As More Churches Approach Fiscal ‘Breaking Point,’ Housing Projects Are Providing A Lifeline

Churches in cities around the country have faced declining memberships and revenues over the last decade, a trend that has been exacerbated by the coronavirus pandemic. 

As land becomes scarce in cities that are looking to build more housing, religious institutions are increasingly partnering with developers to build on their large pieces of valuable urban property, unlocking a long-term source of income for churches that are struggling financially. 

The strategy of church-developer partners is not a new one, but it has become more common over the last few years as the forces of increased housing need and greater financial instability for churches have coincided. And as more of these projects have been successfully completed, churches are seeing positive examples that give them confidence to move forward with these partnerships. 

"It's an idea whose time has come," said the Rev. Donald Isaac, who leads a congregation in Southeast D.C. and is working with a group of churches to facilitate redevelopments.

"The issue of demographics and giving patterns for churches means that we have to diversify our income streams," Isaac added. "If we own land, it allows us to meet the housing needs of the District and strengthen the church with additional revenues."

This development strategy has become especially prevalent in the nation's capital. Bisnow found 10 examples of church redevelopments totaling more than 1,200 housing units that have delivered over the last two years or are currently moving forward in the D.C. area. 

• The Westminster Presbyterian Church in Southwest D.C. is partnering with Bozzuto and Dantes Partners to build a 222-unit development with ground-floor space for the church.
• The Wisconsin Avenue Baptist Church in Tenleytown is partnering with Sunrise Senior Living to build an 86-unit continuing care community on its property. 
• The Bethlehem Baptist Church in Anacostia is partnering with MRP Realty to build 112 affordable housing units on its property. 
• The New Bethany Baptist Church in Shaw is partnering with Gragg Cardona Partners to build a 45-unit residential development on its property. 
• The St. Josephs Seminary in Michigan Park is partnering with EYA to build 80 townhouses on its property. 
• The First Baptist Church in Dupont Circle is partnering with Keener-Squire Properties to add 78 apartments to its property. 
• The Christ Lutheran Church in Bethesda is partnering with JLB Partners to build 310 multifamily units on its property. 
• The Metro Church in Fairfax is selling a portion of its property to EYA to build 50 townhouses. 
• The Arlington Presbyterian Church in November 2019 delivered a 173-unit project in partnership with the Arlington Partnership for Affordable Housing. 
• The St. Thomas Episcopal Parish in Dupont Circle in 2019 opened in a new building alongside 51 housing units after selling the property to CAS Riegler. 

These projects are occurring across the country. In Atlanta, the First United Methodist Church is partnering with a developer to build 300 units on its property. In Boston, Lincoln Property Co. filed plans to build 270 units on a vacant, 14-acre site in the Hyde Park neighborhood currently owned by the Jubilee Christian Church. 

EYA Executive Vice President Aakash Thakkar said the residential developer has also entered into similar partnerships with religious educational institutions, including St. Paul's College in Northeast D.C.

Thakkar said EYA is working on a new partnership, which hasn't been previously reported, with Brandywine Senior Living and the Academy of the Holy Cross in Montgomery County to build townhouses and senior living on a portion of the academy's property. The project, which would create around 120 senior housing units, is in the early stages of the approval process.

"Many organizations are seeing the trend where they don't need as much space or land as they did before, and they can use the dollars that they earn through a transaction like this to put back into their mission," Thakkar said.

This is the case for Isaac's Southeast Tabernacle Baptist Church in Ward 8. He said the church has faced declining revenues, and it is in the early stages of planning a residential redevelopment on the property. The current zoning would allow for about 30 units on the site, but Isaac is looking to go even bigger. 

Isaac organized a group of faith leaders who submitted a letter to D.C. Council Chairman Phil Mendelson, requesting an amendment to D.C.'s Comprehensive Plan that would increase the density for land owned by religious institutions to allow them to develop affordable housing on their properties. 

The letter, which Isaac said was signed by 75 faith leaders and other stakeholders, acknowledged that its request comes in the "eleventh hour" of the Comprehensive Plan process. Mayor Muriel Bowser's administration submitted its administration's final set of amendments in April and has been pushing the council for months to pass it as soon as possible.

But Isaac said a last-minute addition to the amendments could make a real difference. The letter estimated that faith-based institutions own 6M SF of vacant land in the District. It said that changing the zoning guidelines through the Comprehensive Plan process would save churches 12 to 24 months in the entitlement process, lowering costs and allowing them to move faster to add housing on their properties. 

"Faith institutions have a vested interest in being a player in the affordable housing market," Isaac said. "We are owners of land in a city where land is becoming a great scarcity. Many faith institutions have been forced to just sell their properties and move to surrounding jurisdictions. We're trying to provide a way forward for churches committing to staying in the District."

A Mendelson spokesperson, in an email to Bisnow, said the chairman has received the letter and has a meeting scheduled with his staff Friday morning to discuss it. The spokesperson said Mendelson hopes to discuss the request with the faith leaders as soon as possible. 

The trend of church-developer partnerships has grown in recent years, several stakeholders say, as religious institutions have faced increased financial pressure caused by declining membership. 

An April 2019 Gallup poll found that the percentage of Americans who belong to a church, synagogue or mosque fell from 70% in 1998 to 50% in 2018. The pandemic has exacerbated the challenges, as 65% of U.S. churches have seen a decrease in contributions, according to a Barna Group survey reported by Religion News Service. The survey found one in five churches may be forced to close in the next 18 months.

