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Reimagining Child Care: Systems Changes and Solutions

A mother holding her child

Like many stakeholders across the community development industry and beyond, LIIF has spent much of the last year closely following the Biden-Harris administration’s Build Back Better Act and envisioning opportunities to fundamentally shift inequitable systems. The more than $400 billion proposed investment in the early care and education (ECE) sector – including universal pre-K for all three and four-year-olds and policies to ensure families can reasonably afford child care options – would be particularly historic, if enacted. This level of transformational investment could reshape the lives and trajectories of countless children, parents, child care providers and teachers, workplaces and even local economies. 

Although 2021 ended without a clear path forward for this large social spending package, we remain committed to the reality that ECE must be established as a publicly funded good like K-12 education. It’s a matter of giving kids a chance at a prosperous future. It’s foundational for family well-being. It’s a critical step toward racial and gender equity. Properly funding the true cost of child care is also vital to supporting a robust workforce and perhaps the single smartest investment we can make in the future of our children and our economy. The research backs these truths.  

Child care has roots in American slavery when Black women were often the primary caretakers of infants. Today, women make up 95% of the ECE workforce, 40% of providers are women of color and 16% are Black. Due to centuries of discriminatory policies and practices that impeded communities of color from building wealth, the average child care professional does not earn a living wage. Women of color in the field are especially likely to live in poverty. In the first six months of the pandemic alone, nearly 200,000 child care professionals lost their jobs. 

Over 25 years, LIIF has invested more than $241 million in ECE programs across the country, helping create or sustain 297,000 child care slots. We know that for every $1 invested in child care, the return (in health savings, tax benefits and other measures) is up to $12. In fact, America’s GDP would increase by 5%—or more than $1 trillion—if ECE were fully federally funded for babies and toddlers because women would be able to enter the workforce at the same rates as men.  

Though other countries benefit from the social and financial returns of ECE as a public good, the U.S. lags behind. At LIIF, we envision a country where decision makers pass measures to expand quality, affordable child care. Join us as we re-imagine the child care system in our country with examples of our work that are driving innovation and the policy changes required to support quality, affordable child care for all.

 System Change #1: Integrating Child Care with Community Assets 


LIIF provided grant funding to TEL HI Neighborhood Center to open a new child care center co-located with an Uber corporate office in San Francisco. Building child care centers adjacent to or within other buildings like homes, offices and transit centers supports families and the economy.

Imagine a typical workday morning for a parent. She wakes at dawn to ready herself for the day. Shortly after getting dressed, the day shifts into warp speed to feed, clothe and prep her toddler and 5-year-old for school. The children are loaded into the car for a 45-minute commute across town to drop the youngest at the only affordable child care center where she could secure a spot, followed by another 45 minutes across town to drop her child at kindergarten, a stop at the gas station and 30 more minutes to get to work. Four hours of commute time each day means she is short on sleep and patience. Her days affect her mental and physical health. Her focus and output at work is limited. The result is wasteof everything from carbon emissions to time, money and peace of mind. 

In a re-imagined world, U.S. cities would more intentionally design communities that center child care alongside other frequently used assets like schools, health clinics, community centers and grocery stores. What if a parent could simply drop off a child for preschool on the first floor of their apartment building on their way out the door? What if child care options were located in more transit centers, senior centers, YMCAs and office buildings? Child care drop offs on the way work or school could take a few minutes instead of a few hours. 

This community development strategysometimes known as “co-location”—has been employed successfully in areas across the country. In rural Coachella Valley, California, for example, LIIF recently provided $3 million to the Coachella Valley Housing Coalition (alongside Lift to Rise and other partners) for the development of four critically needed affordable housing complexes. One development–the Oasis Villas Community–will create 160 homes for farmworkers and their families earning between 30% and 50% of the area median income, alongside a co-located health clinic and child care center. This will provide significant educational, economic and health benefits to local families who already struggle with low salaries and intense physical demands. 

In San Francisco’s Mission Bay, where poverty rates range from 9% to 27%, the TEL HI Neighborhood Center opened a child care program co-located with Uber’s new corporate office space, with slots reserved for neighborhood families with low incomes. Through its partnership with the City of San Francisco, LIIF provided grant funding to the project, which supported staff salaries for the first year, among other start-up costs. This project was made possible by a local City/County policy that requires new building developments over 50,000 square feet to either pay a fee into the San Francisco child care impact fund or build a nonprofit child care center that contributes to meeting the city’s child care infrastructure needs. 

There are many local, state and federal policy strategies like this one that incentivize the co-location of child care and affordable housing. For example, local governments can require child care space to be included in RFPs sent to affordable housing developers. State governments can amend state Low-Income Housing Tax Credit (LIHTC) Qualified Allocation Plans (QAP) to include points for developments that include ECE space. The Federal government could enact a dedicated funding source for child care facilities to fund co-location. 

Author Rachel Hammond explored more solutions in Building Better for Families, a white paper produced as part of LIIF’s role as co-chair of the National Children’s Facilities Network (NCFN). In a series of follow up interviews conducted by Marnagee Scott, providers operating from a range of co-located spaces shared challenges and successes in their own words. Ultimately, the biggest barrier to smarter, co-located community development is funding, which is often creatively cobbled together but not in a scalable or sustainable way.  

As a financial intermediary, longtime supporter of the ECE sector and community development practitioner, we sit at the intersection of family needs, funding and neighborhood growth and design. We know that it takes policy change at all levels of government and significant capital investments to enact a comprehensive place-based approach. Families must be centered in our solutions to make supported and connected communities a reality.  

