Low Income Investment Fund (LIIF) sponsored Building Better for Families, which was produced by Rachel Hammond, a second year MPP student at the U.C. Berkeley Goldman School of Public Policy. It is the second piece in the National Children’s Facilities Network (NCFN) series Making Space: Leading Perspectives on Child Care Facilities. More information about the Making Space series is available on the NCFN website.
The United States currently faces a severe shortage of both quality early care and education (ECE) options and housing that is affordable to families across the income scale. Prior to the pandemic, 20.4 million renter households were considered rent burdened, meaning they spent more than 30 percent of their monthly income on rent, 51 percent of Americans lived in a child care desert, with a disproportionate impact on Hispanic, American Indian, and Alaskan Native families. The economic consequences of the COVID-19 pandemic have caused many ECE providers to close their doors or downsize their businesses, constraining an already tight supply of care. At the same time, more families are facing unemployment and reduced wages, resulting in 5.7 million households – or 14 percent of all renter households – behind on their rent and facing the risk of eviction as pandemic protections are lifted in the future.
Co-locating ECE facilities with affordable housing developments is a promising strategy to support low income families by improving family access to two vital sources of household stability and economic mobility. Access to high quality care supports child development during their critical early years; it is also a cornerstone of economic stability for families by allowing parents to participate in the workforce while knowing their child is cared for in a safe environment. Co-location is also a practical strategy to work across silos and deliver two critical community amenities in an efficient, sustainable and user-friendly manner. LIIF sponsored a research paper for the National Children’s Facilities Network (NCFN) series Making Space: Leading Perspectives on Child Care Facilities that dug deeper into the co-location strategy – Building Better for Families: Policy Strategies for the Co-Location of Early Care and Education Facilities and Affordable Housing.
Opportunities and Challenges
Many affordable housing developers across the country recognize the value of incorporating ECE facility space as a source of household stability and economic mobility for families. Even without a formal infrastructure to co-locate these amenities, there are several examples of developers successfully executing these projects. For example, BRIDGE Housing incorporated a dual language Head Start program in a housing development located in the North Beach neighborhood of San Francisco, a community that is home to many Chinese immigrants. LIIF provided a total of $66,000 in grant funding to support start up, capital and quality costs at the ECE facility.
While we have seen co-location successes, many challenges stand in the way of executing more developments. These challenges fall under two primary categories: administrative burden and financing challenges.
Co-location developments unite two complicated sectors, and there is an expertise mismatch when affordable housing developers and ECE providers are brought together. Developers do not always know how to find ECE providers with the capacity or desire to join a project, nor are these developers necessarily familiar with ECE facility regulations. ECE providers, on the other hand, have likely never overseen the construction of a new facility, especially family child care providers who have been operating out of their home. Bridging the communication gap between these two sectors and related stakeholders is a primary challenge.
Second, building out an ECE facility is costly and may be a steep barrier for ECE providers who tend to operate on thin margins and may not have the financial capacity to take on debt. Further, many ECE providers are women of color, who are disproportionately likely to be declined for loans, receive smaller loans and pay higher interest rates. Multiple barriers make it difficult for ECE providers to finance the development of a new facility, and in the absence of a subsidy to cover these expenses, a housing developer is unlikely to cover the costs of building out the ECE space.
There are multiple strategies government institutions can take to alleviate the administrative and financial burdens faced by both providers and developers. A successful child care and affordable housing co-location strategy will include policies at all levels of government, as well as intentional partnerships with community development financial institutions (CDFIs) that can offer technical real estate and finance expertise across both the housing and child care industries. The following federal, state and local policy options can help ensure housing developers and ECE providers have the necessary funding and support to complete co-location developments:
Federal Policy Actions
- Provide flexibility in the designation of Qualified Census Tracts to help facilitate successful use of community service facilities in Low Income Housing Tax Credit (LIHTC) developments
- Increase Child Care and Development Block Grant (CCDBG) funding such that states can fund voucher programs that cover the full cost of care
- Enact a dedicated source of federal funding for ECE facilities that can be used to fund the ECE space in a co-located development
State Policy Actions
- Amend LIHTC Qualified Allocation Plans to include points for projects that include ECE space
- Create a funding stream dedicated to ECE facilities
- Increase voucher reimbursement rates
- Reimburse providers based on enrollment rather than attendance
- Provide technical assistance support for ECE providers and affordable housing developers
Local Policy Actions
- Include ECE space as a requirement in Request for Proposals (RFPs) for city land and Notices of Funding Available (NOFA) for affordable housing developments
- Create zoning policies that support ECE, such as height and density bonuses
- Include ECE in Community Benefit Agreements
- Facilitate communication across government departments, such as the departments of education, housing and planning
CDFIs are a valuable resource to support co-location projects. CDFIs, like LIIF, that are engaged in the ECE sector have experience coordinating among architects, contractors and financial entities and can provide technical assistance to ECE providers to help navigate complex systems, bureaucracies and regulations. Many CDFIs are also deeply engaged in the affordable housing sector and can specifically bridge some of the communication barriers between the ECE and housing industries. CDFIs can also provide financing for the build-out of ECE facilities that meet the unique needs of ECE providers and which may not be available through private lenders. For example, CDFIs have offered no-interest and forgivable loans to help providers grow their businesses while serving low-income families. Local governments may also find it valuable to partner or contract with a CDFI that can efficiently manage these varying stakeholders and layers of compliance.
Latest Federal Policies Supporting ECE
Access to quality, affordable ECE is a critical source of support for families and child development, as well as a broader community amenity that contributes to the strength of the local economy. The COVID-19 pandemic has shed light on the essential role child care providers play across the country, and Congress has responded by providing more than $50 billion in relief to stabilize the child care sector — including $24 billion for a new child care stabilization fund, $15 billion for CCDBG and $1 billion for Head Start enacted in the American Rescue Plan Act. The Biden Administration’s proposed American Jobs Plan calls for $25 billion to upgrade existing ECE facilities and to increase the supply of ECE slots across the country, as well as more than $200 billion to increase the supply of affordable housing. Ongoing research should examine opportunities to leverage the significant increase in resources across both the ECE and affordable housing sectors to co-locate more ECE facilities with affordable housing developments.
For more information about co-location, read the full report: Building Better for Families: Policy Strategies for the Co-Location of Early Care and Education Facilities and Affordable Housing.