Brown Law Firm Managing Member Carolyn Brown, a land use attorney who has worked on multiple church redevelopments in D.C., said these projects have occurred for years but have become more frequent as churches have seen their revenues shrink and have begun to look for solutions. 

“The dwindling population is something that’s accelerated over the last 10 years, so it becomes more of a breaking point for a lot of congregations,” Brown said.

“They are not developers, so they have difficulty trying to figure out how to approach this problem," Brown added. "The churches have gotten more focused on the need to do something. Slowly, as examples are building, they realize this is one way to protect themselves and sustain themselves.”  

A consistent pattern among many of the church redevelopments currently moving forward is that they are structured as partnerships that would allow the church to remain on the site and provide stable, long-term revenue for the organizations. This stands in contrast to past examples, where churches would relocate after selling their properties, giving them only a one-time infusion of cash. 

Oussama Souadi, a partner at Gragg Cardona Partners, said the company is structuring its deal with the New Bethany Baptist Church as a ground lease to allow the church to maintain ownership of the land and benefit from long-term revenues.

"Our mission was to try to deliver housing and help an institution that has existed there for 100 years remain," Souadi said. "Historically, churches would dispose of their asset and relocate to [the suburbs]. We really believe that this type of investment is key to figuring out how to keep those stakeholders in place."

Nonprofit Enterprise Community Development has partnered with multiple churches in the Baltimore area on these types of redevelopments. Its sister organization, Enterprise Community Partners, 10 years ago launched the Faith-Based Development Initiative, a program that offers training for faith leaders who want to learn about development options. 

"In the case of the faith-based groups we've worked with, not only did they achieve a significant part of their mission in choosing to utilize land for affordable housing, but in most cases the transactions also generated an important source of capital for them," Enterprise Community Development Executive Vice President Christine Madigan said. 

These projects vary in what they will mean for the existing church building. Some of the projects would keep the church in place and build housing on an adjacent, vacant parcel of land, while others would demolish the existing structure and create space for the church within the new residential building. 

The Westminster Presbyterian Church's partnership with Bozzuto and Dantes Partners is an example of the latter. The project would create a 90-foot-tall mixed-use building with 222 multifamily units and 18,500 SF of ground-floor space for the church. 

Motley Waller Executive Partner Lloyd Jordan, a member of the Westminster Presbyterian church who is representing it in the development partnership, said he has found through outreach and surveys that younger churchgoers are more likely to attend religious services in newer buildings. 

"Nowadays, the new generation of people is not drawn to typical-looking churches," Jordan said. "We've done research and found that becomes a put-off. You'll see a lot of churches that are part of a more mixed-use blended facility ... You've got to change with the tides."

Jordan said the Westminster Presbyterian building is more than 50 years old and has required an increasing amount of money for repairs, and he said continuing with patchwork renovations wouldn't be a sustainable solution. He said he has worked with other churches that have similar issues and he sees churches moving to newer buildings as a growing trend. 

"They have high capital costs, and how do we fix up this building and maintain our mission and serve our community if our building is falling apart? Where do we get this revenue?" Jordan said. "The church ground itself becomes an asset that can be utilized for that purpose."

Isaac, who is still in the early stages of planning to redevelop his Southeast D.C. church, said he hasn't yet determined whether he would keep the existing structure or incorporate the church into a new building. But he agreed with Jordan's idea that a newer church facility would attract younger members, and he also said it would be a more efficient use of space. 

"A lot of churches, particularly inner-city churches, have poor space utilization," Isaac said. "A major focus of the space is the sanctuary, a space you use the fewest times per week. The demands of the community and the congregation dictate that we should look for a different space configuration to get a greater use of the space Monday through Saturday."

The ability of religious institutions to redevelop their underutilized land comes at a time when D.C. and other cities are looking to build more housing supply to address the affordability crisis. 

Bowser in early 2019 set a goal for D.C. to build 36,000 housing units, including 12,000 affordable units, by 2025. In a city smaller than 70 square miles with a building height limit, church properties can provide much-needed land for housing development. 

"It's the crossroads of the housing need and the real estate realities in the District where you have less and less of those massive sites that can deliver density," Souadi said. "Churches happen to be some of those property owners."

Coalition for Smarter Growth Policy Director Cheryl Cort, who has testified in support of some church redevelopment projects, said she thinks the successful examples of these projects have inspired more churches to pursue options to build housing on their land. 

"This is tapping into underutilized land, often in high-demand neighborhoods, where we're both benefiting a church and we're enabling more people to have an opportunity to live in that neighborhood," Cort said. 

Thakkar said it is important for local governments to embrace these projects and push them through their regulatory and zoning processes. 

EYA's St. Josephs Seminary project was delayed for more than two years by a court appeal, making it one of more than a dozen projects that have been caught up in a wave of appeals over the last four years. The Wisconsin Avenue Baptist Church project was appealed in March 2020, and the development team is still waiting for the court to schedule a hearing. 

"It's absolutely essential that cities work with organizations, churches and folks like us to make these projects happen," Thakkar said. "There is certainly demand for housing, and this is another way to get at the demand."

Madigan said it aligns with the mission of religious institutions to provide affordable housing that allows people of all income levels to live in their neighborhoods. 

"I think it's inevitable that we'll see more of this kind of activity," she said. "Faith-based groups are very interested in the experiences of others who've tried the same thing ... and they are looking at how can they utilize their assets to expand upon their mission."