Government Gets In The Way Of Affordable Child Care

By Jason Sorens, via Issues & Insights | October 26, 2024

By all accounts, the presidential election is so close that a relatively few votes in any given state could make all the difference. And, since a recent survey showed nearly 9 in 10 parents said a candidate’s position on child care access and affordability would help determine their vote, it’s no wonder both major contenders are talking about how they’re going to help lower the cost of child care.

Critics have panned Kamala Harris’ idea to cap child care expenses as a percentage of income, because it lacks a funding mechanism or realistic cost estimates. Trump and Vance, on the other hand, have proposed increasing child tax credits, which would also help parents who care for their kids at home.

But the solution to child care costs is not to subsidize demand, that is, pay parents to send their kids to daycare. That’s what we’ve done with higher education grants and loans, and it’s only driven up costs.

The only sustainable solution to high costs is to make child care more efficient and productive, thereby encouraging more providers to enter the market and, in turn, driving down costs for parents. We do that by addressing all the ways government already makes child care more expensive.

These costly requirements come in two buckets: licensing and zoning. Of course, state licensing requirements can include some reasonable safety rules that every child care provider should follow. But the evidence suggests that some of these requirements are excessive.

The most extreme example is the District of Columbia’s requirement that child care workers have at least a two-year college degree. Many of the parents of the kids going to daycare don’t have college degrees; does that make them unfit to care for their own kids? Strict requirements to become a child care worker discourage people from going into the profession to begin with, resulting in lower supply and higher costs.

It also means parents go to unlicensed providers. According to the most recent survey, three and half million American kids go to paid but unlicensed in-home child care providers. Unlicensed home-based daycares outnumber licensed home-based daycares by a factor of more than four!

That number tells us two things. First, state licensing requirements are too costly, causing most home-based providers to ignore them. Second, state licensing requirements don’t benefit kids much, because parents are more than willing to send their kids to unregulated providers. Most parents probably feel that they do their own research on child care providers and keep a close eye on how they take care of their children, so they have no need for a state stamp of approval.

Local zoning requirements also add to the cost of child care. These laws prevent commercial daycare facilities from opening in residential areas and add various other requirements relating to parking, signage, storage, floor area, lot size, and more. This can be especially costly for home-based child care providers.

New Hampshire is the only state with a database of zoning regulations affecting home-based child care. I analyzed that database and found that more than 80% of communities—and a higher percentage in the urban and suburban areas of the state—have onerous regulations on home-based child care, most often banning it altogether in at least some neighborhoods or requiring a special permit from a land-use board.

These special permit requirements are expensive, because, depending on the specifics, someone who wants to take care of a couple of kids in a private home may need to pay an application fee, hire an architect and an attorney, and present to a board in a public hearing—where neighbors could stand up and complain—to get permission for the new practice. And even after all of that, the board could say no.

Fortunately, New Hampshire just passed a sweeping, first-in-the-nation law exempting home-based child care from many zoning regulations and requiring towns to allow it in all residential neighborhoods.

Currently, only 3% of the licensed child care capacity in the state consists of home-based care (97% of the capacity is commercial daycares). But, judging by the survey data, there are far more home-based providers working in the shadows without licensure or, most likely, zoning approval. By lightening their regulatory burden, these providers may well find it worth their while to seek licensure.

Zoning and licensing regulations interact; many providers don’t want to get licensed because that puts them on the radar screen for zoning compliance. Therefore, states could not only reduce the cost of child care, but also boost compliance with basic safety regulations, by exempting home-based child care from most zoning restrictions.

Typically, candidates talk about “fixing” a problem by handing out other people’s money. But reforming child care regulation is an effective way of expanding Americans’ access to affordable child care without having to spend a single taxpayer dollar. Someone tell the politicians.

Views expressed by guest contributors to Issues & Insights are their own and don’t necessarily reflect the views of the I&I Editorial Board.

Jason Sorens is an economist with the American Institute for Economic Research. He has taught at Yale, Dartmouth, Saint Anselm College, and the University at Buffalo.

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