The Guru Is In
House of Worshippers
By David A. Smith
8 min read
Five years after COVID disrupted real estate markets, America’s highest real estate priority is housing, and in particular, affordable housing. Amidst hugely devalued office buildings, shopping malls, restaurants, and retailers, housing has continuously risen in importance as it has risen in scarcity. Nor did interest-rate relief (when we had it, back in 2021-23) provide any meaningful uptick in production. We have an affordable housing shortage throughout the country, and if we could unlock thousands of parcels of urban land that could be developed into affordable housing by entities motivated to help the poor, wouldn’t we do it immediately?
We can do it now – if we have eyes to see. As reported in the October 2024 Tax Credit Advisor:
[I]n 2019, the Urban Institute found that in the notoriously expensive Washington, DC area, there existed 800 vacant parcels owned by faith-based institutions, which – if used for multifamily affordable housing – could convert to an estimated 43,000 to 108,000 new units. Even considering the lowest end of this estimate, such a building spree could wipe out the shortage of rental homes in the area, which the National Low Income Housing Coalition estimates currently sits at just over 33,000 units.
All it takes are two changes of thinking: Motivating faith institutions to deploy their precious land for affordable housing as part of church property and abjuring any Federal resources that seek to prohibit faith institutions from reserving homes for congregants.
This isn’t just thinkable, it’s also worthy, and it taps into faith and practice dating back centuries all over the world.
Long before the Federal government entered into affordable housing at scale in the 1930s, indeed long before there was a United States, affordable housing as charity toward the worthy poor was a foundational tenet of Judaism, Christianity, and Islam. The tradition of building housing for the poor dates back well over a millennium, with the oldest almshouse still in existence believed to be the hospital of St. Oswald in Worcester, England, founded in 990. By the 1500s, England alone held 800 almshouses, and the obligation to create them was enacted into law in 1601, with the ‘impotent poor’ in almshouses, the ‘able-bodied poor’ in Houses of Industry, and the ‘idle poor’ and vagrants in Houses of Correction.
The principle of localized housing philanthropy traveled to Europe, where in 1521, the wealthiest man in the world, Jakob Fugger, founded the Fuggerei:
The Fuggerei is the oldest existing social housing complex in the world, a city within a city with 67 buildings and 142 residences, as well as a church. Jakob Fugger founded the Fuggerei in his and his brothers’ names in 1521. Approximately 150 needy Augsburg citizens of the Catholic faith live here for an annual base rent of €0.88 and three daily prayers.
Poorhouses as localized charity came to America in 1630 when Puritan John Winthrop, before boarding a ship to cross the Atlantic on his way to becoming Massachusetts Bay Colony governor, evoked the Sermon on the Mount when he wrote a covenant for the Puritans’ new world:
Wee must consider that wee shall be as a citty upon a hill. The eyes of all people are upon us.
In 1639, Governor Winthrop mandated that Boston and every other town manage care for the “deserving poor” and “correct…vagrant and dissolute persons” by encouraging them to work. By 1664, Boston had opened the first almshouse in America, and the idea spread through the Colonies. Thousands of communities, large and small, established poorhouses, built them with philanthropic capital and community sweat equity, and operated them with volunteers and regular donations.
Many of these survived for decades, until the Federal government arrived. As part of the New Deal, Congress in 1935 enacted the Social Security Act, which included the Old Age Assistance program that:
[Made] federal money available to the states to provide financial assistance to poor seniors. The law specifically prohibited making these payments to anyone living in public institutions (poor houses, which had become known for their terrible living conditions), thus spawning the creation of the private nursing home industry.
Three decades later, seeking to curtail what was by then a rise of scandalously bad nursing homes and hoping to solve the problem with money, Lyndon Johnson’s Great Society Congress created Medicare and Medicaid in 1965, followed that two years later by requiring states to license nursing homes, and with the 1968 duo of high-volume multifamily rental production programs (§221d3 and §236) Federal occupation of the market space had largely driven nonprofits, including faith institutions, out of the business of development, ownership, or operations of affordable housing. They might have had a narrowly prescribed role as co-developer with minimal compensation, but that was all.
As far as I can tell, none of this sidelining was intentional; it just happened. The new capitalization model, equity syndication of tax-shelter benefits, favored for-profits developers, which grew rapidly and dominated the market. The handful of nonprofits that entered the space back then⸺Volunteers of America, National Church Residences, and Mercy Housing come to mind⸺learned how to play by the Department of Housing and Urban Development’s rules and so put their faith to one side when acting as affordable housing developers or co-developers. For many, though, their ministry to the community could more easily be reconciled with their faith via outreach programs, homeless and elderly services, and all the things that can be better delivered when brought into stable, caring, quality affordable housing – but not the housing itself.
Looked at one way, faith institutions could be natural housing developers:
- Embedded in their communities and have been for decades or even centuries;
- Are always in touch with the needs of their communities;
- Can draw upon the goodwill of a large pool of coreligionists who are regular donors of money, expertise, and time;
- Committed to helping their congregants and helping the poor;
- Familiar with mounting charitable campaigns for worthy causes;
- Own property that is generally exempt from real estate taxation;
- Own land suitable for development, part of their overall campus, or at worst nearby; and
- Have indefinite site control and have the patience of Saint Sebastian, enduring the local approval processes.
Conversely, having been out of the affordable housing business for half a century (and for many of them, never having been in it at all), there are plenty of barriers to entry:
- There are no proven delivery or financing models. There’s virtually no body of practice for faith institutions wishing to develop for their congregants alone, only for the general public;
- They cannot use Low Income Housing Tax Credits, Federal Housing Administration insurance, State Housing Finance Agency financing, or nearly all of the tools one might find in an online search or by asking your friendly AI word Cuisinart;
- As my friend Michelle Norris, formerly senior vice president for business development and policy at National Church Residences, points out, “Faith institutions come in all shapes and sizes: rural versus urban, megachurches versus tiny survivors, growing versus shrinking congregation size, single church versus multi-site campus;”
- Many of the smaller ones are unready to be developers, even if they wanted to be, not configured as corporations, or lacking a board of directors/leadership team ready to create a development subsidiary or otherwise formalize to be a developer or co-developers; and
- Conflicting but worthy priorities. Mission, vision, and strategy: “Wow, these can be very, very different!”
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When I emailed Michelle asking, ‘What’s a congregation’s money for?’ she replied, “How many answers would you like? Local missions, such as food pantries and homeless ministry, facility needs (renovating or repairing current church buildings), administrative needs, denominational support, and international missions like overseas orphanages, schools, and building projects. They all matter.”
Yes, in an irony of principle trumping common sense, faith institutions can go overseas and build housing for congregants in their home countries. Still, if those congregants have immigrated to America, that same faith institution cannot use any Federal resources to help here at home.
Such is our shortage of affordable housing across the country that if it is created anywhere, it will house people who are deserving, and in doing that, will not only help those thousands of households, but it will also relieve overcrowding and pressure on every other form of affordable housing in its market area.
Conversely, if faith institutions are seen just as a source of cheap land that can be developed into affordable housing meeting secular definitions of eligibility, only a handful will ever be motivated and capable enough to do so, and all those homes will be unbuilt.
Right now, few faith institutions know how to become developers or co-developers, but that’s a problem of delivery and financing, one many of us can readily solve if we are working with clients that have land, money, and helpful friends – as faith institutions do.
Putting that land into service for the many in need through affordable housing isn’t just thinkable, it’s worthy – and it’s not just worthy, it’s urgent.
