Jul 4, 2012

The ambiguous economics of religious construction

Among the many economic indicators of America's lingering economic troubles, one of particular religious interest is TLRELCONS. That is: total religious construction, as measured in spending by the Department of Commerce. The latest numbers, crunched by the economic research team at the Federal Reserve Bank in St. Louis, show spending on religious construction fell off a cliff with the recession of 2008.

Just crashed.

And not by a little: Spending now is less than half what it was in 2006.

It's a "Bear Market in God."

But why? It's not at all clear what's causing this or driving this, or what's behind it. What are the conditions favorable or unfavorable to church, synagogue, temple or mosque construction?

Looking into the numbers, it becomes even less clear what's going on.

There are several curious things -- some unanswered and kind of perplexing questions -- about this sharp decline in religious construction spending.

First, religious construction was already in decline at the time of the economic crisis.

In April 2002, for example, religious institutions in the US spent a total of $8.75 billion on construction. Throughout the summer of 2003, spending on houses of worship continued to regularly pushed close to $9 billion. In June 2003: $8.73 billion. July: $8.79 billion. August: $8.8 billion.

By the beginning of 2006, this was down to $8 billion.

That's still a lot of funds poured into construction projects, of course, but the point is that before the recession, religious construction funding was in decline.

By comparison, 2006 was a peak year for residential construction spending, and for total US construction spending, which also includes public construction, institutional construction, etc. That was the height of the building boom -- and the housing bubble -- but religious construction spending was already on the wane.

As Joe Weisenthal writes at Business Insider, it doesn't seem to be a matter of economic downturn: "It's just a long, secular trend."

This fact counters the dominant narrative that churches were doing fine, building and growing and building again, until they suffered a sudden, surprising setback because donations disappeared in the financial crisis. The news story so popular in the last few years has been that churches are getting foreclosed on because of the crisis. It was a great story. Nice and dramatic. It illustrated the crisis without any detour into subprime mortgages or any of the institutional practices that caused the financial collapse, and generally managed to make the victims of foreclosure seem sympathetic. The thing packaged perfectly for headlines: Banks foreclose even on God!

A good story, but a bit of a farce. In one particularly bad year, according to Reuters, 138 church buildings were sold after defaulting on loans. But there are something like 344,894 congregations in the United States, meaning the repossessed, re-sold buildings accounted for roughly one for every 2,500 religious religious structures.

Perhaps more critically, the story missed the way that the economic crisis was serving as an easy explanation, a ready-made narrative, but was not necessarily the whole story. Just because real estate agents, bankers, pastors, church accountants and everyone else was saying "financial crisis" like it was an explanation, didn't mean it actually was. The numbers show that something had changed in the way money was spent on religious buildings well before the economic crisis.

But what?

Second, spending on religious construction hasn't recovered in the slightest.

There's no hint of a reversal or even a weak, tenative recovery. Other types of construction spending have come back at least a little. Private construction spending dropped from a high of $6.7 billion in March 2006 to a low of $2.2 billion in June 2009, a huge dive, but that was the floor, and it didn't keep declining. The spring of 2012 has seen a slight increase, actually. It's coming back, maybe a little. Not so with religious construction.

At the official end of the recession, spending on religious construction was at about $6 billion. In March 2012, spending dipped to about $4 billion. In April, it down to $3.8. In May, $3.5.

Where's the bottom? At what point will spending on religious construction turn around -- or even just level out?

Presumably that depends on a change in the conditions favorable to building religious buildings, but what conditions are those?

Third, spending on construction by religious institutions actually spiked during the recession.

Not by a lot, relatively speaking, but still, it's a spike. The numbers show that by mid 2008, spending had dropped to about $6.9 billion, but then increased that fall by about $500 million. Spending in September, October and November was at a rate of about $7.4 billion per month, just slightly below 2007 levels.

It's possible there're really easy explanations for this. What they might be, though, I don't know.

Perhaps mosques, meeting houses, etc., spent the extra money to finish up projects they'd delayed because of the crisis. But then why hasn't that repeated itself, and why is no similar late-recession spending spike seen in private or commercial construction? Perhaps something happened towards the end of 2008 that made those responsible for deciding on such spending think things had changed, but again, what sign, and why weren't similar indicators seen by other sectors of construction spending?

The only similar movement I can find, actually, is in public construction spending, which is spending meant to affect the market in accordance with the economics of John Maynard Keynes, not spending that responds to the market. I don't see how the rational for that public spending might be related to religious institution's rational.

On the other hand, maybe it is, in a specifically religious form: A lot of churches, for example, when undertaking big building projects, use the language of "sowing" and "expecting," and a kind of build-it-and-they-will-come philosophy. Maybe, in the middle of the recession, some groups decided to act on faith, and spend and build their way to the recovery, though a specifically religious sort of recovery.

I'm not entirely sure I buy that, nor can I think of any readily available evidence that might show that to be the case. But the odd blip is there still to be explained: Who spent an extra $500 million on a religious building in the middle of the greatest financial disaster in however long, and why?

Fourth, the decline in religious construction spending doesn't correlate to "secularization."

The one explanaiton proffered for this chart has been secularization, or the idea, basically, that religious institutions have stopped spending money on building because they've stopped receiving money in donations and they've stopped receiving money because fewer people are attending religious organizations.

