My church is interested in exploring housing development. Now what?

The following are 10 general steps any house of worship must go through to move from visioning to the completion of a development project. These steps were compiled based on dozens of conversations with housing developers, development consultants, representatives from churches who have engaged in development, and other content experts in this field.*

This is an introduction, simplified for brevity, designed to give you a birds-eye overview of the process, introduce terms, and help you wrap your head around the idea of development. Though we lay this out in a set of linear steps, the process is more cyclical and the “steps” will weave within one another, and in many cases happen simultaneously. Each project is different, but these general best practices can help guide your team. Let’s get started.

There are many ways for a house of worship to meet the housing needs of its community. Though you can look to other successful projects for inspiration, your project will be unique to your context, resources, and gifts. To help you discern what is right for your congregation, prayerfully consider these questions:

1. What resources does our church have?
   Do you have your own land to build on or property to redevelop? Can you purchase property to build or redevelop? Do you have members interested in purchasing buildings to rent out independently? What existing partnerships can you utilize?
   Resources take many forms: finances, knowledge, experience, partnerships, networks. Think creatively about what assets your community has to offer.

2. What is our community?
   What is the physical, geographic region you sit in? What do you love about your neighborhood? Why are you committed to it? What is your church’s relationship with the neighborhood?

3. What does our community need?
   Does your neighborhood need housing for seniors, youth transitioning out of foster care, returning citizens, ELI families, veterans? Do you need a grocery store, health clinic, arts space, small business incubator, or another community amenity that can be included in a housing complex?

   Don’t just speculate about the answers to these questions. Talk with your neighbors and listen carefully. The more community voices you can engage with in the process of creating your vision, the more support you’ll generate for building permissions later in the process.

   Don’t be afraid to take your time answering these questions. They are important.

4. How can we use our resources to meet those needs?
   This is the fun part. Flex your creative brainstorming muscles. Think about how your church is uniquely positioned to meet the defined needs of your community.  Don’t be afraid to dream big! Think outside the box! You’ll get to feasibility questions later. What are your “God-sized dreams?” 

Just Homes will talk through these questions with you, serving as a sounding board and thought partner. We’ll help you connect with friendly development experts for informal conversations that can help you narrow your options based on feasibility.

In addition to these big questions, your discernment process should include exploring the historical, community, and political context in which you are working. This will prepare you for the roadblocks you’ll likely face down the line, and help you discern who you might bring on to help you.

This discernment must include your congregation. The pastor can cast a vision, but unless the congregation is passionate about the project and the community voice is included, the project will falter. Jill Norcross, who works as a development consultant with churches across Northern Virginia, has observed that the churches who are the most successful in this process are those who have the congregation on board with the plans, who view development as part of their broader mission as a church, rather than as a unique and separate project.

Before you get too far in your planning, you need to have an objective third party assess your property. If you are building on your own land, ask for the following:

1. An appraisal of the value of your land -- how much is it worth?

2. The buildable square footage -- how much land can you build on and how tall can your structure be?

3. Rights & Regulations -- what air rights, land use issues, zoning restrictions, or other associated rights or regulations are you working with?

4. Potential red flags -- is there a sewer line running through your property? A gas line? A restriction of some kind on the property? Something else that will make development cost-prohibitive or otherwise unfeasible?

Just Homes can get you this information via our free Development Assessment. If you have property and would like our support in this assessment, please contact us!

If you’re looking at purchasing another property, this appraisal will likely be part of the purchasing process. Find out the data so you can be as informed as possible about what you’re working with.

Developers will often offer to assess your property, but be wary of their assessments because your property could be worth more than they value it as. It’s best if you find an objective third party, such as a land appraiser to make the assessment. Just Homes will help you find these people and, if you are comfortable, help research on your behalf.

At this stage, you also want to conduct an internal assessment of organizational readiness: does your church have the capacity to take on this project? Do you have a decision-making process in place? What is your emotional energy level and what structures are in place that can get you to the finish line? Who do you need to get on board? Again, Just Homes can talk through these questions with you.

As you study the feasibility of your project, it will be helpful to hire a development consultant. You’ll need one eventually (see next step), and it can be helpful to bring them in at this stage to help you navigate the initial process. Just Homes will connect you with those who can help. For example, the Enterprise Faith-Based Development Initiative offers assistance with workshops on the basics of development, pro bono legal services, development consultant referrals, and some financing for both pre-development and construction.

