California’s Current Child Care Landscape

California's child care market is at a critical juncture: the pandemic led to significant loss of child care spaces, but recovery is underway and key policy shifts are on the horizon. Affordable, high-quality care is essential for many families, and options include both formally licensed and license-exempt providers. While California's overall licensed child care capacity has almost recovered from pandemic-era losses, statewide counts mask different trajectories of provider types as well as variation across regions.

California's licensed care market consists of family care homes-which offer relatively affordable, flexible care-and child care centers-which serve larger groups of children and often emphasize school-readiness. Over several years prior to the pandemic, the overall number of licensed child care centers remained fairly stable, and capacity increased modestly starting in 2017. Meanwhile, the number of family child care homes-and child care spaces-had been declining steadily since the Great Recession, mirroring national trends. In addition to issues around cost and wages, these small businesses have faced competition with other care options and difficulties navigating complex regulatory requirements.

After child care employment dropped 30% to 35% at the onset of the pandemic, an influx of federal funding aimed to stabilize the sector-amounting to a temporary six-fold increase in federal child care dollars. Family care homes began to grow in fall 2022 and the number of licensed providers reached-and licensed capacity surpassed (+1.6%)-pre-pandemic levels by the end of 2023. Meanwhile, child care centers continued to decline in both sites (-3%) and spaces (-1%). Despite this differential recovery, the total number of licensed providers and their capacity essentially returned to pre-pandemic levels in 2023.

In addition to statewide differences across provider types, there are significant geographic disparities in child care capacity. Many Southern California counties have rebounded to within 1% or 2% of their 2019 total capacity, while counties in the northern region have experienced declines. Counties like Santa Barbara and Glenn experienced significant capacity growth entirely driven by family child care homes, while Mariposa lost family care capacity but increased total capacity by 19% due to child care center growth. Increases in family care home capacity have been generally concentrated in the Central Coast, the San Joaquin Valley, and parts of the northern region, while many less-populous counties in the Sierra region saw declines in family care home capacity. The decline in family care homes has potentially significant implications for low-income families and those who need nontraditional hours of care or live in rural areas, where center-based options are often scarce.

Licensed care represents only one aspect of California's child care landscape. About one in five families who access subsidized child care get this care from family, friends, and neighbors. In addition, the state's expansion of TK-all four-year-olds will be eligible starting next fall-and changes in how the state sets rates for publicly supported care are likely to have major implications for the child care market as a whole. As these and other shifts take effect, PPIC will continue monitoring the challenges and opportunities for both families and child care providers.