The New Golden Handcuffs for Pastors (It’s Mortgage Rates)

The real estate market is encouraging some pastors to stay put. For now.

Rising interest rates produce a “golden handcuff” effect on the housing market. Golden handcuffs refer to a set of financial incentives that employers use to encourage certain employees to remain with a company. These incentives are typically tied to some conditions that make it financially unattractive for the employee to leave the company before a specified date.

Many pastors locked in low-interest rates on their homes. Rates around 3.0% are common. When rates go to 6.0% or 7.0%, the interest payment doubles, which creates an incentive to hold your current loan. Moving to another location becomes less of an option. The new golden handcuff is the spread between the locked interest rate and the higher rate.

This phenomenon is widespread across many professions. Potential sellers hang on to homes because they have a low mortgage rate. Potential buyers are facing lower and lower inventories, minimizing their options. Construction of new homes is not happening quickly enough to keep pace with the lower inventory. Therefore, home prices stay elevated while interest rates go up. Many people, pastors included, are simply staying where they are.

Zillow reports the “tipping point” of this golden handcuff effect is a 5.0% mortgage rate. It is unlikely mortgage rates drop to 5.0% any time soon. Additionally, eight in ten mortgage holders reported having a rate less than 5.0%, and almost a third reported a rate less than 3.0%. We are in this pattern for the foreseeable future.

High mortgage rates can present challenges for individuals, including pastors, looking to purchase homes. This might make it more difficult for churches to attract and hire pastors, especially if the prospective pastors are relocating and need to secure housing in a new area. What are some options if you are a pastor looking to make a transition or a church needing to onboard someone?

    1. This phenomenon has a greater impact in Sun Belt metro areas. Pastors in these areas are less likely to leave. The move to Sun Belt areas is harder because home prices have risen higher along with higher interest rates. Churches in these areas will likely need to do more to attract potential candidates.
    2. Increase the housing allowance provided to pastors. This extra financial support can help offset higher mortgage costs and make it easier for pastors to afford housing. But please don’t go lower on their salary to increase this allowance!
    3. Parsonages are increasing in popularity. Some churches own a parsonage or a house for the pastor’s use. Offering a parsonage can be an attractive incentive for potential pastors, eliminating the immediate need for them to purchase a home in the area. Our church owns four houses, and several staff members have utilized them.
    4. Offer a mortgage interest subsidy. The church can offer to subsidize a portion of the interest on the pastor’s mortgage, making monthly payments more manageable.
    5. Consider renting options. The church can offer to help with rent for a couple of years until mortgage rates go down. This option is more attractive in areas where home prices are stable and do not rise dramatically.
    6. Include a hiring bonus and relocation assistance. While these bonuses are not typical in the church world, they are common in other professions. A hiring bonus could help with the down payment on a home in the area. Churches typically help with relocation assistance, but the amount may need to increase. Offering assistance with moving expenses can help mitigate the overall costs associated with relocating and potentially buying a new home.
    7. Some churches are offering forgivable loans to pastors. Check the legalities and tax implications of such a loan, but this arrangement could benefit both the pastor and the church, especially if the church can hire and keep the right pastor for the long term.
    8. Bi-vocational and co-vocational pastors can be trained from within the congregation. One of the best places to look for pastors and ministers is among the people of your church. The bi-vo and co-vo models will only increase in popularity in the coming years.

This unique real estate environment will not last forever. But the golden handcuff effect is real and will impact hiring in the near term. As we have reported before, most pastors are getting close to retirement age, which only compounds the problem as they enter a stage of life where they are less likely to move.

The key is to be proactive, flexible, and creative in offering support and incentives to prospective pastors. By addressing the housing challenge head-on, churches can make their positions more attractive even in high mortgage rate environments.

This topic was first introduced in Church Answers Central (thanks Kevin!). At Church Answers Central, we cover these kinds of topics and questions every day. Church Answers Central is the world’s largest online community for practical ministry support. Get 24/7 answers to your church questions. Join a vibrant community of nearly 2,000 church leaders in a safe environment. Connect with top church health experts like Thom Rainer, Chuck Lawless, Sam Rainer, and others like you. Become a member today!

Posted on September 6, 2023

As President of Church Answers, Sam Rainer wears many hats. From podcast co-host to full-time Pastor at West Bradenton Baptist Church, Sam’s heart for ministry and revitalization are evident in all he does.
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  • Colin Morley says on

    I would advise thinking long and hard about living in a parsonage. My family and I are currently doing so now, the first time we have done so. In our previous two churches, we owned our homes. While the church takes good care of the parsonage (unlike some) and most of the church members respect our privacy, there are some who do not. Since our parsonage is on church property, we never know who is watching, who will “just show up,” or who will traffic “our” property as they traverse from church building to church building. I have also found it difficult to leave church work behind when I go home because I constantly see the church building and am reminded of all still needing to be done. It has taken a serious mental toll on me and my family. As strange at it sounds, living in a parsonage can be just awkward. Who pays for what? Who does repairs when something breaks? Can we do this to the house or should we check first and with whom? Additionally, we have lost financial leverage we previously had. For most people, their home is their biggest source of equity. Not owning a home leaves you without that source of collateral. And the current economy makes is exceedingly difficult to save toward a down payment for your own home.
    I want to be clear I am thankful we have a place to live that is comfortable and convenient. But don’t go into a parsonage housing situation naive to the other possible challenges it brings. I did and honestly regret doing so.

  • Housing challenges for pastors are not just because of high interest rates, but also from the price surges of the last few years. If trends continue, this could mark the end of the “full-time pastor” for the next generation, as well as accelerate the closure of smaller churches who cannot find pastors. Any pastors who owned a home before 2020 reaped equity gains from the surge in home values, so relocating for them only means a doubling or their mortgage payments because of high interest rates. However, for the generation of pastors just getting started who do not already own homes, affording a house on just the church’s income will likely be impossible, and could remain so for the long-term. In the past, many churches enjoyed having a full-time pastor who’s wife stayed at home with the kids and also served as an unpaid part-time church secretary. Those days seem gone.

    Many of Sam’s suggestions assume that churches can pay more to offset higher housing costs, but the reality is many smaller church budgets have remained stagnant or declined over the last decades. These churches will now find moving in a pastor from outside their geographic area impossible. Their only options of calling a new pastor will be from retired boomer pastors already living in the area. Otherwise they will just have to settle for a rotation of laymen filling the pulpit or be acquired by another congregation.

    Even when the Federal Reserve lowers interest rates in the future, home prices will just rise again to compensate because “now people can afford more house for the same payment.” Young men graduating from Bible college who are only trained in church work are going to find it very challenging to support a family. Bible colleges would do well to help equip the preacher boys with skills for a secular trade, to be tentmakers when needed.

    Without a market crash or major policy changes, the situation will only get worse. Expect the figures of 1 church staff member for every 60 people in average attendance to start creeping higher. We already face major demographic difficulties of young people stuck living with their parents, getting married far later than previous generations did, and declining birth rates. The housing situation is a factor in all those and will make those milestones even harder to achieve.

  • Pastor Mike says on

    This economy (and related housing issues) is also affecting pastors like me, who might be ready to retire, but the cost of housing is keeping us working longer (I’m in a parsonage, so will need to rent – or preferably – buy a home when I retire and relocate).

    My wife and I have been looking at homes in the town where we hope to retire (near one of our daughters and her family), and the housing market has been very limited – and expensive!

    I will pass on this article to my church’s HR committee; there is some excellent advice here to guide them as they get ready to do a search for their next pastor (I am pretty certain I WILL retire a year from now).