As you assess feasibility, remember those “God-sized dreams” you came up with back in Step 1. Write down the reasons why you want to build the thing you’re building. Who are you serving? Where, how, and when did God call you to this?

This will be a long and challenging process, and if you aren’t certain of and fully committed to your mission and vision, you will struggle to persevere.

It also helps to know your values and deal-breakers as you move into the phase of building your team and your partners. What parts of this vision are musts and which are negotiable?

For churches with their own property, this is likely the time for your first big decision. There are a few different ways to transform your land resources into housing, each with its own benefits and drawbacks. Just Homes can help explore and advise which is right for your congregation. 

To start with, let’s explore these options as described by Virginia Diocesan Homes, a division of the Episcopal Diocese of Virginia that supports churches through housing development:

1. Sell land to the developer

   Advantage: Simplest option, provides income for the church, requires minimal effort on the part of the church.

   Disadvantage: Church loses its ownership of the property, must relinquish its decision-making power over the property and provision of services.

2. Lease land to the developer

   Advantages: Maintains ownership of property, can still bring in income through the lease, brings in expertise and experience, reduces burden of managing day-to-day oversight and activities.

   Disadvantage: Church has little to no input in the vision of the development once the agreement is made (unless special provisions are included), and no access to developers fee.

3. Lease land and co-develop with a developer

   Advantages: Maintains ownership of property, brings income from both land lease and portion of the developers fee, allows church to drive mission and vision of the development.

   Disadvantages: More risk, requires significant time, effort, and investment from church leadership.

Just Homes will make sure you have all the information you need to make an informed decision. Many factors are involved -- land factors, church denomination factors, housing market factors, congregation & financial factors -- and often churches end up moving forward with a combination of these options.

For example, Westminster Presbyterian Church in Southwest DC sold a portion of its land outright and leased another portion for two separate development projects. Fairlington Presbyterian in Alexandria sold portion of its land for development but included an agreement with the developer that they could be part of the building design and planning process.

If you choose to sell, Just Homes can help you do so in a way that aligns with your mission. There are opportunities to sell your land using an affordable housing covenant to restrict use in the future and to preserve affordability, to sell your land to a community land trust to ensure its use remains mission-focused, or countless other creative solutions. 

Once again, you’re not making this decision alone. Just Homes is here for you and will bring in other trusted experts to help you make the best decision for your congregation and community.

Once you decide you’re ready to develop, you’ll need a committed team to complete your project. This includes internal and external people, both volunteers and paid professionals. 

The following is a list of who should be included on your Internal Team:

1. Pastor: If your pastor is not able to buy into the vision of the project and champion the project within your congregation, you will struggle. The pastor doesn’t need to be the primary day-to-day coordinator, but she or he must fully own the vision. 

2. Internal Champion(s): This is the point person(s) in the congregation who will take on the organizational leadership of this process. A committed volunteer or team of volunteers is needed to provide consistency, coordinate all the stakeholders involved, and keep the congregation informed and engaged.

3. Community Development Corporation (CDC): Just Homes and most pastors who have gone through this process recommend that you form an independent 501(c)3 nonprofit development corporation to separate liability and finances from the church, and to open the door to more funding opportunities. This is not always necessary, and some churches don’t take this step, but it is usually worth it in the long run. Just Homes can help you with the logistics involved in setting up this CDC

4. Development consultant: someone who has gone through the development process before and can help shepherd you through it. Development consultants will both explain the process to you and help protect you against bad deals.

5. Lawyer with real estate/development expertise: you need someone who can fight for your interests. Not a joint lawyer for you and a developer. Not a lawyer who specializes in something else.

6. Housing finance expert: someone to help navigate the complicated affordable housing development financing process and explain it to you as you make decisions.

As we discussed above, Just Homes can connect churches with these people and Enterprise FBDI has a bullpen of people available for these roles. Some of them work at discounted rates, some offer their services for free, and others are referrals for full-time, full-price professionals who have experience working with nonprofits or other houses of worship.

These early decisions are all overwhelming but as soon as you start talking with professionals, you’ll be surprised how quickly you pick up the vocabulary and concepts. Don’t be scared!

