A New Business Venture Aims To Be A Lifeline For A Child Care Industry In Crisis
Miren Algorri figured it would be a slam dunk—she’d easily be approved for a mortgage on a new home because it’d be the site of her daycare business, which would generate enough income to cover the monthly payment.
But her livelihood turned out to be more of a hindrance than help.
"The broker said even though I had an income, it was not steady income, and he said, 'you'd be better off working at McDonalds and earning minimum wage,'" said Algorri, who’s been a child care provider in Chula Vista for 23 years. "It's very hard for providers to purchase a home. That really opened my eyes to the inequality we face."
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Algorri, who has been a home-based child care provider in Chula Vista for 23 years, was eventually able to buy a home with her now ex-husband, but the experience opened her eyes to the challenges child care providers face when trying to put a roof over their businesses.
A new business venture aims to solve that problem. Mission Driven Finance, a San Diego based investment company, wants to attract socially motivated investors who will put money into properties that child care providers could rent, and in some cases, eventually own.
"That is both working to build more wealth in the community and cut their costs over time," said David Lynn, the cofounder and CEO of Mission Driven Finance. "So we're shifting the model from making loans or other sorts of investment directly to the providers to providing a real estate investment structure that we can then use provide quality space."
The program, Lynn said, will both allow existing providers to reduce one of their largest costs and potentially make it easier for new providers to enter the business.
The overall goal is to alleviate the ongoing child care crisis in San Diego that has been made much worse by the pandemic. More than 5,000 providers statewide have closed since March, according to the Child Care Providers United, a project of the union United Domestic Workers, which is unrelated to Mission Driven Finance's project.
And most who’ve managed to stay in business are suffering. A study from UC Berkeley found that since the start of the pandemic, 62% of child care programs in Southern California experienced a loss of income due to low attendance or families not paying the fees, and 81% made staffing changes including laying off employees or cutting benefits.
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Right now, child are providers are able to get loans, but they usually have shorter time periods to repay them, said Laura Kohn, an early care and education expert who is advising Mission Driven Finance on the project.
"In creating a real estate entity, we can do financing over a longer period of time than child care providers do right now, and that will bring savings," she said. "So they can get better facilities for the same cost, or the same quality of facilities for less cost," she said.
Long term, Kohn wants the program to provide additional resources to child care providers.
"If we are friendly, child care oriented, equity committed landlords, then we can start to integrate other features and services that child care providers would appreciate," she said. "We can bundle health care benefits, access to better food, cheaper supplies, because we're buying on behalf of all lessees in other facilities. We can also host professional development, and build a reputation of facilities that host quality child care, which could lift up the whole market."
For Algorri, the child care provider in Chula Vista, the project was welcome news. She said it might help her expand her business.
"This is the best news I've heard since the pandemic," she said. "If there is a project out there to support child care providers, I want to know, how do we promote this, how do we support this project?"
Mission Driven Finance plans to begin raising money from investors for the project early next year and has a goal of launching pilot sites in San Diego in 2021.