The walls of the aging church were bowing outward. The stressed Lutheran congregation near Lake Street in Minneapolis couldn't afford to fix it. That, says the Rev. Jen Nagel, was the point at which the crisis reached its peak.

"We had an extremely large building, 4,000 square feet, and we couldn't afford it. The congregation faced a hard question: Do we live or die? We decided we wanted to live; that our biggest asset is the land and building. Let's let go of a big chunk to keep the smaller parts."

The decision to surrender much of the structure and its big parking lot on Lyndale Avenue to create cool high-ceilinged shops and affordable housing right on a bus line has earned her church and another congregation that shared the site the highest rating from a Metropolitan Council advisory group that is guiding the allocation of a $7 million fund to encourage sprawl-busting, space-conserving, transit-friendly developments in the cities and suburbs.

In fact, the two top-rated projects both stem from the decisions of Minneapolis churches to turn over their own land to help create affordable housing -- and may well create a model that still more will follow in the years to come, Nagel said.

The other project, near Minnehaha Creek, involving Mayflower Church, is being billed as a creative way to add affordable housing to a high-income neighborhood, with church parking underneath the three- and four-bedroom units.

Other recommended recipients include:

• The creation of 60 affordable senior units as part of the Cobblestone neighborhood in Apple Valley. The project would unite shopping, homes and a transit station that seniors could reach through a tunnel under a busy, wide thoroughfare. This was the highest-rated suburban project.

• The first new multi-tenant office building on St. Paul's University Avenue in decades, created in anticipation of the Central Corridor light-rail line.

• A downtown campus in Norwood Young America in western Carver County, that will unite affordable senior housing with a new library and new City Hall. All the elements are part of a hub that is expected to become a commuter rail stop in the years to come.

With conventional development tanking, it was a trying year in which to find good projects, said Ruth Grendahl, an Apple Valley City Council member who leads the Met Council advisory group.

"We kept asking people, 'Do you know what the market's like out there?' But people were hopeful."

Still, she said, the state of the market probably helps explain the number of nonprofit and publicly supported projects on the final list. "Two of them came in with partnerships with faith communities," she said, "and we haven't seen that before."

The Livable Communities program is best known for its role in helping create community-shaping projects such as Excelsior & Grand in St. Louis Park and Burnsville's Heart of the City -- new downtowns for suburbs that hadn't had one.

This year's projects are smaller-scale, though White Bear Lake is being recommended for $1.39 million to help reshape a key section of shoreline along the big lake, with a public plaza and perhaps a new museum. Centerville, in the north suburbs, is also seeking to give a jolt to its downtown redevelopment, creating what's being described as a prototype for a new downtown.

It may be the new uses for sprawling city-church properties that wind up having the greatest long-term effects.

"We're just one of many, many city congregations facing these questions," Nagel said. "Our building is very large -- so large that our crisis hit us early, before some others might face it. But we're all facing similar issues, especially in this economy, which is a tough time for churches."

Her church, Salem English Lutheran, has worked with Lyndale United Church of Christ to share staff and facilities. But even together, they had a hard time seeing how to sustain a large, aging building over many years to come.

The solution: Bring in a developer who will create 9,000 square feet of commercial space and 65 residential units. That will turn a dead-space parking lot on an important city street into a much livelier set of shop fronts, while creating places to live for underserved populations and spinning off proceeds for the churches to keep going.

"The developer will keep the historic texture of our original building, more than 100 years old, but reduce us to a much smaller footprint," Nagel said. "We're excited. The workforce housing piece feels innovative, and it will have a strong green element. And we'll have a new ministry center. We're thinking about buildings in a different way."

David Peterson • 952-882-9023