Meeting the Need at the Source: The Benefits and Challenges of Co-Location

According to the report, “Co-Locating Early Care and Education Facilities with Affordable Housing in Oregon," co-location is crucial to meeting the need for safe, high-quality child care in Oregon. While co-location offers valuable benefits for families and communities, it also brings unique operational and financial challenges.

BuildUp Oregon is equipped with a team of facility advisors who can assist developers with some of these hurdles, such as lining up funding opportunities, navigating regulations and licensing for child care facilities, and offering best practices for facility design. You can learn more about how BuildUp Oregon can help in the concluding section of this blog, “A Partner in Co-Location Development.” 

For this article, we talked to Erik Pattison, the relationship manager at Network for Oregon Affordable Housing (NOAH). Pattison has worked for several community development corporations(CDCs) as a project manager and has overseen affordable housing development projects. We used his insights to lay out the benefits and challenges of co-location projects and provide solutions to help developers navigate and overcome these hurdles.

The benefits of co-location

When child care spaces are built into affordable housing, the benefits are multiple:

• ‍Happier, healthier kids. A child’s early years are critical to their academic, social, emotional, mental, and physical development. In a safe, supportive environment, they can learn healthy behaviors and skills which provide a solid foundation as they grow.

• ‍Equitable access. 72% of Oregon families are estimated to live in a child care desert. Co-located ECE facilities can play a crucial role in ending this shortage and addressing racial and economic disparities in certain communities.  

• Improved household income. A 2018 survey found that workers with kids under the age of 3 lose an average of 2 hours of work per week due to child care issues. High-quality child care near a family’s home makes it easier for parents to join the workforce, potentially stabilizing or increasing household finances.

• Improved infrastructure. When child care is steps from home, families spend less time in cars or on public transportation, reducing their carbon footprint and increasing the neighborhood’s walkability and child-friendliness.

• ‍Stronger community. With preschools situated in residential buildings, “relationships are established, and people get to know each other,” says Erik Pattison. “It feels like a home; there's not as much transition, and it creates a happier, more stable environment.”

• More small business opportunities. Every co-located ECE facility provides an opportunity for someone to not only become a small business owner but also to create jobs for others.

• ‍A stronger economy. Child care issues don’t just affect parents, but employers, workplaces, and the economy at large. One study attributes an annual economic cost of $122 billion in lost earnings, productivity, and revenue to the national child care crisis.

The challenges of co-location

Building a co-located ECE facility into affordable housing costs less than developing a large commercial child care center. However, this model comes with some unique challenges, as well:

• Funding and financing. The main issue developers face is securing funding to build an ECE facility within an affordable housing project. Affordable housing developers often use the Low-Income Housing Tax Credit (LIHTC) program to cover construction costs, but LIHTC financing doesn’t apply to commercial spaces, which includes child care centers. "It comes down to finding someone willing to provide a capital grant," Pattison explains. Programs like BuildUp Oregon can help bridge these funding gaps, which ultimately helps keep child care fees affordable for families.

• Prevailing wage requirements. Prevailing wage rates are the amounts set by the Oregon Bureau of Labor and Industries (BOLI) that must be paid to construction workers on all public works projects in Oregon. Affordable housing developers get prevailing wage exemptions as an incentive; however, adding a commercial component, like a child care center, often triggers the requirement to pay prevailing wages across the entire project. This can add 10% to 20% to the total cost, making the project less financially viable.

• Finding certified child care providers. After a family child care (FCC) unit is designed and built, “you still need to fill it with somebody that is already or wants to be a certified child care provider,” says Pattison. If the person lacks certification, developers must find a service partner to assist with the process. Once certified, providers must also meet but not exceed the U.S. Department of Housing and Urban Development income requirements, adding an additional layer of complexity.

A Partner in Co-Location Development

BuildUp Oregon is uniquely situated to help developers untangle operational red tape and overcome financing hurdles for co-location projects. Composed of four Community Development Financial Institutions — Micro Enterprise Services of Oregon (MESO), Craft3, Network for Oregon Affordable Housing (NOAH), and Low Income Investment Fund (LIIF) — its members are dedicated to ensuring equitable access to high-quality child care and supporting the growth and development of early care and education providers.

Some ways BuildUp Oregon can help developers with a co-location project include:

• Advising on ECE space design best practices. Through our partnership with Low Income Investment Fund, a CDFI with deep expertise in facilities development, we provide tailored guidance on designing ECE spaces that are safe, nurturing, and compliant with regulations. Our advisors leverage best practices and lessons learned from previous projects, ensuring that every facility supports children’s growth and aligns with providers’ operational needs. Moreover, we can help developers connect with architects and project managers who specialize in child care facilities.

• Navigating child care-specific regulations. With a deep understanding of state licensing requirements, safety codes, and zoning laws, BuildUp Oregon simplifies the complex regulatory landscape for developers.

• Facilitating ECE sector partnerships. We connect developers with a network of child care professionals, early learning stakeholders, and community organizations. By fostering these partnerships, we help ensure that each project not only meets the needs of families but also supports the long-term sustainability of ECE providers.

• Bridging funding gaps. In 2022, we received $10 million from the Oregon Housing and Community Services (OHCS) fund to support the development of co-located ECE facilities. While BuildUp Oregon's OHCS funding applications are currently closed, we continue to serve as a knowledge resource for developers interested in co-location projects. Currently, we are partnering with Children’s Institute and working with legislators to secure additional funding.

To deepen your understanding of integrating ECE facilities with affordable housing developments, we encourage you to explore resources in our library.