By Rick Reinhard
Houses of worship in the U.S. are closing left and right. Up to 100,000 may close over the next several years, up from 3,750 to 7,500 per year (75 to 150 per week) in pre-Covid times. Congregations that don’t want to close are considering reusing or redeveloping their oversized, expensive, outdated real estate.
Not only faith institutions but also municipalities and communities need to prepare themselves for the decline and closure of houses of worship in their cities, towns, and villages to assess how to transform them from empty hulks into neighborhood assets.
And the processes required to affect these metamorphoses need to involve a complicated web of stakeholders—from congregations to clergy to municipal officials to neighborhood associations to developers to financiers to citizens—in order to make them come alive.
Why are churches closing?
One reason for this spate of closures is that fewer and fewer Americans consider themselves to be religious. Reporting for Gallup, Jeffrey H. Jones wrote, “U.S. church membership was 70 percent or higher from 1937 through 1976, falling modestly to an average of 68 percent in the 1970s through the 1990s. The past 20 years have seen an acceleration in the drop-off, with a 20-percentage-point decline since 1999 and more than half of that change occurring since the start of the current decade.”
A second reason is the increasing costs of managing real estate, especially aging real estate. If it costs $5 per square foot (while paying no property taxes) to operate a church, that would mean a modestly sized 10,000-square-foot church building would cost $70,000 per year, roughly the equivalent of each of the 100 members—man, woman, and child—placing a $20 bill in the collection plate 35 weeks per year, just to support the cost of the real estate, never mind other expenses. The median size congregation of one denomination in one state I am familiar with was 49, hardly robust enough to financially support a structure.
A third reason is a service-delivery model constructed in another era. Many denominations located houses of worship every four or five miles so people could ride their horses to and from services on Sunday. In urban communities, each neighborhood might have its own church of each denomination as a matter of neighborhood pride. As mobility has increased and neighborhood identity has decreased, worshipers may look for a different experience than they once did.
Finally, the Covid-19 pandemic is having its radical effect, keeping worshipers away and making virtual services seem not just easy and natural but, to some, even preferable. While the prevailing wisdom is that Covid is killing our houses of worship, most were in serious trouble before the pandemic; Covid is sealing their fate.
Given the decline in properties of houses of worship, both faith communities and municipalities and communities need to focus on the incoming glut of empty houses of worship and the gallant efforts of faith institutions to better reuse and redevelop them, and in so doing, unlock the asset value of their real estate.
What should faith institutions be doing?
Faith institutions are in the religion business, not the real-estate business. Clergy go to divinity school to spread the Good Word, not become the Grim Reaper. Countless new faith leaders graduate to find themselves perplexed to be in charge of not only a challenging congregation but often a big, rundown building. Lay leaders on the boards of houses of worship find themselves unable or unwilling to deal with the difficult situations they inherit.
When a congregation spends more than half of its annual budget on operating its real estate—and when three-quarters or more of its asset value is tied up in illiquid real estate—it’s time to take a serious look at reuse or redevelopment.
These dilemmas face their parent organizations as well as individual houses of worship. A denomination in one state rated 20 percent of its 530 churches in “critical condition” (declined and not paying their bills) and an additional 40 percent in “serious condition” (well on the way to being critical). That same denomination’s churches had a median weekly attendance of 49, hardly enough to keep paying to operate a property, much less to fund clergy musicians. As one pastor told me: “Many of us are one new roof away from closing.”
Here are eight actions a faith institution can take to prepare itself for oncoming glut of struggling houses of worship:
To Do #1: Get to know your property.
Clergy and congregations typically know only what is on a Zillow page little about their own real estate and can document even less.
- Size, layout, and condition, including required major repairs and replacement.
- Congregations should consider paying for an appraisal from a professional who understands the local market.
- Zoning and historical protections. On the one hand, restrictions may help preserve the value of the property. On the other hand, they may make difficult or impossible some possible uses, e.g., affordable housing.
- Tenant agreements. Leases with other congregations, child-care centers, and health-care clinics.
- Deeds and any restrictions, including reversionary clauses. It is not unheard of that the land donated for a house of worship is restricted to always be used for a church; once it is to be used for another purpose, the property reverts to the former owner.
To Do #2: Get to know your community.
Houses of worship often fail to know their communities the way they once did.