There's not much interpretation of these TLRELCONS numbers -- perhaps because they seem so disconnected with anything else economists or economic reporters might be trying to explain. There's nothing like a real consensus of an account that I can find, or even, actually, much in the way of accounts at all. There are a couple of references to secularization, though.

But, despite being very reasonable sounding, neither aspect of the secularization thesis is supported by facts.

While it's true, for example, that charitable giving dropped off in the recession, it hasn't continued to decline. There was actually an increase in giving in 2011. And then another increase in 2012. According to one widely-accepted group's studies, giving declined by nearly 13 percent in 2008, but has ticked upwards since then. In 2010, Americans gave about $6 billion more than had than the year before. In 2011, they gave $12 billion more than they had in 2010.

That's not nothing.

In fact, on a "relative historical basis," according to the Atlantic, it's a pretty high level of philanthropic giving, and actually "slightly exceeds the inflation-adjusted value in 2000, making it more than in any year prior to 2004." This reportedly corresponds to a long-term pattern, where American's charitable giving increases by about 2.6 percent in the two-year period following a recession.

Not all of that is religious giving, obviously, and religious giving hasn't rebounded in the way that giving more generally has rebounded. Giving to religious institutions decreased by 0.8 percent in 2010, according to the same study. It decreased again by 1.7 percent in 2011. In both years, though, religious giving accounted for the largest portion of charitable giving, so that roughly one out of every three dollars given away was givien to a religious institution.

That's more than $100 billion given to religious institutions in a very bad year.

That amount and the rate of change, critically, bear little to no resemblance to the decline in religious construction spending.

And even if the post-recession decline in charitable giving exactly correlated to the decline in religious construction spending, we still wouldn't know what was going on. Charitable giving increased from 2002 to 2006, and yet religious construction spending declined. There could perhaps be an argument that this kind of giving and that kind of spending are related to each other in some way if only the period after the recession is considered, but what about before?

The same problems persist in attempts to correlate religious attendance and religious construction spending: They just don't relate in any clear way.

There's a very well-known story, now, about the rapid rise of a group sociologist call "nones." That increase in religiously disaffiliated people in America does increase at the same historical moment that this spending on construction by religious affiliations decreases. Disregard first appearances, though. The increase in the "nones" is not going to work to explain the bear market in synagogue and temple, etc., construction.

Why? Because, 1), the change doesn't exactly line up right. And 2), the change is change in identification, not necessarily attendance. Between 1990 and 2010, the percentage of people who say they don't attend religious services of any sort has increased by 8 or 9 percent, according to Robert E. Putnam and David E. Campbell. That's significant, but it's a matter of self report, and not an unambiguous indicator of religious behavior. What we know, from that statistic, is only that the way people describe themselves to strangers on the telephone changed in this particular way by this particular amount during this particular time frame. It may be the case that these 8 or 9 percent of people used to, before the 90s, regularly attend religious services, but we don't know that. It's at least as plausible that they didn't, but felt they needed to say they did because that's what was socially acceptable to say when someone you didn't know asked you this kind of private, kind of loaded question.

To what extent that change in self-identification has meant an actual change in the numbers of people in churches, synagogues, etc., is pretty hard to pin down.

Besides that, the rate of the increase in the number of self-described "nones" seems to have leveled out since the recession, which isn't true at all for the dramatic decrease in TLRELCONS in that same period. Where spending on construction plummets after the recession, attendance at religious services doesn't. If you ask people how often they attend religious services, as Gallup did in 2008, 2009 and 2010, they say more or less exactly the same thing all three years.

This counters the oft-repeated truism that people flock to church during recessions -- if it was once true, it isn't now -- but doesn't explain the decline in construction spending.

Self-reports about religion are not exactly reliable, so one could disregard these self-reported rates of attendance. It would be possible, perhaps, to speculate that a decreasing number of people are attending religious services but a correspondingly increasing number of people are lying to pollsters about religious attendance, the numbers not matching the reality. Except there are a few studies that report actual head counts at actual religious services, and they don't don't show a huge rate of dis-affiliation either. From 2000 to 2007, according to one report that actually errs on the side of thinking churches and Christianity are about to go extinct, church attendance specifically declined by 1.7 percent.

That's not much. That's not really likely enough to be noted in most churches, much less cause the kind of panic that would result in a serious adjustment to spending and long-term plans.

The secularization explanation doesn't really work, then.

Fifth, a good explanation of this decline also has to explain why there's still more than $3 billion per month spent on religious building.

Daniel Shutlz (aka "Pastor Dan"), for instance, suggests that the decline is no surprise, since,
"Church buildings are almost optional by definition to begin with: as long as it was built properly in the first place and hasn't burned to the ground, you can generally make do with what you have rather than add on or tear down and start over."
While this seems right, it still doesn't really help. The core question is not yet answered, the core question being what are the conditions connected to the decisions to build or not build houses of worship? Besides not accounting for the fact this isn't simply connected to the economic crisis of 2008, Shutlz's point that, obviously, it's not necessary to build religious buildings doesn't explain why, then, people still do.

And they do. In May of this year, in America, they did it in fact to the tune of $3.5 billion. Way back in the summer of 2003, they did nearly $9 billion's worth of this by-definition optional construction. Whatever changed between the middle of the year nine years ago and this spring, it wasn't the optional nature of new religious building construction.

As it stands, at the moment, there just doesn't seem to be a good working theory. There's not a good answer, and the question still hangs there: what are the economic conditions of religious construction? When are houses of worship built? And why are they built when they are built? What dictates more religious construction? Or less?