BRIEF:
Child Care Facility Co-Location
Co-location leverages economies of scale and shared costs with new developments to integrate into spaces that are shared with other purposes. It is most efficient when building child care into new developments from the start – integrating it from day one.
Examples:
- New affordable housing complex includes space for a licensed child care center on the first floor and contracts with a child care provider for operations
- Community health clinic builds a new facility and includes a child care center within the same building
- Housing developer designates units for family child care homes and prioritizes tenants who plan to operate child care programs
- Partner organization helps a child care provider purchase or rent a home through a “child care-friendly landlord” program
Co-location is an ideal strategy for expanding child care supply in communities that are undergoing new housing and other development.
START HERE
- Build the case for co-located child care in developments. Present this rationale with local developers, governments, economic development entities, and other potential partners.
- Find out what’s in the local development pipeline. Ask your planning department or housing authority for projects currently in predevelopment. Identify locations that would be a good fit for child care, and connect to make the case.
- Create a system map to build cross-sector literacy. Overlay housing development timelines, child care licensing steps, workforce funding cycles. Find where they intersect.
- With state-level partners, identify local regulatory barriers to co-location and identify opportunities, such as reduced parking requirements, zoning rules changes, etc. to modify. See Topic Brief Child Care Friendly Regulations (Sec. 2, II.) for more detail.
WHY: CO-LOCATION UNLOCKS FUNDING AND REDUCES COSTS
Facilities are the greatest expense to child care providers after personnel, and supporting access to facilities can help create a more sustainable child care business model (see Child Care Dollar in Learn More). Repurposing (detailed in Brief 3) and co-location are two opportunities for cost-effectively creating new spaces for care. Co-located child care elevates child care as part of the core infrastructure of a community.
KEY INSIGHT
Development Creates Demand for Child Care
New housing, workforce development, large employers coming into an area – all of these conditions create a need for more child care within that region.
Take time to understand the needs of families and child care providers in the community alongside opportunities for new development to create aligned projects. See the Virginia Early Childhood Foundation’s Supply and Demand Dashboard in Learn More.
Unlike repurposing (which converts existing spaces retroactively), co-location requires developers, child care providers, and community partners to align early in the planning process. Building child care into housing developments, workforce programs, community centers, or employer facilities at the design stage enables unique funding mechanisms and cost efficiencies that standalone centers cannot achieve.
Partnerships Unlock Shared Resources
Child care is a natural partner in affordable housing, workforce development, and other community development strategies. Building housing without considering where children will receive care addresses only part of the puzzle. Co-located developments bring teaching jobs, employment opportunities for families, nurturing spaces for children, and connections to wrap-around services. This essential community resource can also increase the desirability of new development.
Workforce development partnerships can offer a dual-impact model: training participants in early childhood careers while providing care for attendees’ children. Virginia stakeholders have demonstrated this approach in repurposed commercial buildings, addressing both child care access and workforce pipelines. See EO Companies in Learn More for an example.
Employers can invest in building or repurposing facilities, subsidize or waive rent, cover utilities, and guarantee enrollment for employees. The federal IRC §45F tax credit (see Child Care Credit in Learn More) supports employer-sponsored child care, and subsidizing the cost of care reduces out-of-pocket fees for parents while maintaining program viability.
Building Together Reduces Costs
Shared building systems reduce costs. HVAC, plumbing, fire suppression, and ADA access can be designed once rather than twice, and architecture and design work benefit from economies of scale. Developers often plan for ground-floor commercial space anyway, lowering the marginal cost of including child care.
Shared operating costs like maintenance, landscaping, security, and insurance can be distributed across partners. For infant and toddler programs where staffing consumes most of the budget, this reduces recurring costs that would otherwise squeeze wages or quality. Long-term, below-market, or no-cost leases dramatically reduce financial risk and allow more resources for quality and compensation.
New Funding Opportunities Emerge
Housing developments can unlock funding sources that standalone child care facilities cannot readily access: Low-Income Housing Tax Credits (LIHTC), federal HOME funds, Community Development Block Grants (CDBG), tax-increment financing, and philanthropic dollars. Many offer bonus points for co-located functions. Reciprocally, child care funding sources (for example, Virginia Small Business Financing Authority loans, Child Care Subsidy Program funding , philanthropic early childhood grants, employer consortium contributions, and participation in Head Start/Early Head Start or State PreK) unlock resources that developers could not otherwise access.
KEY INSIGHT
Favorable Lease Terms Support Provider Sustainability
When developers build the space and develop favorable lease terms like no- or low-cost rent, minimal maintenance and repair obligations, or long-term guarantees, child care providers can focus more resources on operations.
Consider what a low-cost facility might look like for a provider. See the lease agreement from Teton County, Wyoming in Learn More for an example.
HOW: BUILDING CHILD CARE INTO NEW DEVELOPMENTS
These advantages emerge when developers and child care providers collaborate from the earliest stages of planning. Co-location means building child care into a project before ground is broken, requiring all parties to understand each other’s constraints and timelines early. Strong community partnerships are the foundation. Invite child care providers into planning processes, identify providers ready to grow, and connect projects with the right partners and resources.
