It's bad news for the religious real estate market. From the November issue of Christianity Today:
Hundreds of congregations have filed for bankruptcy or defaulted on loans. University of Illinois law professor Pamela Foohey, who tracks church bankruptcies, says more than 500 congregations filed Chapter 11 between 2006 and 2011-- and the pace hasn't slowed since. About 90 congregations filed for bankruptcy in 2012 ...These numbers should be kept in perspective. Ninety congregations isn't that many when there are more than 300,000 in the US. Since the financial crisis, there has been a spike in foreclosures on houses of worship, but anecdotal reporting makes this seem more significant than it is. During the worst year, the banks repossessed 138 churches. Even at that point, though, only one congregation out of every 2,500 was defaulting on loans.
Still, continued defaults and bankruptcies are not good signs.
Add that data to all the other signs, and it seems the financial crisis of 2008 has had serious impact on the economics of American religious institutions, possibly with effects we can not yet fully calculate. The news of real estate problems, for example, follows reports that giving to Protestant churches has declined for four straight years.
In the most recent year on record, 2011, total giving was down by $87.2 million. The rate of giving had declined, too: Christians gave 2.3 percent of their income to Protestant churches in 2011, down from 2.4 percent the year before. By comparison, in 1968, they gave 3.1 percent.
According to Katherine Burgess, reporter for the Religious News Service, "The only other period of prolonged decline in giving per member was from 1928 through 1934, almost entirely during the Great Depression."
It wasn't just giving to churches that dropped dramatically in 2008. In another study, it was noted, however, other sectors of charitable giving have recovered, or are recovering. Religious giving continues to decline. By 2013, giving to health organizations had returned to 2007 highs. Giving to environmental causes and animal welfare organizations is expected to return to pre-crisis levels in 2015. Protestant religious giving is still declining, though, four years after the financial crisis. Who knows when that trend might turn around.
That story, about a religious sector of the economy not bouncing back like other non-religious sectors, is a familiar one.
Spending on religious construction has sharply dropped since 2008 and -- unlike commercial and residential construction -- has shown no signs of recovery. When the financial crisis hit, about $7.5 million was being spend every month on the construction of houses of worship. By the middle of 2012, that was down to about $3.9 million per month. That's still a good bit of money spent on religious construction in America, of course, but a serious decline from where it was.
The other bit of related bad news in the economics of houses of worship is in the church bond market. In 2010, church bond issues from the company offering the most church bonds dropped by about 50 percent, to $100 million for the year. According to the company, Reliance Trust, investors just weren't interested, even though church bonds were traditionally very safe. At least partly this was due to foreclosures, which increased from 1 percent to 10 percent for churches issuing bonds through Reliance Trust.
The once safe market was almost completely abandoned, after that.
According to the most recent issue of Christianity Today, this is still an issue in 2013. Ken Walker writes:
The church bond market, once a refuge for cautious investors, is now a black hole, says Rusty Leonard, CEO of Stewardship Partners, a Christian investment management firm.
Before the 2008 economic crash, church bonds had strong investment appeal due to a decades-long safety record. Now, 'the market has disappeared,' said Leonard.One mutual fund, which invests almost entirely in church bonds, stopped selling new shares this year. The market is basically so bad investors who specialized in that market have stopped investing.
What all this means is not totally clear. It's hard times for Protestants, and for religious institutions generally. The economic situation has been harder for these groups than for other economic sectors, though it's totally not clear why. Churches may have had their own market bubble to burst. The effects of that can't be completely tallied, yet, and we don't know what long term changes this will bring about.
Probably the real question, right at this moment, is whether this is as bad as it gets, or if it's going to get worse. What happens if giving declines next year and the year after that? What happens more churches default on church properties and file for bankruptcy? What do things look like, 10 or 100 years from now, if these trends continue the way they're going?