- What form of municipal government does the city, town, or village have? Is there a district councilmember? Is there a Planning Commission? Historic District Commission? Neighborhood association? Does your house of worship have relationships with them?
- What is the real-estate market like in your area, for housing, office, commercial? Is another house of worship looking for space like yours—either to own or to share?
- Who are the local realtors and real-estate developers who participate in projects like one you may contemplate?
To Do #3: Get to know your religion or denomination.
Some religions or denominations are “top-down” (decisions made at headquarters). Others are “bottom-up,” (decisions made by congregations). Others are a combination. Some vest decision-making authority in clergy, others in laity. Some require votes of congregations and/or of a larger group. Some religions or denominations specify what real-estate proceeds can and cannot be used for.
To Do #4: Assume your congregation prefers the status quo, not change.
Congregants are understandably proud of the history of their faith institutions and the connections to their families but can easily let remembrances keep them from moving ahead. Similarly, the congregation may put up roadblocks to cooperation with any nearby houses of worship. Houses of worship like unanimous agreement, so prepare for a handful of naysayers to block any initiative.
To Do #5: Assume your neighborhood or municipal government will be less than supportive.
Any change in use may be regarded as a nuisance, producing parking headaches if nothing else. Once a house of worship signs a lease or becomes vacant, municipal governments often become overeager to remove tax-exempt status and add the property to the tax rolls.
To Do #6: Be skeptical of the first developer or realtor who walks in the door.
It is not unusual for a savvy developer or realtor to make a low-ball offer for a property. Don’t accept it. You can find at least a handful of developers in your region—including not-for-profit developers—with the experience and wherewithal to pursue a project.
To Do #7: Design for the house of worship of the future, not the past.
No one is sure exactly what a post-pandemic religious experience will be like. It is a given that designing for public health is more important, as is designing for web streaming of services. Planning for mission-related services—food, clothing, shelter, health, and mental health—is more critical.
To Do #8: Get going right away, and budget conservatively with both time and money.
It will take a long time to get a congregation to embrace a project and to get a parent organization, a municipality, and development partners onside. However long you are told your project will take, it will take longer. However much money you are told your project will cost, it will cost more. Budgeting contingencies, both in time and money, is a wise move.
What should municipalities and communities be doing?
The responsibility to reuse and redevelop underutilized real estate of houses of worship lies not only with faith institutions but also with municipalities and the community at large.
The City of Orange Township NJ, population 30,000, has 18 churches in its small downtown area, most struggling for survival on valuable property a 35-minute New Jersey Transit ride from Midtown Manhattan. Other cities are finding their historic Downtown churches, whose architecture can make them difficult to redevelop, are emptying or emptied out. Small burghs are discovering that the churches found front and center on their towns’ postcards are falling into disrepair with uncertain futures.
Here are eight actions a municipality or community can take to prepare themselves for the oncoming glut of struggling houses of worship:
To Do #1 Compile an inventory of the properties of houses of worship in the area.
At the same time, develop relationships with clergy and lay leaders. Especially important are key houses of worship in key locations. It is equally important to begin to develop an understanding of the rules involving real estate of various denominations, such as learning who makes key decisions: the bishop (or like official), the local clergy, the lay leadership, or some combination.
To Do #2 Develop a property tax strategy that encourages appropriate reuse and redevelopment.
Active houses of worship are tax-exempt. Vacant properties are not. Houses of worship are often unclear that, while they own property, they can preserve tax-exempt status by holding infrequent but regular religious services or storing religious equipment on site. Renting out the property to tenants can subject the property to taxation.
To Do #3 Develop zoning strategies that encourage appropriate reuse and redevelopment.
Property that served the community well as a house of worship in the past may no longer have the same as its highest and best use. Well-located houses of worship may be ideal locations for dense development, as many are located near transit or at key intersections in a neighborhood or center city.
It is not only zoning laws that hamper most reuse and redevelopment projects involving houses of worship. Regulations involving parking, curb cuts, water, sewage, water runoff, fire safety, historic preservation, and provision of social services often prevent the most innovative uses.
To Do #4 Assist with delivery of social services currently housed in houses of worship.
The clothes closets, child-care centers, health clinics, and 12-step groups accommodated by houses of worship often greatly outweigh the size and scope of a congregation. Partners for Sacred Places, a Philadelphia-based not-for-profit organization working on saving historic churches, and the University of Pennsylvania School of Social Policy and Practice have identified a “economic halo effect,” whereby an average urban congregation creates more than $140,000 per year in value through the contribution of volunteer time; space at below market rates; and cash and in-kind donations to community-serving programs.