Start Early
Child care must be part of development conversations as early as possible to ensure that spaces are
well-suited for child care and avoid costly change orders. Virginia stakeholders report that early engagement – before financing is finalized and before architects complete drawings – is the single most impactful opportunity in co-location.
Build Mutual Benefit
Co-location works when each partner gains something meaningful. Housing developers may earn competitive points, employers improve recruitment and retention, workforce programs strengthen their model, and child care providers gain affordable space. Aligning incentives turns ideas into sustainable projects. This requires cross-sector understanding: How does LIHTC scoring work? What enrollment makes programs viable? What does licensing require for different age groups?
Providers benefit from access to affordable, high-quality space to run their businesses. Partners can support providers by offering long-term leases with favorable terms that ensure the provider won’t be displaced as priorities change. Agreements must minimize provider costs through below-market rent and shared costs for maintenance and overhead to support their financial sustainability.
Providers can support partnerships by taking responsibility for their areas of expertise – operating a child care business and providing high quality care for children. Providers can also absorb much of the risk of operating the child care business, a benefit to employers, developers, and other potential partners.
The inclusion of child care in a development project can open new doors. For example, some funders may become interested in a project which includes child care because they appreciate the creative approach. Some development projects may be seen more favorably in the community when they include this critical community service. Identifying incentives and benefits for all parties involved helps to create a viable project.
Convene the Right Partners
Once a project or potential partnership has been identified, the group can begin to convene people to serve in various project roles, as in the table below. Some roles may be optional or combined based on project scale and local context.
The alignment of regulatory processes to ensure streamlining, efficiency, and removal of unnecessary barriers to child care programs can help to foster co-location projects. For guidance, see Topic Brief Child Care Friendly Regulations (Sec. 2, II.).
KEY INSIGHT
Sustaining Partnerships Over Time – Success Components
- Shared services for ongoing cost savings
- Mutually beneficial long-term agreements designed up front
- Mission-aligned partners whose motivation extends beyond profitability
- Partnership with community-minded providers
- Child care friendly leases that provide low- or no-cost facilities and long-term stability
Explore LISC: Building Innovation for Child Care Report in Learn More on co-location partnerships.
WHAT TO EXPECT: EMBRACING COMPLEXITY
Cross-sector literacy takes time but pays off. Housing and child care operate with different funding cycles, regulations, and incentives. Regions can accelerate learning by connecting with Virginia organizations already doing this work, see Learn More for some examples.
Start by learning what’s already in the pipeline and getting the right partners around the table to work through the details. Encourage developers to consider including child care. Share how the inclusion of child care may benefit their project.
KEY ACTION
Create A System Map
Overlay the processes of different sectors and find where they overlap and work together. This is a great way to visualize what’s possible with co-location.
See Appendix A of LIIF: Family Child Care in Affordable Housing in Learn More for the various sectors whose processes can be mapped together.
Finally, regions should familiarize themselves with the funding tools that make co-location possible. The Virginia Small Business Financing Authority offers low- and no-interest loans for child care facilities. Federal tools like LIHTC and New Markets Tax Credits support co-located projects. Many individual donors and foundations have an interest in the innovative potential of co-location. See Financing Tools & Resources in Learn More for resources.
CONCLUSION: CO-LOCATION CREATES UNIQUE OPPORTUNITIES FOR CHILD CARE
Child care is ideally situated near where people live or work. When child care is co-located with other core community services and programs, families’ access increases. Co-location also creates many valuable options for improving the child care business model through resource sharing and economies of scale.
LEARN MORE
Virginia Examples and Resources
- EO Companies. Co-located child care with workforce development.
- Kindlewood Early Learning Center. Affordable housing redevelopment with nine-classroom early learning center; resident-led design process.
- AHC Inc. Decades of partnerships across properties with donated or subsidized space.
- Virginia Early Childhood Foundation. Supply and demand data.
Out-of-State Models and Resources
- CARE Project. Leases homes to providers below market rates; pathway to ownership.
- LIIF: City Playbook for Child Care. Embedding child care in affordable housing.
- LIIF: Family Child Care in Affordable Housing. Design, financing, and policy considerations with co-location scenarios.
- Teton County, Wyoming: Child Care Lease Agreement. Low-cost lease example ($1.00 conveyance, maintenance absorbed by lessor).
- Where Does Your Child Care Dollar Go? Cost breakdown for child care programs.
Financing Resources
- Virginia Child Care Financing Program (VSBFA). Low- and no-interest loans for facility acquisition, construction, renovation, or equipment.
- LIIF: Child Care Facilities Fund. Loans and grants for acquiring, constructing, or renovating child care facilities.
- LISC: Making Space Matter Toolkit. Step-by-step guide for child care facilities policy development.
- LISC: Building Innovation for Child Care (BIC) Report. Foundational elements and policy recommendations for co-location.
- LISC: Co-Location Impact Calculator. Quantifies impacts of co-located child care.
Federal Policy Models
- Build Housing with Care Act (S. 310/H.R. 646). Proposed legislation: HUD grants up to $10M for co-located child care and affordable housing; prioritizes underserved areas and child care deserts.
Employer-Sponsored Child Care Resources
- IRC §45F: Employer-Provided Child Care Credit. 25% of facility + 10% of referral expenditures (up to $150k); supports consortium models.
Click for related Playbook Resources: