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church foreclosures

In Late January articles appeared from various sources regarding church foreclosures [NPR, WSJ, Guardian], all of them quoting a researcher from CoStar Group [link]. I haven’t been able to find the research report from CoStar, but I’d been ever so grateful if someone else can find it.

The main point is that church foreclosures have risen substantially in relative terms in the last five years, from 2 in 2006 to 96 in 2010, as shown in the sidebar at the NPR article. NPR tries to put the number in context as follows:

After all, there are more than 300,000 houses of worship in the U.S., so a few dozen foreclosures does not spell the End of Times.

This isn’t the right context, though: of those 300,000 churches some could never contribute to the foreclosure numbers, either because they were paid for up front by their governing body, or because they’re old buildings with no outstanding debt. So these two numbers don’t tell us what we want to know. The Journal takes a stab at contextualizing, but without numbers:

But the property-financing problems have been concentrated among independent churches, which while seeking to expand lack a governing body to serve as a backstop to financial hardship.

And the Guardian attempts to suggest a predictive number by asking Jesse Jackson:

There are 200 churches in Atlanta alone facing foreclosure, according to Reverend Jesse Jackson, founder of civil rights organisation Rainbow/Push.

Neither of these really tell us what we need to know, which is in what denominations (for lack of a better term) the foreclosures happened, on the one hand, and what exactly “facing foreclosure” means and how representative Atlanta is of the rest of the country on the other.

There are some clues in the examples cited: NPR names what appears to be a suburban independent evangelical church of the Saddleback variety; the Journal names a Vineyard and a church with “Family” in its name (suggesting it’s another suburban independent evangelical church); the Guardian names an AME megachurch. Of the two WSJ examples it’s interesting to note that Family Christian Center/The Family Church had borrowed $4.2 million for a congregation of 650 (that’s $6462 per person), and the Vineyard church deal was complicated by a vacant rental property:

Vineyard Christian Fellowship in Sacramento took out a $1.9 million mortgage to acquire a $2.3 million 18,000-square-foot property in 2004 that included a church and two retail spaces. Johnny Zapara, the pastor, had refinanced his own home for $400,000 to make a down payment and expected to pay most of the $17,000 monthly payment with income from retail tenants. When one of the tenants went out of business and a new one couldn’t be found, Vineyard subsidized the payments for two years. Eventually the church ran out of money

In other words, the Vineyard sank its church by getting into the commercial real estate business.

The Guardian article, for its part, is essentially fact-free, apart from the big round number from Jesse Jackson and the name of the one AME church with undisclosed problems making mortgage payments.

The NPR story doesn’t tell us how much Crossroads Community Church was in debt, nor how many people attend church there, but there is plenty of detail suggesting that the church’s failure was a result of a downturn in the local economy. The sidebar in the Journal article, detailing the aggregate size of distressed sales by state, suggests that foreclosures are concentrated in states where the recession has been the worst: California, Michigan, Florida, etc. It’s also interesting to note that with the exception of Texas and Ohio, the distressed sales average a million dollars per building or more in those states. Also, the real estate bust hit Nevada and Arizona pretty hard, but they didn’t make the list. Hmmm.

In summary, I think we’ve learned the following: church financial failures often involve leadership malfeasance (see e.g. Paula and Randy White) or poor transition planning (Crystal Cathedral), or high debt load per donor. Also, independent churches are more likely to fail for a number of reasons, some of them already having been listed. For these reasons I would still encourage a critical reading of any article suggesting that a particular church foreclosure was due to “a downturn in the overall economy” full stop.


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