You won’t be doing this project alone. You will always have some kind of development partner that you’re working with as well as a whole team of other professionals who do the work of your project. These roles include:

1. Developer: one or maybe two, depending upon the project

2. Property Manager: will operate the property when it’s finished

3. Architect: puts your vision on paper

4. General Contractor: makes sure the buildings is built

5. Lenders/other financial partners: banks and organizations who finance the project

Once you have your development partner, they will likely help bring along the other partners, based upon their experience. The developer you choose to work with is, therefore, a key decision in this process.

You could have several developers bid for partnership with you on this project, because your land is valuable and they want to build on it. This doesn’t mean that developers are going to take advantage of you. Rather, it means you have important leverage in this partnership, and should be bold about asking for what you want. In that boldness, though, remember your feasibility study and be aware of what is realistic and what isn’t. Many church committees have unrealistic expectations about how much their land is worth, so do your research and refer to your development consultant to help you in this process. Getting an accurate appraisal of your property is also critical, as we saw above.

Take the time to review different proposals and determine which partnership will be right for you and your congregation. Just Homes will help with this, both by reviewing the technical parts of the proposals and by partnering with you in prayerful discernment. Your development consultant will also help with this.

Development partnerships can take different forms. The most common, which Just Homes recommends, is a joint venture between two groups: your church (or, even better, the CDC your church has formed) and a developer with affordable housing experience. Sometimes a larger developer who has good relationships with banks (bringing access to financing) can also be part of the venture. 

For example, Emory Fellowship formed the CDC Beacon of Light, and did a joint venture with The Community Builders, a mission-driven developer. Mt. Lebanon Baptist Church formed Mt Lebanon CDC and did a joint venture with the mission-driven developer Mission First.

CDCs/Churches and Development Partners form a Joint Venture Agreement that outlines the following questions: 

1. Who has rights to make decisions? How will you resolve conflict?

2. What kind of confidentiality measures do both parties want?

3. Who is putting up money for risks? Who holds liability?

4. Who gets the rewards? (Who is entitled to the developer fee? How do you split it? What is the timing for delivery of this fee? What about continued cash flow?)

5. What does the exit strategy look like for both parties? Who owns the building at the end? How long must this building remain affordable?

Do not say “we’ll figure this out as we go along.” Know all the possibilities from the beginning. Assert your rights from the beginning of the partnership. Think long-term. This is why you have a housing lawyer -- to help you draw up this agreement.

Remember when you were researching and dreaming about what kind of project you could build? As you find your trusted development partner, you’ll begin to put that dream onto paper. You’ll work with your developer, architects, engineers, contractors, and other professionals who can help you come up with a realistic plan for your vision.

Remember you probably will not be able to do everything that you initially envisioned, so be ready to make some sacrifices. Know what points are non-negotiable and be ready to back up why those aspects are important to you. Again, data from your community can help you make your case.

Don’t forget your biblical justice lens during this part of the process. Be realistic and flexible, but don’t forget your vision. How can this project as a whole best reflect the vision of biblical justice we discussed earlier? Can you include hiring local workers as part of the plan, to ensure the project creates jobs for the local community? Are green spaces, community spaces, and/or social service resources part of your design? Are the units designed in a way that upholds human dignity of residents? 

You likely will not be able to include all of these elements, but incorporate as many as you can. They will likely increase the price of the development, but if you are confident in your call to ensure this housing is justice housing, it is worth the extra cost. This is the advantage to mission-centered, Kingdom-driven development.

If your church belongs to a denomination, the diocese, presbytery, council, elder board or other group, they may have authority over your property or spending. Ensure you have proper approval according to your context. Looping those parties in from the start will help smooth the way for approval when the time comes. These approvals can often take a lot of time, so start these conversations early and lead with relationship and vision.

You’ll also need approvals from the city.  Permits are required for any demolition, digging, landscaping, and/or construction. Permits can take longer than expected, so be aware that your timeline could get pushed back during this phase. Don’t be discouraged! Trust in God’s sovereignty over the process, remain faithful in prayer, and persist with patience. Unless the Lord builds the house, its laborers toil in vain. Also consider hiring permit expediters, who are usually well worth the added cost. 

You also may need to get permission for zoning changes, land use adjustments, or other related issues. In this phase, you’ll likely be engaging with the DC Office of Planning, DC Regulatory Affairs, and the Department of Housing and Community Development. 