On the one hand, these programs need to continue serving a municipality with as little interruption as possible. On the other hand, struggling faith institutions need to be adequately compensated for providing space for community programs.
To Do #5 Serve as facilitator or mediator between houses of worship and developers.
Houses of worship tend not to trust the profit motive exhibited by the real-estate community. Elected and appointed officials can sometimes be the best translators between the spiritual language of a house of worship and the business language of a developer.
To Do #6 Develop access to grants, loans, and other incentives, especially for low-income and affordable housing.
Housing, especially affordable, low-income, or senior housing, often is the logical use for excess property owned by a house of worship. A religious organization can fulfill its mission to serve the disadvantaged and elderly, while a municipality can take advantage of below-market-rate land.
To Do #7 Develop a willingness to assist small but growing houses of worship.
This is especially important for those houses of worship serving immigrants. If an empty house of worship building is to be reused, the most likely use is another house of worship, and the most likely users are immigrant communities. Immigrant churches often start in living rooms and storefronts, but as they outgrow them, look for affordable individual buildings.
To Do #8 Get going right away, and budget conservatively with both time and money.
The same as with faith institutions.
Throughout the U.S. and beyond, many faith institutions have successfully reused or redeveloped their underused properties. No two projects are exactly alike. What works in a hot real-estate market (New York, San Francisco, Washington DC) may not work in a cold one (Appalachia, the Heartland, rural America). What works with a robust, young congregation may not work with a struggling, elderly one. What works in a progressive community may not work in a conservative one.
All too often, a declining house of worship is closed, and the property is sold before an intervention can occur. At one level, selling real estate to the highest bidder is the capitalistic American way, and returning exempt properties to the tax rolls is good for municipalities. At another level, however, faith institutions in concert with municipalities should look at excess properties of houses of worship as an opportunity to produce community goods and services that might otherwise not be delivered.
Faith institutions more and more are turning to intermediary organizations to assist them with the complicated processes involved in bringing reuse and redevelopment projects to fruition. Some faith institutions have set up community-development corporations (CDCs) to assist. The United Church of Christ Church Building and Loan Fund, formed in the 19th century, currently is working on several redevelopment projects. The Roman Catholic Diocese of Buffalo has formed Delta Development and the Western North Carolina Annual Conference of the United Methodist Church has formed the Wesley Community Development Corporation, both nonprofits concentrating on affordable housing. Judson Memorial Church in Manhattan has formed Bricks and Mortals, cultivating a citywide impact across all denominations and religions.
Two large not-for-profit community development corporations—Enterprise Community Partners and LISC (the Local Initiatives Support Corporation)—have set up nationwide initiatives to partner with faith institutions to convert their properties into affordable housing. Philadelphia-based Partners for Sacred Places focuses on refurbishment of historic faith properties
Some municipalities have embarked on initiatives to actively transform empty faith properties into affordable housing. In San Diego, the City Council unanimously endorsed the Mayor’s YIGBY (Yes in God’s Backyard) housing reforms. San José is following suit. San Antonio’s Neighborhood and Housing Services Department has launched a Mission Oriented Development pilot project, to help religious partners get through the development process.
A repeated focus of these programs is to form partnerships to produce affordable housing in cities that need it desperately. Other faith institutions take the money and run. First Methodist Church in Seattle sold its property to developers for more than $30 million and built a new, more modest church several blocks away.
There has been little support at the state or federal level for reuse and redevelopment of struggling religious properties. While the White House and most federal departments and agencies (including the Department of Housing and Urban Development) have Offices of Faith-based and Community Partnerships, little momentum has developed in these offices toward the issue.
Rev. Graham Singh, Anglican pastor and founder and executive director of Trinity Centres Foundation in Montreal, redeveloper of St. Jax Center, says that failing Christian churches, seeking inspiration, often ask the question WWJD? (What would Jesus do?) when they should be asking the more relevant question WWJJD? (What would Jane Jacobs do?) about the houses of worship’s underused real estate. Municipalities and communities need to be asking the same question.
Rick Reinhard, Principal of Niagara Consulting Group and counselor to The Lakelands Institute, served public-private, community- and economic-development partnerships and city governments for 30 years before devoting most of the last six years to working for the United Methodist Church.