System Change #2: Financing ECE Facilities


LIIF provided a $300,000 grant with our partner, OSSE, for the construction of the Two Birds child care center in Washington, D.C., which created 96 slots. There is no federal funding for child care facilities, exacerbating the national care and education shortage.

Imagine if all children from infancy to 5 years old had access to quality early learning environments that kept them safe, stimulated their imaginations and improved their social skills. What kinds of capable, well-adjusted adults would they grow up to be? Imagine an ECE center or family child care home with quiet nap areas for brain growth, spacious play areas with developmentally appropriate toys, playgrounds to grow physical confidence and toddler-height windows and furniture to keep them engaged in a world where they can actively participate. 

Research shows that developmentally appropriate environments like these improve learning and development among children, yet the physical buildings are an often overlooked and under resourced component of the ECE industry. ECE business owners operate at such thin margins, there is often little to no money to improve physical spaces.  

Alongside our partners and funders, LIIF has long worked to provide facilities financing to support these small businesses and the children and families who rely on them. For example, $220,500 in grants was provided to St. Albans Early Childhood Center in Washington, D.C., with funding from the D.C. Office of the State Superintendent of Education, to help fund the renovation of five classrooms and installation of a laundry room, sinks, kitchenettes, changing stations to support 32 new child care slots. 

“The funding was instrumental for construction, equipment and supplies necessary to develop expanded space,” the owner wrote. “All renovated rooms are bright and spacious which supports the growth and development of our children. Our expanded space will support the child care community by providing more availability as child care options continue to diminish.” 

To move beyond gap-fill measures in facilities financing, we must create a carve-out for facilities financing at the federal level, as the more than 60 members of NCFN have proposed. Very few state and local governments have dedicated funding streams for ECE facilities financing, though there have been wins in this area.  

Thanks to influence and advocacy by the Build Up California network of 45 organizations, for example, the California governor included $250 million for child care facilities financing in the 2021-2022 budget, a move that will sustain and expand the supply of vital child care in the state. 

System Change #3: Building Capacity of ECE Small Business Owners 


LIIF hosts frequent trainings and webinars — like this one led by Build Up California — to build the business capacity of child care small business owners. Greater access to resources and experts is critical to support time- and cash-strapped providers.

ECE small business owners often juggle substantial financial and social stress with long hours caring for children, varied parent and staffing needs, and endless paperwork, taxes and regulations to navigate. But what if child care providers were part of a robust support network of other small business owners connected to partners in child development, finance, development, city planning and the public sector? What if they had streamlined access to resources and experts on call? 

Many community development financial institutions (CDFIs) like LIIF serve as a connector among funders, facilities developers and government agencies, offering both financial support and technical assistance to child care business owners, yet the need is greater than the capacity.  

In fiscal year 2021, LIIF’s ECE staff trained more than 1,300 providers (a 150% increase from the previous year) on topics like employment law, lease negotiation, grant opportunities and budgeting. LIIF partnered with groups like Start Small Think Big (which helps providers from marginalized communities create thriving businesses) to host a four-part webinar series, translated into Spanish and Cantonese, reaching hundreds of people across the country. As the co-chair of NCFN, LIIF has brought more CDFIs into capacity building space to support child care providers.  

“All workshops by Start Small Think Big and LIIF for family child care providers are really helpful to our child care community,” said Oscar Tang, a San Francisco-based family child care advocate. “Employment information and legal information are not offered that often, especially with Chinese and Spanish interpretation support.” 

Our solution must be to expand the networks of organizations building the capacity of child care providers coupled with grantmaking, lending and federal funding to reach poorly funded geographies—particularly in rural areas and the South. We must fund CDFIs’ capacity building work and deepen grassroots advocacy to make our ask clear to legislators.  

System Change #4: Growing Assets for Greater Wealth and Sustainability


Volunteers work on building out a backyard play space at a family child care home, with grant funding from LIIF. Many child care providers don’t own their homes or centers and operate on razor thin profit margins, creating a high risk for closure. (Photo courtesy of SF Children & Nature)

Child care practitioners and advocates have long imagined a reality where ECE providers are justly esteemed as brain architects of future generations and foundational to the success of our country. In this world, educators and caregivers earn a living wage for their vital role, family child care providers can afford to own their own homes and small business owners are supported by policies that make it possible to build strong, sustainable businesses. 

The reality is that generational wealth has been largely denied to the child care profession due to a long history of devaluing work led by women and women of color and policies that fail to properly support the sector. Today, nearly half of child care providers rely on public subsidies like food stamps, annual child care staff turnover is about 30% and many small businesses are in debt due to low pay and the high cost of care. 

LIIF currently has multiple efforts in the works to improve the financial stability of the sector, like an asset building program in D.C. to support predominantly Black-owned family child care homes with financial planning and grants to expand their economic sustainability. We are also looking for ways to support home ownership options for family child care homes, digital literacy so providers can access more grant opportunities, and ways to advance policies in emerging areas led by our partners like homeownership grants, national paid leave and pay equity laws. 

LIIF has advanced extensive grantmaking programs to child care providers over the years, including recent investments in Atlanta and nationally during COVID. But for true wealth building to be achieved, we must move beyond patchwork grantmaking to fill gaps and invest in systems to move educators out of debt and into a place where they can financially thrive. 

If we want to build a sustainable, functioning child care system with high quality care and education for every child in the U.S. who needs it, we must creatively re-imagine and advocate for systems changes like these. Our children, families and current and future workforce depend on it. 

Early Care and Education