate (FIRE) with a $15 million endowed chair at Notre Dame University as “an interdisciplinary hub for world-class research in this field.” Although not a headline news story, the founding of FIRE is a demonstrative signal that some religious institutions are waking up to the magnitude of this opportunity.

Since 2013, over 100 churches have sought housing and community development assistance and financing from the United Church of Christ Church Building & Loan Fund (CB&LF) that I direct. CB&LF is a US-based church building fund that has continuously operated since 1853—the oldest fund of its kind in the country.

CB&LF’s most transformative project is the 30,000 square-foot mixed use Village at West Jefferson, in Louisville, KY, which opened in 2021. Built next to a United Church of Christ building on its former parking lot, this project has enabled a small church to bring a credit union, a health clinic, and a business incubator into a low-income community; provide daycare to 70 children; and open the first sit-down restaurant in the community in decades. The project created over 100 permanent jobs for local Louisville residents. It also influenced the development of a $100 million hospital nearby—the first hospital in the West Louisville community in nearly 100 years.

A Practical and Prophetic Opportunity

The opportunity facing religious congregations is both practical and prophetic.

It is practical because it is an opportunity for US faith-based institutions to help solve the urgent need for community development and decent affordable housing in every neighborhood. It is prophetic because redeveloping church properties to advance a congregation’s mission is a novel approach that revitalizes both church and community.

As religious institutions awaken to this opportunity, faith-based real estate development could lead to historic transformation of underinvested communities.

Note:

1. According to the Appraisal Institute, highest and best use of a property is defined by what is legally permissible, physically possible, financially feasible, and maximally productive. While “maximally productive” typically refers to maximum financial returns, for faith institutions, this must translate to the highest possible missional impact.