Over the 2020s, houses of worship in the United States will be closing like never before. While many close, some congregations will seek to redevelop or reuse their properties as a means of staying vital.
Municipal managers need to join with religious leaders and the real-estate community to prepare for the onslaught of empty religious buildings, and to facilitate the rebirth of single-use churches into mixed- and multiple-use developments. What follows is an overview of the challenge, where it has come from, how to overcome barriers, and the opportunities for revitalization through development.
Overview
In the past decade, between 3,850 and 7,700 houses of worship have been closing per year in the United States, or 75 to 150 congregations per week, according to estimates from the Center for Analytics, Research, and Data, sponsored by the United Church of Christ. Some reopen for other congregations, most notably immigrant congregations. Others are transformed into low-income housing, community arts centers, luxury condominiums or other development, but those are exceptions. Most churches remain empty.
An empty house of worship, like any empty building, can be a security problem and can decrease the value of surrounding properties. Perhaps more importantly, an empty house of worship, especially one at a main intersection, can be seen as a symbol of community failure.
In the aftermath of the current public health crisis, the number of church closings will increase dramatically. Conservatively, the number will double or triple. To frame this issue by analogy, recent estimates suggest that 30 percent of all U.S. restaurants will close or fail to reopen. If churches are similar to other service businesses—with estimates of a post-pandemic closure rate of 20 to 30 percent—then somewhere around 100,000 of the estimated 384,000 houses of worship in the U.S. will close in relatively short order.
Before the pandemic, one denomination in one state rated their churches based upon nine performance criteria, relating to economic health, congregational size, and the relationship between the two. If a church fell below certain standards in at least five of the nine performance criteria, it was rated in “critical condition”; if it fell below in three or four of the nine criteria, it was rated in “serious condition.”
Of 530 churches, 105 were rated “critical” and 208 were rated “serious.” The denomination in that state may be faced with taking drastic action with 313 of its 530 churches in the next decade or sooner. Further, many houses of worship deemed “healthy” are in fact barely holding on, with clergy concerned about dwindling membership, aging congregations, decreasing contributions, a shaky bottom line, and an uncertain future.
Causes
Decline in church attendance
One reason for this spate of closures is the rapid reduction in individuals who consider themselves to be religious. Jeffrey M. Jones, reporting for Gallup, 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.”
Rising costs
A second reason is the increasing costs of managing real estate, especially aging real estate. According to the Building Owners and Managers Association, it costs $12 per square foot, not including property taxes, to operate an office building; $2 per square foot to operate a warehouse building. If one assumes that a church is akin to a building that is half-office, half-warehouse, it would cost $7 per square foot, not including 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 100 members placing a $20 bill in the collection plate 35 weeks per year, just to support the cost of the real estate, never mind compensation for the pastor or organist or other expenses. The median size congregation of one denomination in one state I am familiar with was 49.
Change in behavior
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.
Preference for virtual
Finally, the COVID-19 pandemic is having its radical effect, keeping worshippers away and making virtual services seem not just easy and natural but, to some, even preferable.
These causes beg an age-old controversial question of what constitutes a sacred space. It is interesting to note the burgeoning of new congregations that use movie theaters, storefronts, school cafeterias, and community centers for worship services, thus avoiding, or at least severely minimizing real-estate costs. Reasonable worshipers may disagree on whether there is something spiritually or theologically special that occurs in a house of worship that cannot or does not happen through a computer or in a cafeteria or in a stadium, or really anywhere on the planet where worshippers gather.
Alternatives
A house of worship that is unable to afford its real estate faces two alternatives: either sell the property; or repurpose its real estate into an alternate use, sometimes with multiple or mixed uses.
Congregations often are in denial about their financial condition in general and their properties specifically. The philosophy of “the Lord will provide” often outweighs the reality of “we have only 10 members, a roof that leaks, and a boiler that doesn’t work.”
Municipalities, religious organizations, and developers need to be open to both of the described alternatives, preparing themselves for a tsunami of closed churches, as well as the desire of active churches to create multiple- and mixed-use developments.
Problem or Opportunity?
Is an empty church—or a church that wishes to become multiple- or mixed-use—a problem or an opportunity for a municipality?
On the one hand, no municipality wants an empty building dominating a prominent intersection, especially an empty hulk that is difficult to reuse or to demolish. An active house of worship often serves as the site, if not the sponsor, for considerable social-services programs: food pantries, clothes closets, child-care centers, health clinics, and 12-step groups (such as Alcoholics Anonymous and Narcotics Anonymous). These initiatives often are taken for granted by municipalities, which may be forced to find alternative sponsors and alternative spaces if a church closes its doors.
