Both former president Donald Trump and his running mate J. D. Vance struggled over the past month when asked to identify ways of lowering the cost of childcare. Vice President Kamala Harris’s offering—capping childcare costs at 7 percent of a working family’s income—is so vague as to be meaningless. One New York State legislative proposal, from State Senator Jake Ashby, would provide parents of newborns with a $1,000 “baby bonus” tax credit. It’s well-intended and likely to gain political traction from left-of-center politicians concerned with poverty reduction, but legislators should embrace a policy that would do even more good: simply building more housing, especially in high-demand places like New York City. They are missing an opportunity to connect skyrocketing childcare costs with the lack of housing supply.
Business and political leaders have drawn attention to the national decline in fertility. In 1990, there were about 70 births for every 1,000 American women; today, that figure stands at 54.5. Couples are waiting longer to marry and have children, deciding instead to accumulate savings to buy a home and start a family. These demographic challenges touch just about every facet of public policy, including the long-term sustainability of entitlements like Social Security, the salience of immigration policy, and the economic and social dynamism of everywhere from small towns to superstar cities.
Measures like Ashby’s are not new. The U.S. federal government’s Earned Income Tax Credit, a refundable credit for low-income families with up to three children, may help alleviate family poverty and improve health outcomes, such as by reducing low-weight births, but it has not proven sufficient to raise American fertility rates. Nor have parental cash assistance and generous paid family leave in places like Japan, Scandinavia, and Western Europe pushed fertility above replacement level.
All these programs share a common approach: they subsidize incomes for households with children to offset the costs of child rearing. Insofar as such programs increase demand for goods like housing, however, they may be giving with one hand only to take with the other, in the form of higher prices. Nor are welfare programs necessarily highly effective at alleviating child poverty or increasing fertility rates. New York, for example, spends more than any other state in public welfare—over 60 percent more than the national average. Billions of dollars each year fund generous city and state programs seeking to alleviate child poverty and defray childcare services. Yet according to a recent report by State Comptroller Thomas DiNapoli, New York ranks ninth-worst in the nation in child poverty.
In addition to supplementing incomes, some governments subsidize childcare by providing free early childhood-education programs, which are also touted as a way to assist women’s participation in the workforce. But New York’s clumsy and expensive 3-K program demonstrates how governments struggle to allocate and distribute seats across the city to meet demand. Besides, some families may prefer not to send their children to childcare or early education, opting instead for stay-at-home parenting or grandparental care. Such programs do little to address families’ struggles to find housing suitable for their needs, such as dwellings with three- and four-bedrooms and multigenerational options. Limited public dollars can only go so far, too.
Instead, governments should alleviate the stresses of child rearing by lowering the cost of living. They can do that by facilitating more private housing construction. Allowing housing development by-right, permitting mass-timber and “point access block” apartment buildings that utilize a single stairwell, streamlining application processes, and loosening zoning regulations can open more housing opportunities for families through lower development costs. Families currently priced out of desirable, high-productivity metro areas could afford to relocate to these places and climb the economic ladder through better-paid employment—all without direct government subsidy.
A housing-supply approach would have several advantages over existing income-boosting programs. Childcare providers’ biggest expenses are typically labor and real estate. Higher housing costs push wages higher, as workers either demand higher pay to remain in an area, commute from farther away, or exit the area’s labor market. And many childcare facilities operate out of homes, meaning that rent increases for the provider get passed on to parents. Building more housing would let more childcare workers live closer to their jobs, expanding the labor pool and lowering operating costs.
As Robert VerBruggen found in a Manhattan Institute report last year, “the metros that are objectively attractive to families are the ones with low cost of living, including affordable housing and child care.” Median childcare costs in the U.S. vary from $80 to $360 per week. This fourfold difference from the least expensive metro area to the costliest is far wider than the cost of living generally. In essence, this means that increases in an area’s cost of living have a multiplying effect on childcare costs. Housing costs are often the most important factor in an area’s cost of living; lowering them should also markedly improve families’ childcare costs, enabling them to have more children.
A 2011 study by economists Lisa J. Dettling and Melissa Schettini Kearney discovered that a 10 percent increase in home values reduced births among non-homeowners by about 1 percent in an average metropolitan area, with a more pronounced effect on births after the first. In New York City, where some two-thirds of residents rent their homes, soaring housing costs have affected the city and state’s plummeting fertility rates. Homeowners, by contrast, tend to have more children when housing prices rise, as they can use the increased economic security and access to equity to defray child-related costs. But if fewer households can afford to become homeowners in the first place, then it stands to reason that this positive effect would shrink over time.
Similarly, in a seminal paper, Jeanne Lafortune and Corinne Low demonstrated that, when married couples own a home, the value of that asset serves to provide security to the lesser-earning spouse—more often than not, the woman—because in the event of a divorce the spouse will usually receive half the value of the home. This security encourages the lesser earner to specialize in childrearing and domestic activities, leaving the other to focus on breadwinning. The authors found that 1 percent higher housing costs at the time of marriage reduces the number of children per family by at least 0.07 on average.
Candidates and elected leaders interested in reducing family poverty, boosting economic growth, increasing native-born birthrates, and making entitlement reform more sustainable should find common cause in prioritizing more housing supply. In a divisive election season, both parties should agree to help American families find more and better places to call home.
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