January 28, 2020

Leveraging Property Owned by Faith-Based Organizations

Faith based organizations

The Enterprise Policy Development & Research (PD&R) team today released its new white paper on Leveraging Property Owned by Faith-Based Organizations to Create Affordable Homes and Public Benefit. The rising acquisition cost of developable land, among other factors like the rise in construction material costs and shortage in skilled construction labor, has been driving the cost of residential development, impacting developers’ ability to create affordable homes. As part of our Expanding the Supply of Affordable Homes research initiative, we have explored the use of publicly owned parcels – sites owned by a governmental or government-chartered entity, such as units of state or local government, transit agencies and school districts – as an effective and proven strategy to expand the supply of affordable homes. Through effective partnerships and informed decision-making processes, faith-based organizations (FBOs) who own underutilized or vacant property are also able to repurpose their property to create affordable homes and public benefit.  

Leveraging Property Owned by Faith-Based Organizations to Create Affordable Homes and Public Benefit aims to assist FBOs and community stakeholders interested in advancing this strategy with: 1) understanding what it takes to successfully undertake this solution; and 2) becoming familiarized with different paths that can be pursued to implement this solution.  

Read the white paper

WHAT IT TAKES TO MAKES INFORMED REAL ESTATE DECISIONS 

Since creating affordable homes and community facilities is commonly not part of FBOs’ core mission, they often lack the expertise and financial capacity needed to make informed real estate decisions and successfully complete real estate development. While this challenge could discourage some FBOs from repurposing their surplus or underutilized property to create affordability and public benefit, effective partnerships can provide FBOs with access to financial, legal and real estate expertise necessary for an informed decision-making process. The white paper encourages FBOs to explore factors that can significantly impact the success of their development/disposition plans ahead of making any real estate decisions. These factors include, but are not limited to: 

  • Understanding the leadership structure and decision-making authorities  
  • Crafting a vision and desired goals for the development of property 
  • Conducting due diligence to identify site constraints and any unexpected hurdles 
  • Ensuring and demonstrating that the proposed development is financially viable 

Understating the importance of the due diligence process to making informed real estate decisions, Enterprise has launched its Faith-Based Development Initiative (FBDI). In his foreword, Rev. David Bowers, vice president and the Mid-Atlantic market leader at Enterprise, notes that this initiative seeks to engage and assist the faith-based community in helping to ensure that people of all incomes have access to fit and affordable housing and community resources. This assistance includes providing FBOs with access to capital, pro bono legal services, organizational and development technical assistance. 

NAVIGATING STRATEGIES TO UTILIZE PROPERTY OWNED BY FBOS 

The white paper notes that every property has its own characteristics and circumstances. Therefore, our research avoids providing a specific path for property development that could be deemed as on-size-fits-all strategy by stakeholders. This resource rather highlights some of the proven and available paths for developing or repurposing property owned by FBOs into affordable housing. Our research highlights a set of strategies that can enable FBOs (property owners) to accomplish their desired development goals and create affordable homes or public benefit on their property:  

  • Establishing development partnerships with potential ownership opportunities 
  • Exploring subdivision and co-location to facilitate the creation of affordable housing and mixed-use development with an affordability component 
  • Entering into a long-term ground lease agreement, requiring the development of an affordable housing component 
  • Implementing interim uses on vacant sites without a clear disposition or development timeline 
  • Selling a parcel with the stipulation that the developer will create affordable housing as part of the development project  

KEY TAKEAWAYS

Our research offers the following high-level takeaways:

  • Crafting a clear, inclusive and comprehensive vision with desired goals and objectives for the development of the property can increase the effectiveness of the process, avoiding overburdening it with competing goals that can inhibit the proposal’s feasibility 
  • Conducting upfront due diligence activities and collecting needed information, including any legal, technical and financial factors that can have implications on the desired development outcome, is essential to making real estate decisions 
  • Navigating and establishing effective partnerships is a vital step for accomplishing the desired development outcomes when the existing technical and financial capacity is limited 
  • Ensuring the availability of necessary financing resources and public/private subsidies is integral to determining whether any proposed development project is financially feasible 
  • Leveraging underutilized and vacant property to create affordable homes through entering into a long-term ground lease agreement or a joint venture partnership can create affordability while offering the FBO long-term control over the site’s future use and financial benefit 
  • Using underutilized or vacant property on an interim basis while the disposition/development negotiation process is in the works provides vulnerable populations with critical access to temporary shelter 
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