Compared to other wealthy nations, the U.S. is a dramatic outlier in how it funds—or rather, does not fund—childcare. The government contributes about $500 per year for a toddler’s care, compared with an average of $14,000 per year compared to other wealthy countries. According to the Center for American Progress, childcare costs the average family $250 a week, or $13,000 a year.

Despite the high costs for parents, many childcare providers are struggling as their thin profit margins grew even tighter during last summer’s steep drop in enrollment from the onset of COVID-19. They are also being impacted by the labor shortage as they struggle to find and retain workers.

A grant program in Atlanta aimed to help fill in that funding gap locally and make early childcare more accessible to parents by supporting home-based childcare centers. It was launched by PAACT, or Promise All Atlanta Children Thrive, a collaborative of civic and private leaders across the city focused on early childhood education that was assembled in 2018 by GEEARS: Georgia Early Education Alliance for Ready Students. The grants were made possible by a national grant from the Wells Fargo Foundation and were administered by CDFI Low Income Investment Fund (LIIF).

Brittany Collins, the director of PAACT, said they wrapped up the program in September after deploying 20 grants—totaling $240,000—to family childcare providers in Atlanta to help them shore up the stability of their small businesses, adjust to new health and safety requirements, and more. They were intentionally non-prescriptive with what the grants had to be used for, believing that providers knew their needs best, and uses ranged from outdoor playground equipment to adding drama education.

“Many of the programs used the funding for scholarships for families,” Collins says. “So they may have had families who lost their jobs and weren’t able to return, and as a result of receiving these funds they were able to just be a bit more flexible to continue serving them while the families were going through their own personal transitions.”

Prior to the grant program launch, PAACT conducted an area-wide survey to assess the challenges local childcare providers face. They found that while traditional childcare centers were able to handle the volume, they faced a complicated set of challenges. Fee structures were more rigid, and some families simply couldn’t afford to return to them with the financial transitions they faced. Many providers also had staffing challenges.

However, the survey found that 62% of parents preferred home-based childcare centers, especially during the pandemic. Home-based childcare providers generally have smaller enrollment and can provide more individualized attention, but are also more flexible, including with payment structures.

The groundwork for the initiative was laid years prior through the work of GEEARS and PAACT. In 2018, GEEARS pulled together the Atlanta Early Education Leadership Council, a round table of public and private partners in the city of Atlanta, including the mayor, the superintendent and local business and nonprofit leaders. They asked them all the same question: What does it look like to create the best city in which to raise a child? The following year, they released a study with eight recommendations as actionable strategies to provide better opportunities for young children to thrive. Soon, however, new challenges arose with COVID-19.

“The pandemic really opened up a broader set of issues with inequity in the early care learning space,” Collins says. “But it also brought the perspective of folks who truly were understanding the important role that early care learning plays in our society.”

LIIF was among those organizations working in the education space. The CDFI provided funding to the PAACT fund for the relief grant, as well as helped identify eligible applicants.

“LIIF identified PAACT as an organization with a strong track record of working with the childcare community in Atlanta and administering grant funding,” says Angie Garling, the Vice President of Early Childhood Education at LIIF.

Among the grant recipients was business owner Jane Benson, who says she lost many clients throughout the pandemic who were no longer able to afford childcare.

“At times, I would only have two paying clients, which made it very difficult to support the business, my autistic son and myself, as he requires many support services not covered by my insurance,” Benson says. “Despite these financial setbacks, I choose not to increase tuition to provide support to my clients during these unprecedented times.”

Benson says her tuition rates are already lower than the other centers in her area, but she believes in providing an affordable “safe haven” for children in her community. The grant allowed her to remain open and hire a new staff member.

“I am also now able to provide a scholarship to an existing client,” she says, “a single mom who no longer was able to afford childcare.”

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.