Fostering Neighborhoods: Faith-Based Organizations and the Development of Affordable Housing

Fostering Neighborhoods: Faith-Based Organizations and the Development of Affordable Housing

Policy proposals such as the Faith-Based Affordable Housing Act and New York City's City of Yes for Housing Opportunity would allow Faith-based organizations to develop affordable housing beyond what zoning currently allows. Photo credit: iStock.com/Ultima_Gaina

In New York City, policymakers and practitioners are focusing on faith-based organizations (FBOs) and their access to land as a means to address the affordable housing shortage. A zoning analysis by the New York University (NYU) Furman Center found that FBOs own more than 92 million square feet of land throughout New York City's five boroughs, and researchers estimate that much of this land is underdeveloped. In light of this zoning analysis, recent policy reform efforts, and examples of FBO-led development of affordable housing, the Federal Reserve Bank and the NYU Furman Center hosted an event on April 25, 2024, called "Fostering Neighborhoods: Faith-Based Organizations and the Development of Affordable Housing."

The event featured presentations and two panel discussions with researchers, policymakers, and practitioners focused on building affordable housing on FBO-owned land. Matthew Murphy, executive director of the NYU Furman Center, moderated the first panel discussion, "Exploring the Policy Necessary to Scale from the City and State Perspective." Panelists included Brian Cunningham, assembly member for New York State District 43; Bishop R.C. Hugh Nelson, senior pastor of Church of God of East Flatbush; Linda Heinberg, assistant attorney general and section chief of transactions for the Charities Bureau of the New York State Office of the Attorney General; and John Mangin, head of the housing division in the New York City Department of City Planning. Otho Kerr, director of strategic partnerships and impact investing for the Federal Reserve Bank of New York, moderated the second panel discussion, "Tackling the Challenge of Financing Faith-Based Affordable Housing." Panelists included Adam Zeidel, chief executive officer of Coconut Properties; Kate Toth, executive director of Bricks and Mortals; Victoria Barreca, director of capital solutions and partnerships for Enterprise Community Partners; and Reverend James Clark III, managing director of mission real estate development for Trinity Church Wall Street Philanthropies.

Legislation for FBO Affordable Housing

FBOs often are intentionally at the centers of residential neighborhoods and have missions to serve the communities in which they reside. This civic presence is borne out by maps showing the prevalence of FBO-owned land in residentially zoned districts. Even though this underutilized land could both provide affordable housing and build FBOs' financial capacity, FBOs and governments must first surmount regulatory barriers to developing the land to meet housing needs. Recently proposed policies at the state and local level in New York would allow FBOs to develop affordable housing beyond what current zoning regulations allow. The first is the Faith-Based Affordable Housing Act, a state law Cunningham has sponsored. The act's provisions include restricting localities from imposing requirements that typically delay or derail development projects, basing minimum density requirements on the population of the locality, and setting a minimum allocation for income-restricted affordable housing. The act also requires officials of religious corporations to undergo real estate development and affordable housing training.

The second proposed policy is New York City’s City of Yes for Housing Opportunity, which would ease citywide zoning restrictions to allow FBOs to convert old convents, schools, and other buildings into housing, permit three- to five-story buildings on FBO sites that are near transit or commercial areas, and allow historically landmarked sites to transfer unused development rights to nearby FBOs.

The proposed legislation would support existing legislation, including two statutes that encourage FBOs to develop affordable housing. Enforced by the attorney general's office, the Not-for-Profit Corporation Law and the Religious Corporations Law in New York give the state's attorney general the power to oversee real estate transactions by religious organizations. The attorney general approves these transactions after fair and reasonable consideration, which includes evaluating the fairness of the property appraisals and payment structure and the alignment of the transaction with the organization's mission or members' interests.

The Predevelopment Phase of FBO-Led Affordable Housing

In the second panel, Kerr facilitated a discussion on the process of FBO-led affordable housing development. According to the panelists, who primarily represented nonprofit and philanthropic entities that support FBOs wishing to develop affordable housing on their land, predevelopment work, such as conducting feasibility studies, pursuing a zoning analysis, and developing preliminary design concepts, is both critical and hard to fund. Barreca explained how Enterprise Community Partners, a national nonprofit organization involved with FBOs since 2006, created its Faith-Based Development Initiative to help FBOs decide whether to proceed with an affordable housing project. As faith-based leaders and congregations assess their vision, commitment, and readiness for a long-term project, Enterprise helps conduct and cover the costs of predevelopment work.

Once the FBO decides to proceed with the project, Enterprise helps the FBOs form a development team, including creating the request for proposals to solicit experienced, trustworthy, and mission-oriented developers. Toth explained that Bricks and Mortals provides faith leaders with a list of consultants, such as architects or attorneys. The FBO then finalizes all funding sources simultaneously to begin the construction phase. Finally, the project enters the marketing and lease-up period.

The predevelopment phase is fundamentally a process of discernment — a process for which Trinity Church encourages its clients to "stay in the driver's seat as long as possible," according to Reverend Clark. One reason for FBO engagement in the process is the availability of funds for predevelopment work, which helps FBO leaders decide on the target population, affordability level of their projects, and identify a mission-aligned developer. Well-known lenders include the United Church of Christ Church Building and Loan Fund, the Cornerstone Fund, and the Texas Methodist Foundation.

The Path Forward

In addition to available land, increased advocacy for progressive zoning policies, and philanthropic support to guide FBO-led development, faith leaders need to clarify their congregation's mission within the community they intend to serve. Bishop Nelson shared how his FBO aligned its mission to serve not only as a religious center but also as a catalyst for neighborhood revitalization and a source of housing for seniors. Rather than upgrading its church, the FBO purchased two city blocks for $8 million and rezoned them for affordable housing with ministry space on the ground level.

In addition to clarifying their missions, Rod Grozier, chief executive officer of Gro-Dev, emphasizes that FBOs need good counsel when developing affordable housing. Enterprise's affordable housing development model includes multiyear cohorts for houses of worship. Within the cohort, FBOs learn about available resources for developing affordable housing. The cohort also serves as a peer network in which FBOs can share their experiences. Along with existing philanthropic support, such as that offered through Trinity Church Wall Street Philanthropies, David Bowers of Enterprise believes that funding from local county governments to support these multiyear cohorts is part of the future of FBO-led community development.