Hal Hart

Washington D.C.’s Calvary Episcopal Church engaged Cap Ex to guide early exploration of affordable housing development.

Introduction

Across the U.S., many houses of worship face shrinking congregations, rising costs, and aging buildings. At the same time, the demand for affordable housing continues to grow. Rather than viewing these challenges as setbacks, faith-based organizations can turn them into opportunities—using their real estate to advance mission, strengthen finances, and serve their communities.

California’s SB 4 law, known as “Yes in God’s Backyard,” clears a path for churches to repurpose property for housing. While the opportunity is significant, it requires careful navigation of zoning, financing, and partnerships.

While the opportunity is significant, it requires careful navigation of zoning, financing, and partnerships.

The Opportunity in Faith-Based Real Estate

Houses of worship are often located on prime land, yet declining membership can leave properties underutilized. Rising maintenance costs only add to financial pressure.

Redevelopment offers an alternative to selling: transforming sites into affordable housing that turns a liability into a mission-driven solution. With thoughtful planning, congregations can remain community anchors while addressing urgent housing needs.

Legislation as a Catalyst

Signed in 2023, SB 4 makes it easier for faith-based organizations and nonprofit colleges to build affordable housing on their land.

Key provisions include:

  • By-right approval: Qualifying projects can proceed without discretionary local reviews.
  • Exemption from zoning restrictions: Housing can be built even if land is zoned for institutional or commercial use.
  • Streamlined process: Fewer approvals reduce delays and costs.
  • Affordability requirements: Projects must be 100 percent affordable, with rents restricted for lower-income households.
  • Parking flexibility: Replacement parking is not required if housing takes part of an existing lot.

In short, SB 4 cuts through zoning and permitting red tape, giving churches a clearer path to building affordable housing while ensuring projects serve low-income communities. Similar legislation is gaining traction nationwide.

Creative Financing and Long-Term Ownership

Selling land may provide quick revenue, but redevelopment offers lasting impact. Projects can preserve worship space or add new facilities while generating income through affordable housing.

With tools like tax credits, grants, and impact investments, congregations can retain ownership, reduce maintenance burdens, and support community needs. This approach requires financial expertise and trusted advisors who understand both markets and ministry.

Redevelopment as an Income Source

Affordable housing is designed to be financially sustainable—not profit-driven. Rents are tied to area median income (AMI) and kept below market, even as operating and compliance costs rise.

This means affordable housing typically covers expenses but rarely generates strong cash flow. Congregations expecting large profits may find financial realities more modest. When tax credits are involved, experienced advisors are essential to ensure churches are well-positioned in development partnerships.

Congregations expecting large profits may find financial realities more modest.

Case Studies of Possibility

Calvary Episcopal (Washington, D.C.): Engaged Cap Ex to study redeveloping church-owned properties into affordable senior housing, including units for congregants. Feasibility analysis revealed a clear path to meeting both community and mission goals. This engagement was supported through Enterprise’s Faith-Based Development Initiative.

Tyer Temple United Methodist (Tampa): Explored options for a large parcel with multiple aging facilities. Early planning showed how the site could support new housing along with multipurpose worship space.

In both cases, Cap Ex provided space planning and financial modeling, helping congregations see how their properties could evolve into hubs for housing and community activity.

Resources for Congregations

Several national organizations are supporting faith-based redevelopment with funding, training, and expertise:

Enterprise Faith-Based Development Initiative
Offers grants, capital, technical assistance, and peer-to-peer learning for congregations pursuing housing development.

Partners for Sacred Places
While not specific to housing, the organization provides grants for the restoration and adaptive reuse of sacred buildings, including:

    • National Fund for Sacred Places: In partnership with the National Trust for Historic Preservation, this program has helped 100+ congregations secure $50M+ in capital funding.
    • Intervention Fund (Emergency Restoration Grants): Provides up to $25,000 for planning and $50,000 for emergency repairs—disbursed quickly and without cash match requirements.

Cap Ex Advisory Group
Cap Ex supports houses of worship facing a range of real estate challenges and opportunities. In addition to housing development, Cap Ex has helped congregations expand, engage communities through new shared space, and explore developer partnerships.

Conclusion

Underutilized property can be more than a liability—it can be a catalyst for mission and community impact. With supportive legislation like California’s SB 4, creative financing strategies, and guidance from experienced partners, churches can transform aging facilities into housing that serves neighbors while sustaining long-term ministry.

Though affordable housing is not a quick path to profit, it offers stability, relevance, and renewed purpose for faith communities seeking to remain anchors in their neighborhoods.

Key Takeaways:

  • Opportunity in Real Estate: Redevelopment can turn underused properties into affordable housing, advancing mission and sustainability.
  • Legislative Support: Laws like SB 4 streamline approvals, making projects more feasible.
  • Financial Reality: Affordable housing covers costs but is not built for large profits—expert guidance is critical.
  • Long-Term Benefits: Redevelopment can preserve worship space, reduce maintenance costs, and generate steady income.
  • Models of Success: Case studies show how churches in Washington, D.C., and Tampa are reimagining their land.
  • Available Resources: Enterprise and Partners for Sacred Places offer funding and technical assistance. Cap Ex brings experience supporting multiple congregations from feasibility to capital projects.

References:

Senator Wiener’s YIGBY – Yes in God’s Backyard bill passes Assembly — California State Senate. (2023, September 6). California State Senate, District 11.

Working with faith-based organizations on affordable housing development. — Department of Housing and Urban Development. HUD Exchange. 

Churching NIMBYs: Creating affordable housing on church property. Reidy, P. E. (2023). Yale Law Journal.

Quantifying the potential of California’s “Yes in God’s Backyard” bill. Terner Center for Housing Innovation. (2023, August 24). Planetizen. 

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