Economic conditions ebb and flow, sometimes for the good and sometimes for the bad. While the pandemic and the period of inflation that occurred afterward have had their impact on church building and remodeling, lessons learned from past recessions can help church leaders implement the church design they want and need. As the saying goes, those who don’t learn from history are doomed to repeat it.

Recessions Are a Fact of Life

Recessions are cyclical—they come around every 10 to 20 years. When the economy contracts, growth declines. And when there is no growth, there is a recession and, in the worst of times, a depression. Of course, there was The Great Depression in the 1930’s. The Great Recession, the last big recession, occurred in 2008.

In 2008, the housing market’s growth bubble burst because of bad loans, the stock market declined, and many companies, especially financial institutions, found themselves in money trouble. The federal government provided bailouts and other steps to pull the country out of difficulties. It also enacted new laws to prevent future difficulties. One major piece of legislation was the Dodd-Frank Act. And while Dodd-Frank was good for financial markets, it wasn’t so good for churches.

How Frank-Dodd Affects Church Financing

In simple terms, prior to Dodd-Frank, if you needed a $500,000 appraisal, you found an appraiser who would say the property was worth that. It didn’t matter if they could prove it was. Lenders would then issue a loan for that amount. Dodd-Frank changed this practice, requiring appraisers to adhere to strict guidelines and imposing penalties for non-compliance.

Appraisers now had to look at comparable sales in an area and base their appraisal on this information. But for churches, which often don’t have comparable sales information because churches rarely go on the real estate market, this was a problem. It led to church buildings being under-appraised, in effect reducing how much money could be borrowed to finance a project.  

Good Old Days Were Gone

From the 80’s to early 2000’s, churches grew accustomed to financing things relatively easily and at cheap rates. Now, due to lower appraised values, churches would need more money upfront for capital projects. In 2018, under President Trump, the regulations relaxed somewhat, and only affected the largest banks. However, many of the smaller and mid-sized banks continued to follow Dodd-Frank. This continued difficulty in getting financing resulted in many churches losing hope, delaying projects, and eventually looking for other options.

The good news is that lessons were learned, and other options have come along. Churches have made changes to accommodate the financial situation, as well as reevaluating their needs. We’ll examine some of these changes in the next post.

Want to know more about the ins and outs of church building and design? Join us for our free i3 webinar series, which covers a different topic in each session. We can also answer your questions in these live, interactive webinars.