Many churches look to subsidize budgets by renting out space for events, meetings, and other external uses. However, determining appropriate hourly rental rates can be challenging. This comprehensive guide covers best practices for setting fair, data-driven fees aligned with expenses and facility value.
Why Base Rates on Expenses?
Deriving church rental rates directly from operational costs provides many advantages versus arbitrary or competitive-based pricing:
Ensures fees cover expenses and support asset upkeep
Allows accurate tracking of true program costs across the organization
Enables adjustment of rates as costs fluctuate over time
Provides rationale for pricing to potential renters
Helps forecast rental income potential for budgeting
Careful analysis of costs provides a formula for customized rates tailored to your specific facility.
Gather Key Building Data Points
The first step is compiling basic information on the church property:
Total square footage, broken down by specific spaces
Replacement cost per square foot based on construction norms
Depreciation schedule (ex. 30 years for buildings)
Total annual operating hours available for rentals
This data serves as the foundation for cost calculations. Maintain details in a spreadsheet for reference.
Tabulate Operating Costs
Add up all annual facilities operating expenses such as:
Utilities - electricity, gas, water, trash
Insurance
Security monitoring
Janitorial services
Landscaping
Parking lot maintenance
Product supplies - restroom, cleaning, events
Repairs and routine maintenance
Divide each expense by the total building square footage to derive an operating cost per square foot.
Calculate Administrative Costs
Determine what percentage of staff time applies to facility administration based on responsibilities. Assign a share of salaries accordingly.
For example:
Facilities manager - 80%
Office staff - 20%
Pastor - 5%
Add the building-related portions of salaries together, then divide by total square footage to get an administrative cost per square foot.
Factor in Capital Costs
Look at long-term capital investment costs like:
Mortgage payments
Future replacement reserves
Major maintenance projects
Spread these over the lifetime to determine a capital cost per square foot each year. This allocates major costs appropriately.
Derive Total Cost Per Square Foot
Add together the operating, administrative, and capital cost factors.
Divide this total by the building's square footage to determine the all-in cost per square foot of the facility annually.
Apply Cost Factors to Individual Spaces
To set room rates, assign cost shares based on specific spaces.
Add a "common area" surcharge percentage to room square footage, such as 30%, to account for lobbies, restrooms, etc.
Multiply gross square footage by the total cost per square foot rate to derive a cost of ownership for each room annually.
Divide by total annual operating hours to calculate a basic hourly room rate.
Factor in Competitive Rates and Demand
Compare resulting rates to rents charged by other venues and factor in supply and demand for an additional premium if warranted. It may be possible to set rates higher than direct costs justify if demand is robust.
Review and Adjust Church Rental Rates Annually
Revisit assumptions and recalculate church rental rates each year as expenses, debt levels, and operational factors evolve. This keeps pricing aligned over time.
Regularly deriving rental rates directly from core operating expenses provides a fair, data-driven pricing model for church facilities. While complex, this methodology results in rates tailored to your actual costs and asset base. An annual review process maintains alignment as financial factors fluctuate. Investing time in careful analysis pays dividends through many years of optimized rental pricing.
