Looking Beyond Child Care: New Solutions Through Affordable Housing

In January 2020, Fannie Mae announced the winners of its Sustainable Communities Innovation Challenge, which sought creative ideas to help build economic security for low-income families through affordable housing and education. Among the five recipients is the Guadalupe Neighborhood Development Corporation, or GNDC, an organization that provides affordable housing for families in Austin, TX. With this award, GNDC will partner with a local preschool to increase access to early learning and create 90 affordable rental homes for families living in underserved neighborhoods.

Fannie Mae’s announcement formalizes a long overdue connection between access to affordable housing and early childhood. The lack of affordable, high-quality child care plagues our nation’s families, especially as more parents enter the workforce and unemployment rates decline. And just as there is a shortage of child care options, there is also a shortage of affordable rental housing for low-income families. Access to both child care and housing can help put families on a pathway to economic mobility and improved health outcomes, yet for too long, these issues were approached separately. Following the lead of Fannie Mae, the early childhood field should invite housing experts into the conversation to identify cross-sector solutions that can better support families.

It is well documented that the housing crisis affects many families across the country. According to the National Low Income Housing Coalition, all states lack an adequate supply of affordable rental homes for “extremely low-income” families, or households with incomes that are at or below 30% of the area median income. In fact, 11 million extremely low-income households, those most at risk of becoming homeless, compete for only 4 million units available and affordable at their income level, resulting in a shortfall of 7 million homes. This leaves nearly three-quarters of extremely low-income renters severely cost-burdened, meaning they spend more than half of their income on housing. Federal rental assistance has failed to keep pace with rising rent burdens, with such assistance reaching only one in four households that qualify.

To bring both issues together, the early childhood field should better understand affordable housing and what policy levers can be pulled to promote child care. One such lever is the Low-Income Housing Tax Credit, or LIHTC, a federal tax credit that incentivizes the development of affordable rental housing for low-income households. Established through the Tax Reform Act of 1986, LIHTC is available to developers and investors to help offset the cost of constructing affordable housing. In turn, developers must agree to meet income and affordability requirements to ensure those who need affordable housing have access.

Under the LIHTC program, the Internal Revenue Service allocates tax credits to states based on their population. State housing finance agencies then award credits to development projects through a competitive application process based on their state-created qualified allocation plans, or QAPs. While states must prioritize projects that serve the lowest-income households and remain affordable for the longest period of time, they have broad flexibility to design their QAPs according to their particular housing needs. QAPs, which are reviewed annually, identify specific priority areas for which points are awarded, and developers structure their applications to earn the most points possible.

QAPs across states have identified priority areas that include the availability of on-site programs, supportive services, and amenities; the proximity to essential community services; proximity to transit; set-asides for high-needs populations, such as low-income families; and developments in underutilized locations to promote community revitalization. Falling within these criteria is an opportunity for promoting child care. States, in their QAPs, can prioritize projects that provide access to child care for their low-income families, either by including it as an on-site supportive service or ensuring the development is within close proximity to a child care program.

In a scan of available state QAPs, all states identify low-income families as a priority for development projects. Only 20 states, however, explicitly name child care in their plans. To start, several states prioritize child care as a potential on-site service or amenity, including California, Colorado, Iowa, Nebraska, New Jersey, and Wisconsin. Specifically, California’s plan will award points to large family projects if licensed child care is made available to its residents. Colorado will also award points to projects that offer supportive services at no cost to residents, identifying child care as an example. Several other states, including Delaware, Georgia, Idaho, Indiana, Kansas, and Texas, prioritize the proximity of supportive services, including child care. Both Delaware and Georgia award points if child care is less than half mile away from the development. Kansas recognizes that close proximity to supportive services is important to residents, and “the more of these that are close at hand (within a few blocks) the higher the score,” further stating that “a family-oriented development will need schools and day care as a high priority.”

While most states have not named child care in their plans, there are instances of developers considering child care in their affordable housing projects. In addition to the Sustainable Communities Innovation Challenge, Fannie Mae announced a $14 million LIHTC equity investment for the Mino-bimaadiziwin Apartments, a multifamily affordable housing complex in Minneapolis, MN. The developers, the Red Lake Band of Chippewa Indians, are planning a mixed-use space that includes a child care facility. Alongside this, BRIDGE Housing, headquartered in California, launched a Community Development Initiative in 2015, which integrates holistic community development practices into affordable housing. One component of this initiative is to better serve families by planning for on-site child care centers in housing projects.

Finding solutions that increase access to child care and affordable housing can help move low-income families toward economic stability. BPC recognizes that states can play a role in building this connection and recommends that states review their QAPs to understand the needs of families in affordable housing—and this includes explicitly identifying access to child care in their plans. BPC also recommends that the early childhood field broaden its community of experts to include those in other fields, which can help identify cross-sectoral solutions that work for all families. Taking these recommended steps to reach across issue areas to serve low-income families holistically and directly in their communities can increase the impact of public investments and lead to economic gains for the nation’s most vulnerable families.