A Parsonage or Housing Allowance- Which is Better?

The Pastor’s Point of View

It’s hard to know. It all depends. Which way is better for whom-congregation or the pastor’s family?

For pastors there’s a number of reasons why a parsonage makes sense; why the housing allowance makes: sense too.

Why many pastors prefer parsonages.

1. When the pastor wakes up in the middle of the ~~: night, hears water running, and discovers there’s a leak in the plumbing, what does he do? He calls the: parsonage committee. That’s a major advantage of the parsonage. He doesn’t have to bother with these problems personally. It’s the committee’s job to fix the leak. The congregation is the landlord; the pastor is only the tenant. No fuss, no mess. Leave it to the committee.

2. Not every house in every community is easily sold. If marketability or residential housing is – 0:g limited, a pastor should not become a home owner. A parsonage avoids the risk of a soft market. 51

3. For pastors eager to relocate quickly, the parsonage offers an immediate exit; no selling problem, no fixing up to sell, no haggling with buyers,> no delay in moving. Just call a moving van, pack a suitcase, and leave. ,

4. Some parsonages are elegant, far more – REP housing than a pastor could ever afford to buy. It’s a dream come true for the pastor’s spouse. Church members are often proud to have their pastor’s:: family live in a very fine home.

5. Pastors who cannot afford to purchase a home may have no choice. It’s not easy to come up with a down payment on a pastor’s pay. Often a parsonage is the only alternative.

6. In most places a parsonage is exempt from real estate taxes. The pastor who owns a house pays those taxes.

7. Some pastors simply do not want to be bothered with the details, problems, and potential t headaches of home ownership.

Why many pastors prefer housing allowances.

1. A home in the hills, a cabin on the lake, a ranch-style in the suburbs, an historic monument g in the country-you name it. With a housing allowance a pastor has more of a choice. Congregations < may have preferences, they may make suggestions, h they may limit choices by the dollar allowance offered, but the pastor picks out the house. |

2. Paying off a mortgage is like being forced to g put money in the bank. Home owners increase their I financial worth by reducing their mortgages and . building up their equity.

3. In recent years inflation has played havoc with W housing costs. But that cost to a buyer is equity to g the seller. Buy a home, do nothing but live there for | five years and the market value may double. Pastors 8 in parsonages stay even; home-owning pastors may û move ahead.

4. Pastors who constantly receive offers to relocate may find home ownership helpful in evaluating a potential move. It’s not always easy to sell and leave. There’s a certain permanency about owning a home.

5. Home ownership offers the pastor more opportunities to be involved in community affairs home owners pay real estate taxes and real estate taxes support the community. Pastors who are concerned about the use of tax monies or who promote Q the use of those dollars for special projects may be more convincing as tax payers. Pastors in parson- g ages may be concerned or promote, but if they can’t 8 put their money where their mouths are, they lose. some credibility.

6. Home ownership forces pastors to know the S difference between a pair of pliers and a screwdriver. It guarantees experience in fixing leaky g faucets, knowing termites from ants, shoveling a snow off a roof, and solving a damp basement problem.

7. A mortgage may help a pastor’s ministry be-i come more effective. The pastor with a mortgage has a financial burden that parallels his congregation’s. If he has to struggle to meet that monthlyÇ payment, he’ll better understand the financial frustrations of others. In fact, a home-owning pastors can show that giving to the work of the church need not be diminished simply because of normal, financial obligations. The pastor’s credibility is enhanced.

8. Among the important advantages of home ownership is the problem of family housing at the time of death or disability. Parsonage families must move eventually. Home-owning families can stay as long as they like. One trauma is not compounded by another.

9. Housing for the retirement years is no small matter. Among the greatest of clergy concerns, especially clergy over age fifty, are retirement housing needs. Parsonages are not for retired clergy. A i housing allowance provides an early solution to this | problem.

10. There’s an advantageous tax benefit for home-owning clergy. According to Section 107 of the Internal Revenue Code, any housing allowance paid to a minister is excludable from taxable income to the extent used to provide a home. That income is simply not taxable. Also, clergy in parsonages need not report the fair rental value of their home as income. All clergy have this advantage. However, the home-owning pastor has more of a benefit. Not only may that allowance be excluded to the extent it is used (and use includes down payment, mortgage payments, taxes, utilities, furniture, repairs, and insurance), but the interest paid on the mortgage and the real estate taxes paid on the home are also deductible on Schedule A of Form 1040. That’s a double tax benefit-something clergy in parsonages don’t receive.

