More and more houses of worship are shuttering their doors. Declining membership, increased internet streaming and COVID-19 pandemic pressures all have conspired against traditional, steepled structures. Faith communities are trying to hang on and even prosper by analyzing how to better use their overabundant, oversized, over-expensive properties.
If a house of worship isn’t ready for a long, bumpy ride, there probably is very little chance of success.
Rick Reinhard
In locations with hot real estate markets, struggling houses of worship attract developers who circle around them, vying for their properties to turn them into luxury housing, office space, night clubs or brew pubs. Developers — especially not-for-profit ones — may agree to structure deals that reserve worship space or develop affordable housing, cultural facilities or space for not-for-profit organizations as part of the project. In locations with cooler real estate markets, houses of worship piece together partnerships that will allow them to persevere while continuing to serve the community.
Houses of worship often hear both the siren call of profit and the clarion call of service. One church in downtown Tampa sold its building to a private developer for $5 million as it sought smaller, less-expensive space for worship services elsewhere in the city. Another church, just a few blocks away, closed and allowed a sister congregation to operate the building as a second urban campus, offering social services to the community. One chose cash, the other chose mission. Sometimes it is possible to balance the two.
“Up to 100,000 houses of worship will be closing over the next several years, so the scale of house of worship redevelopment will be several times anything we have experienced before.”
Up to 100,000 houses of worship will be closing over the next several years, so the scale of house of worship redevelopment will be several times anything we have experienced before. Churches and their parent organizations need to be ready. To assist in making these decisions, here are seven key dos and don’ts:
1. Don’t assume your congregation will want change, no matter how dire the circumstances.
People 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 — the “My family has been members of this church for generations” syndrome. Similarly, the congregation may put up roadblocks to cooperation with any nearby houses of worship. “We cannot possibly work with them; do you know what happened between us 25 years ago?”
Houses of worship like to operate via consensus, so prepare for a handful of naysayers in the congregation to try to block any initiative. If a house of worship isn’t ready for a long, bumpy ride, there probably is very little chance of success.
2. Don’t assume your neighborhood or municipal government will be supportive.
Neighbors to struggling houses of worship often develop a habit of using the sparsely used grounds for their own purposes. Any change in use may be regarded as a nuisance, producing parking headaches if nothing else. Similarly, once a house of worship signs a lease or the building becomes vacant, municipal governments can become overeager to remove tax-exempt status and add the property to the tax rolls. One vacant church in Washington, D.C., naively rented out the basement to a martial arts studio, only to find the entire property subjected to taxation for several years back.
3. Don’t sign up with the first developer who walks in the door.
It is not unusual for a savvy developer or Realtor to make a lowball offer for a property. Don’t accept it. You can find at least a handful of developers in your region with the experience and wherewithal to pursue a project with the house of worship. Some may be not-for-profit community development corporations. Some — for-profit or not-for-profit — may be willing to structure a joint venture in which the house of worship shares in the risk and return.
Be in charge of your own process. Only partner with local developers with good track records.
4. Do budget conservatively, with both time and money.
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, are your friends.
“However long you are told your project will take, it will take longer.”
Funding for projects almost always comes from multiple sources — private, public, not-for-profit, debt, equity, tax credits. The larger and more complex the project and the more parties involved, the roomier the contingencies should be.
Also, be sure to understand that a house of worship’s operating revenues, whether from contributions or from earned income from tenants, likely will plummet for the duration of a major project.
5. Don’t assume a new or renovated building will produce a revitalized congregation.
A house of worship’s health depends upon a number of factors — pastoral leadership, area demographics, social relevance — with the building being just one. Disruption caused by construction may serve to kill a struggling congregation in the years it takes to complete.
6. Do design for the church of the future, not the past.
No one is sure exactly what a post-pandemic religious experience will look like. Design for public health is more important. So is design that allows first-rate broadcasts of services via the web. The COVID-19 pandemic also has taught us that mission — food, clothing, shelter, health and mental health services — is a critical function of our houses of worship.
“Congregations are finding themselves spending half and more of their annual budgets on real estate, leaving few resources for much else.”
What does the congregation deem as most important? Flexibility of space is extremely important precisely because of the uncertainty of the future of houses of worship.
7. Don’t wait until it’s too late.
Many houses of worship find themselves in a downward spiral: congregations dwindle, contributions decline, reserves erode, buildings deteriorate, staff is less able to be supported, the church becomes less attractive to attend. Congregations are finding themselves spending half and more of their annual budgets on real estate, leaving few resources for much else. It is common to hear congregational trustees say that they are “one new roof (or boiler or steeple repair) away from closing.” Once the downward spiral starts, it becomes tougher and tougher to escape. Get help and get it early.
More details may be found in Rick Reinhard’s article “Redeveloping Houses of Worship” in Public Management Magazine, April 2021.
Rick Reinhard is principal of Niagara Consulting Group and associate at The Lakelands Institute. He served public-private economic development partnerships and city governments for 30 years before devoting the last five years to working for the United Methodist Church. This column is adapted from “Leading Ideas” at Lewis Center of Wesley Theological Seminary.
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