• SMS Global Blog

Urban Revival The Church and Affordable Housing Development (Part I)

Updated: Aug 18, 2019

Much of the writing today surrounding the issues of affordable housing development has centered on the business and legal framework of the real estate deal. Little attention has been paid to the actual organizations that have, in fact, held the vision of reviving urban communities by developing affordable housing, and these visionary groups have a penchant for revival.

Stephanie M. M. Smith

A Christian approach to business is not a cookbook of simplistic recipes for resolving complex business problems.3 The Christian world view is, at its very core, reality seen through the eyes of faith.

They are often faith-based organizations that form a development arm as a Community Housing Development Organization (CHDO) under its 501(c)(3) nonprofit status for the intended purpose of building afford- able housing.

This commentary is the first of a two-part series to explore the workings of faith-based organizations in their relation to the secular world of real estate, and the evolving role that the development attorney must play to bridge any impending gaps between the two worlds.

The first part will analyze the ontology of the church and the community-at-large that it serves. The second part will focus on several African-American church/business models, as they are often on the fore- front of affordable housing development in urban areas. It will also ex- amine their successes and failures from a legal perspective, and it will postulate on the church as a formidable business partner in the affordable housing equation and the evolutionary role of the development team.

Business from a Biblical Perspective

A certain amount of tension between business and Christianity seems always to have existed. St. Jerome said that, ‘‘[a] merchant can seldom if ever please God.’’1 St. Augustine, a fifth-century Christian bishop, wrote that ‘‘[b]usiness is in itself evil.’’2 A Christian approach to business is not a cookbook of simplistic recipes for resolving complex business problems.3 The Christian world view is, at its very core, reality seen through the eyes of faith.4 Some people believe that faith is a mask that covers up a fundamental weakness.5 In the affordable housing development context, the nonprofit church group is held out as having little to no bargaining position in the grand scheme of the real estate deal. In fact, private, state, and local finance groups encourage the nonprofit to joint venture with a for-profit developer, which would then be seen as the ‘‘deep pocket’’ part- ner.

These funding entities are then satiated with the knowledge that the for-profit developer’s experience, knowledge, and financial portfolio, cou- pled with the faith and commitment of the nonprofit group, make for a recipe for success.

Unfortunately, this comfort level is delusional at best if the match is not perfectly ideal. There have been many instances in which the for-profit developer fails to share the joys and pains of predevelopment concerns with its nonprofit partner. Going alone with this ‘‘knight in shining armor’’ mindset, the for-profit can risk being blind to various realities of the politics of a community. If not consulted early in the process, the nonprofit is un- able to activate its political clout in ‘‘making things happen’’ if its for-profit partner is moving forward without sensitivity to the concerns with which the nonprofit group would be familiar. It is often necessary to advise the for-profit entities’ counsel on how to navigate the local political system(s) for the financial interest of its for-profit client. In other words, faith without works is a dead-in-the-water project.

Is Capitalism Christian?

It is clear that every business decision today under our capitalistic structure is made within a web of influences, some of which represent or try to represent the public interest.6 In our system of free communication of ideas, it is not just formal law that influences business decisions, but also the informal pressures of public opinion, media scrutiny, and interest-group pressure.7

In the affordable housing context, the importance of political and com- munity support is paramount to getting the project out of the jaws of the planning and development office and into the hands of a general contractor to start breaking ground. The problem, however, lies in the intrinsic zero- sum game that is played out in the capitalistic context. As the attorney, one’s duty is to represent the interests of one’s client. However, a client who denotes God as the shadow executive director of the nonprofit board can pose certain ethical dilemmas for the representing attorney. One might ask: ‘‘Whose values are integral to the decision-making process?’’ This and similar questions are not to be answered here, but only as contemplative notions that usually do not come into play when representing your secular real estate client. Capitalism has long been held the great evil of the twentieth century. But, for our purposes, is it a ‘necessary evil?’

