Child Care and Affordable Housing - A Potential "Win/Win" for Residents and Owners

person A.J. Johnson today 01/02/2022

A "gray rhino" is a highly probable, high-impact yet neglected threat. These are not random surprises but occur after a series of warnings and visible evidence. The bursting of the housing bubble in 2008, the aftermath of hurricanes, and the fall of the Soviet Union are examples of gray rhinos.

Jill Schlesinger, a CBS News business analyst, recently wrote an article making the case that childcare should be added to the list of gray rhinos.

Some of the data Schlesinger outlined relating to childcare costs is stunning.

  • A report from the U.S. Treasury stated, "The average family with at least one child under age 5 would need to devote about 13% of family income to pay for childcare, a number that is unaffordable for most families."
  • The Department of Health & Human Services (HHS) considers childcare affordable when it costs no more than 7% of household income. With a U.S. median household income of $67,521, affordability is less than $100 per week. Childcare at this price is almost impossible to find.
  • The average childcare cost in a daycare center is $340 per week, which means an annual income of more than $250,000 is needed to consider the care to be "affordable."

A 2021 annual cost of care survey found that 57% of families spent more than $10,000 on childcare in 2020.

Finding care is also a problem. Thousands of centers closed due to COVID-19. The low-paid workers of these facilities are now finding other - better paying - jobs.

The median annual pay for daycare workers is $25,460 (12.24 per hour - if they work 40 hours per week). This is not a livable wage.

The impact of all this is that parents (mainly women) are being forced to leave the workforce to care for their children. In September 2021, nearly 300,000 women left the labor force. Since the pandemic began that number is 3 million.

The Build Back Better Plan of the Biden Administration would cap childcare costs at 7% of income for kids up to age five on a sliding scale, depending on the state of residence. In today’s political climate, the chance of passage is close to zero.

This lack of affordability presents a potential opportunity for forward-thinking owners of affordable housing. Among the possible ways to improve childcare affordability for residents is

  1. Partner with local daycare organizations to negotiate rate breaks for residents, in return for advertising the daycare facility at your property;
  2. Offer community space to local daycare operators to set up onsite care for children of the community; or
  3. Set up a childcare facility as a community amenity.

This third option requires an analysis of the financial feasibility of the operation, as well as a determination of required local approvals. Despite this, such an operation is feasible and already exists in a number of properties across the nation. The following analysis indicates the method an owner may use as a starting point for determining feasibility.

  • Assume that demand is such that 15 households at a property would consider onsite daycare if it was affordable.
  • To pay for a full-time and part-time daycare worker ($18 per hour & $15 per hour:
    • Full-time salary: $37,440
    • Part-time salary (assume 20 hours per week): $15,600
    • Employee benefits of $17,680 (Insurance, paid leave, health care).
    • Total annual employee cost: $70,720
  • If 15 children are cared for at $100 per week for 50 weeks, income is $75,000.

Childcare at apartment communities would be considered a resident amenity - not a profit center. A simple break-even outcome may make consideration of this option worthwhile.

Regardless of whether apartment owners determine that acting affirmatively regarding childcare is something to be initiated, the childcare crisis is real - and only getting worse. Thinking about how this burden can be eased for our customers seems like good business.

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