There are a lot of different parties to navigate, so it’s important your “internal champion” has clear communication skills. Remember those teams you built? Engage those people. Land use and housing finance experts can be helpful here as these processes can be long and complicated, and lawyers or other experts can help expedite the process.

Another source of approval that may be less formal than a permit but has equal potential to make or break your project: the community. Neighbors and even community activists outside your neighborhood can be vocally opposed to development projects for a variety of reasons. They can block approvals and permits, so it is critical that your church and CDC be present at community meetings, community events, ANC proceedings, and any zoning hearings. Do your research so you can make the argument as to why this community needs your development! Be sure you can answer the following questions:

1. What’s the history of the community? Historic Preservation battles are common, and knowing your history can save your project. Pastor Daniels of Emory Fellowship faced an intense historic preservation battle, but was able to win approval by knowing his community’s history better than those trying to oppose the project on historic grounds.

2. What are the demonstrated needs in your community that your project is fulfilling?

3. What value are you adding to the community?

4. What are the demographics of your community and how does your development fit in or challenge that? Why is that important?

Virtually every neighborhood in the District needs more affordable housing, yet virtually every neighborhood has residents trying to block it. Your church is an anchor of the community, so don’t back down in the face of opposition. Utilize relationships with respected community leaders who can help champion your project.

You got your approvals, and you’re ready to start the actual building process! Fortunately, your development partner will likely handle most of the financing issues, but your internal team should know enough to keep up with the process. This is, again, why a housing finance expert should be part of your team. And of course, Just Homes can help talk through anything you want support with.

You could study housing development finance for years, so we’re not going to try to give you a full education here. Instead, here are a few basic concepts you need to know to sit at the table.

Every real estate development project has a list of sources and uses. 

• Sources are the places your money is coming from and uses are the things you’re spending it on. 

• Sources are almost always a combination of debt (money you have to pay back with interest) and equity (money you don’t pay back, raised through attracting investors to your project). 

• Uses include predevelopment costs, construction costs, paying contractors, paying down debt, etc. 

When you are building affordable units, you should minimize debt. In market rate housing construction, debt is the larger part of the financing deal because the rent that future residents pay helps to pay down the debt more quickly. With affordable units, future resident rents are lower, so you can’t rely as heavily on that income for debt repayment. Financing affordable housing development is about finding low-interest/deferrable/forgivable sources of debt and reliable sources of equity.

Here are some common financing tools used by affordable housing developers in the city:

1. Low Income Housing Tax Credits (LIHTC, “lie-tech”): LIHTC is a federal program administered by DC and the most common tool for affordable housing development. Simply, it provides a tax incentive for investors to invest in your project, providing equity. This is typically used for projects of 20 units or more  

2. New Market Tax Credits: NMTC is another tax credit program that operates similarly to LIHTC, but is open to more than just housing. If your development includes small business development or other mixed-uses, you could be eligible.

3. Opportunity Zones / Opportunity Funds: This is a brand new tax incentive added to the tax code by the 2018 Tax Reform Act. Though there are a lot of regulations still pending, Opportunity Funds could provide a source of equity for affordable housing development because they incentivize tax-free investment in certain neighborhoods. If your church sits in one of these Zones, there could be a great chance to connect with an Opportunity Fund and access new financing.

4. Housing Production Trust Fund: The DC Department of Housing and Community Development (DHCD) operates a pool of $100 million annually ($130 million in FY20), to support affordable housing development. This is a competitive fund, accessed through a “Request for Proposals” (RFP) process, which occurs every 9 months. Funding comes in the form of loans and grants, and will supplement other funding sources (not pay for the entire development). There is also a special Affordable Housing Preservation Fund that could help if you’re redeveloping existing affordable housing.

5. Oramenta Newsome Fund: DHCD recently began offering a fund specifically for pre-development costs, available ONLY to non-profits (such as churches). Pre-development costs include purchasing a property, feasibility studies, and other activities prior to construction. Applications are accepted on a rolling basis.

Once your finances are in place, you and your development partner will get to work building. You’ll mostly supervise at this point, and depending upon the relationship, you’ll monitor to make sure the vision isn’t lost in the day to day process of construction. Again, don’t be discouraged if the process takes longer than expected. Construction timelines are notoriously under-estimated, and can range anywhere from 6 months to several years, so expect to have your ground-breaking, construction timeline, and end date pushed back several times.