On the other hand, most municipalities would welcome the opportunity to take a prominent property that has been off the tax rolls and get it to generate local property taxes. Perhaps just as important is to take a prominent property that has seen limited use—perhaps one or two days a week—and turn it into a mixed-use activity generator. Many municipalities are looking at the properties of houses of worship as ideal sites for needed affordable or low-income housing. However, alternative uses may be the highest and best use. Municipalities should be wise to the fact that what is best for a religion or a developer may not be best for the community and should be prepared to negotiate.
Municipalities should evaluate the potential of each house-of-worship property based upon at least seven factors:
1. Property: Is the property in good condition or has a lack of investment by a financially ailing congregation weakened the condition of the property. Some houses of worship, due to financial hardship, have neglected to invest in roofs, HVAC systems, and other major capital assets in their worship spaces, education centers, and parsonages.
2. Market: Is the property in a high-, moderate-, low-, or no-demand market or submarket? Is the demand highest at that location for housing, office, retail, or institutional use?
3. Political environment: What is the zoning of the property? How will neighbors and neighborhood associations greet a change in use or structure? Neighbors may be resistant to change, especially when they have not been involved in the process or even consulted.
4. Congregation: Is the congregation prepared to settle on a strategy and, if not, what will it take—and how long—to get them settled? Is the congregation more interested in mission or money? It is rare that they can accomplish both.
5. Denomination: Who makes decisions in the religion or denomination involved? Is it “top-down,” “bottom-up,” or something in between? Is the denomination more interested in mission or money?
6. Partners: Are there experienced for-profit and not-for-profit developers in the area with the capacity to carry off a project? Are there experienced consultants—real estate, design, engineering, finance— to support it?
7. Finance: Is a proposed development financially viable? What grants, loans, and other incentives can be provided by the municipality, state, or federal government, or foundations to write down the cost of a program important to the community?
Obstacles
Before entering into any discussion about repurposing, the municipality needs to recognize that partnerships with houses of worship can be extremely difficult.
First, congregations and denominations tend to make decisions based less upon facts but more upon emotion. Arguments such as “my grandparents were married in this church” tend to dilute arguments like “we only have six members with a median age of 80.”
Second, clergy and lay leadership tend to trust neither real-estate professionals nor government officials, feeling dutybound to preach the word and save souls. They view with suspicion goals of profit or re-election, especially when the profits are mostly going to someone outside of the congregation or community.
Third, clergy are educated to promote religion, not to converse with municipalities or developers about management, social entrepreneurship, urban planning, or real estate. This leaves them woefully unprepared to enter into the technical matters that a repurposing project naturally entails.
Fourth, different religions and denominations have different rules for decision making. Some, like the Roman Catholics and Church of Jesus Christ of Latter-day Saints, are very top-down: what the church hierarchy says goes. Others, like the United Church of Christ and Judaism, are very bottom-up: decision making is at the congregational level. Some, like my church, the United Methodist Church, are both: a Book of Discipline prescribes a complicated route for closing and/or redeveloping churches.
Fifth, congregations can be unclear on their desired outcomes. Some begin a project, wanting to fulfill their mission to the poor by constructing homeless shelters or low-income housing on their property, only to expect the sort of revenues that market-rate housing, office, or retail would provide.
Finally, houses of worship can have complications involving their real estate. One denomination discovered late in the process that a reversion clause entered into decades ago meant that, if a house of worship closed, the land would revert back to the original owner. Often cemeteries promising perpetual care are part of a house of worship’s property and end up becoming the responsibility of the house of worship’s parent body, the developer, or the municipality.
Taking Action
To plan for church closings, municipalities may consider the following actions:
Compile an inventory of the properties of houses of worship in the municipality.
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.
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.
Develop a property tax strategy that encourages appropriate 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.
Develop zoning strategy that encourages appropriate development.
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.
Assist with alternate places for social-services delivery.
The food pantries, clothes closets, child-care centers, health clinics, and 12-step groups accommodated by houses of worship need to continue serving a municipality with as little interruption as possible.
In addition, to promote joint ventures/mixed and multiple use, municipalities may consider the following actions:
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.
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.
Be reasonable and clear on regulations for uses involving food, childcare, and public health.
Houses of worship often run afoul of regulations when allowing their facilities to be used for these critical community needs and require assistance to understand government regulations.
After a 30-year career in special-district management and economic development, I have spent the last five years in church administration. The experience has offered me a unique perspective on houses of worship, their role in communities, and their real estate. The possibilities are promising when municipalities are prepared to work with houses of worship, developers, and the community to work boldly and creatively together.
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