Church as the Corporation

Twenty years ago, the church generally taught that it should talk and teach as little as possible about money so as to not offend the congregation, and, most importantly, God.9 Consequently, church groups have been loose around the edges when it comes to developing the corporate-strategic vision, to implement hard-hitting plans, and to set realistic financial goals and priorities.10

Thus, as churches have tested the waters of economic development, many have encountered rough seas. In order to set sight on smooth sails, religious-based groups must artfully construct and communicate their ba- sic message to financial institutions, since those institutions operate out of a modern corporate structure.

The creation of nonprofit corporations under the charitable purpose re- quirement of Section 501(c)(3) of the Internal Revenue Code (IRC) has helped to redefine the traditional notion of corporation in today’s business world. However, in order to persuade the financial institutions to partici- pate in community development, the nonprofits must maintain a business model in order to strive and thrive. In turn, corporations too must be open to fresh perspectives from the non-secular ilk.

The affordable housing industry has made significant attempts to strike a balance between financial profits and the interests of the public in the use of federal funding such as the Low Income Housing Tax Credit Pro- gram, HOME, and HOPE VI. For nonprofits that may relegate the profit goal to a secondary position, there is a clear challenge to be the leader in balancing the interest of business, the public, and the nonprofit itself.11

In fact, most naysayers would intimate that the church’s prospects for success at large-scale affordable housing development are a fools-hardy dream at best. In the face of this image, the church still maintains its pur- ported dream which is to connect genuine economic development to wealth-creating activities and turning that money over in the community several times, all the while building affordable housing for the community residents to combat urban blight.

The church as the corporation has embraced a can-do theology, creating within its sphere Christian visionaries who are considerably the urban missionaries of today and wealth-builders of tomorrow.12

Building Communities in Urban Blight

The noble and just causes of building affordable housing in the urban communities and serving the spiritual needs of its people go hand-in-hand. The connection lies in the fact that when a community is economically stabilized, a strong church culture is established and the building of God’s kingdom can continue. To some, there may seem to be an impractical in- terplay between neighborhoods and the loftier goal of spiritual growth. In defense of this commentary’s position, however, it is necessary to state that no amount of cleaning or building will make a difference in a community if the residents in that community do not experience a difference within themselves. In other words, if the residents lack hope in their future, their children’s future, and even their neighbor’s children’s future, a shiny new house will not erase a despondent spirit.

This notion is squarely addressed when the religious nonprofit group formulates its strategy to rebuild a blighted urban community for its continued growth and success.

Beyond ‘Brick and Mortar’—The Development Attorney’s Dilemma

The theological perspective of affordable housing development goes far beyond the ‘brick and mortar’ concept. It is, in essence, an evolutionary shift in creating a meaningful existence for the community at large.

One may ask what impact a theological perspective can or should have on the legal framework of the deal. If the attorney is not aware of all of the competing goals, including those of the faith-based nonprofit, then the at- torney will find it hard to navigate a client through the harrowing maze of applying for low-income housing tax credits, for example. The attorney may fail to run successful interference, when necessary, between the non- profit and for-profit partners in these complex transactions.

Overall, the attorney may not understand the language and culture of the faith-based client, without the aid of an interpreter. The importance of counsel to understand the culture is akin to representing a foreign corpo- ration and the need to understand the nuances of that culture to effectively represent the client. In other words, the client will have little to no faith in your ability to represent it and will not be forthcoming in providing im- perative business information to move the deal along smoothly. In that scenario, everyone loses—the for-profit developer, the contractor, the in- vestor, and, of course, the community.

Although this topic is rarely broached in law offices, I think our ethical duty as development attorneys is to at least address some of the differences that may exist between representing a traditional business client versus a faith-based business client. When your client looks to you to engage in the closing prayer at the end of its Board meeting, what do you do?

It is enough to conclude at this juncture that many of these notions fall outside the traditional boundaries of the legal framework for development work. However, a more fundamental charge is at stake here, namely, the humanistic element in the equation. Using case studies, the second part of this commentary will explore how the legal community has embraced this humanistic element in efforts, which are actually building-up communities, one prayer and one brick at a time.

50 views1 comment
Logo (1).png