During construction, you and the developer will work on a plan for the lease-up and management of the building. Your Joint Venture Agreement should outline who has ownership of the property when it’s finished, including who is responsible for property management. Most often, churches and developers use a contracted partner for property management because there is a lot of compliance to consider, and most churches don’t have the bandwidth or expertise to add a property management arm permanently. Utilizing an outside property manager also allows the church to remain removed from the more challenging elements of property management such as evictions.

However, you can still have a presence in the building. There are many models for church engagement in apartment communities. Just Homes Neighbor Teams can help your tenants move in and provide relational community support as the residents adjust to their new home (more on that in the Serve section of this resource). Apartment Life places people into apartment buildings to intentionally build community within the building and demonstrate the love of Christ to their neighbors. If you’re serving specialized populations with your housing, consider built in social services like those provided by Jubilee Housing.

House of Lebanon is managed by an external property management company, but Pastor Edmonds and his church are still present in the community on a regular basis, holding events in the community space and frequently engaging with residents. Emory Beacon of Light (Emory Fellowship’s CDC) is a 50% owner of the building and operates businesses out of the building, but their development partner TCB handles all property management duties.

Or, your church could completely remove itself once the building is done. What works best for your church? Just Homes can help you decide. Whatever it is, be clear about those expectations from the beginning.

Make sure you have a big party for your grand opening because you deserve it! Better yet, don’t wait until the project is done before you celebrate. Celebration should be a constant thread throughout your development process. Development is a challenging, lengthy process, so be sure you celebrate small victories and milestones along the way. And each step of the journey is an opportunity to give God glory for His faithfulness and provision in the process.

At this point you’re probably feeling overwhelmed and discouraged. Please don’t be! You will not, at any point, be alone in this. Just Homes is here for you. Others have paved the way for you to do this work. You’ll have partners, and we will be here with you every step of the way to provide guidance, encouragement, and the energy to keep going.

Common mistakes to be aware of before you begin

In our conversations with pastors, developers, and consultants, we heard a lot of common mistakes churches make during this process. Here’s what you should avoid:

1. Absence of prayer: If your project, your site, and your people are not bathed in prayer, you will fail. If you are not leading with prayer, constantly seeking the Spirit’s guidance and the Lord’s voice in the process, you will lose your motivation and could end up harming rather than helping your community. 

2. Poor relationship definition: you should anticipate all potential crossroads you may stumble upon with the development partners. For example, who will have access to the development fee at the end of the deal? How will it be divided? Who is the ultimate decision-maker? This goes for within your CDC, your church, and in your partnership. Who decides what throughout the process?

3. Lack of appropriate expertise and leadership: When an already overextended pastor tries to be the main internal driver of the project, things often get missed. Appointing another person in the congregation to play this role helps mitigate against this pitfall. Similarly, churches that don’t hire experienced professionals to represent their interests in the project are easily susceptible to bad deals. This includes financial advice, legal representation, understanding of tax law, and other areas. You will pay more in the long run for not hiring the necessary expertise.

4. Poor long-term planning: if you’re building or renovating a new church, do you have the funds for upkeep? Who will manage the property once it’s built? 

This was a lot of information, and likely falls far outside the comfort zone of most faith leaders. However, more and more houses of worship in both the DC region and across the country are seeing that development is possible. Recognizing that church land resources are uniquely suited to meet the critical need for justice housing. 

Just Homes is walking with you, so let’s take this one step at a time and begin to explore what is possible.

*The information above was compiled based upon dozens of conversations with a wide variety of experts with varying experience in the housing development space, including pastors, developers, consultants, and others. We owe a special debt of gratitude to Pastor Joe Daniels of Emory Fellowship, Pastor Lionel Edmonds of Mt Lebanon Bapsti, Pastor Patrice Sheppard of Living Word church, Jill Norcross of Virginia Diocesan Homes, Nina Janopaul of Arlington Partnership for Affordable Housing, and Raymond Nix of Nix Development & Urban Matters. Their input shaped this content and any wisdom offered here is a direct result of their generosity of lending their expertise so other churches can learn. Thank you.