The Congregation’s Point of View

For the congregation there is yet another set of reasons, pro and con, why one choice makes sense and the other does too.

A parsonage or a housing allowance? Perhaps you’re up against the issue now. If so, this article may help.

Why many congregations prefer parsonages.

1. Tradition is one of the most common reasons congregations hang on to parsonages; “That’s the way we’ve always done it.” And there may be good reason for keeping the parsonage in spite of the “we’ve always done it that way” syndrome. Change for the sake of change usually creates problems. If there are no good reasons for discarding the parsonage concept, why change?

2. Many parsonages are white elephants, they could never be sold or used profitably in another way. Rural parsonages do not sell and inner-city townhouses may have to be abandoned if not used. The congregation has no choice.

3. Congregations like to build their net worth. Equity builds for the congregation just as it would if the pastor owned the home. Plus, congregations with parsonages always have a home to offer to the next pastor who comes along.

4. Many churches believe that a parsonage is less expensive than a housing allowance. However, this. may be deceiving. A fully-paid $60,000 parsonage converted to cash and drawing 15 percent interest would earn $9,000 per year. And there would be no maintenance, insurance, or utilities. A housing allowance may be the least expensive of the two options.

5. Some pastors simply cannot finance the purchase of a home. Housing may be too expensive even if mortgage money can be found. Consequently, a parsonage is the only choice; and it assures the congregation that they can immediately house their pastor.

6. Most congregations like their pastor to have a nice home. To guarantee that the pastor lives in a home as nice as the membership, they provide a parsonage. Obviously, a beautiful home will make a potential pastor’s family more receptive to relocating. ]

7. Parsonages are usually exempt from real estate taxes. A home-owning pastor would have to pay that tax.

8. Some congregations prefer to keep all their options open: if things don’t work out, a pastor in a parsonage can be moved out of the community conveniently, easily, and quickly. Those who own their own homes may be around for some time.

9. Parsonage mortgages do get paid; a housing allowance never ends. Repairs, upkeep, and utilities will continue, but so does an allowance. Parsonages may be a way to keep long-term costs for clergy housing under reasonable control.

Why many congregations prefer a housing allowance. ]

1. Increasing numbers of congregations are considering the housing allowance. Most congregational leaders simply want to get the church out of the real estate business. Selling the parsonage and paying a housing allowance does that. It eliminates the problems of being a landlord. The venerable parsonage committee can be disbanded forever.

2. Paying rent provides shelter, but it doesn’t boost net worth. Congregations that are in a position to put their pastor’s financial interests before their own will provide an allowance.

3. At death or disability, what does the congregation do? Kick the family out of the parsonage? Of course not, but it does create an awkward situation. Many congregations avoid this problem by offering a housing allowance.

4. Planning for retirement housing isn’t easy for anyone, but it’s a lot easier for clergy who have a housing allowance than for those in a parsonage. Concerned congregations may offer a housing al

allowance to assist the retirement planning process.

5. Some pastors will only consider a move to a church that offers a housing allowance. That’s especially true if they are already home owners. Moving from a home to a parsonage can have costly capital gains tax consequences. This may not be sufficient cause to reject a call, but it it will be a consideration.

6. Housing allowances tend to simplify church budgets. There are no mortgage payments, no repairs, and no estimates for utility costs. It’s clean, quick, and simple.

7. Not many people prefer to live in housing selected by a committee; a housing allowance gives the choice to the pastor. Congregational leaders who are sensitive to pastoral choice will advocate the allowance idea.

8. There’s no worry (or meeting upon meeting) about selling an unmarketable parsonage. It solves the white elephant problem

A final note-

A parsonage or a housing allowance? Which is better? Whatever the choice, pastor and congregation alike must keep in mind that it’s not all roses either way. The options presented here are certainly not exhaustive. You may think of others. But this listing may stimulate discussion that enlightens both sides.