Year-End 2024 Report: U.S. Child Care Market Trends and Challenges
- Alan Stahl
- Jan 4
- 4 min read
Updated: Feb 6
Recent Industry Developments
The U.S. child care sector in 2024 has experienced significant shifts, driven by federal funding, market activities, affordability challenges, and operational strains.
Federal and State Funding:
o Child Care and Development Block Grant (CCDBG) Reauthorization: The CCDBG, a bi-partisan federal program providing child care assistance to low-income working families, has not been reauthorized since 2014. In August 2024, Senator Deb Fischer (R-NE) introduced the Child Care and Development Block Grant Reauthorization Act of 2024, proposing several improvements to modernize the program.
o Pandemic-Era Funding Impact: The American Rescue Plan Act (ARPA) of 2021 provided substantial funding to stabilize the child care sector during the COVID-19 pandemic and was largely phased out in September 2023.
Market Activity
o The Learning Experience (TLE): By and large the fastest-growing national child care group, TLE opened nearly 60 new locations in 2024, solidifying its status as a leader in the sector. Their turn-key development model and streamlined operations have enabled rapid expansion, even amidst rising construction and financing costs.
o In October 2024, KinderCare Learning Companies, the largest private provider of early childhood education in the U.S., went public on the NYSE under the ticker "KLC." Priced at $24 per share, the IPO raised $576 million, valuing the company at approximately $2.74 billion. Shares opened 12.5% higher on the first trading day, reflecting strong investor interest. The proceeds are intended to reduce its $1.5 billion debt.
o Guidepost Montessori, operated by Higher Ground Education, has experienced significant growth in recent years, expanding to over 150 locations across the United States. However, this rapid expansion has led to financial challenges, including missed rent payments and abrupt school closures.
1. In October 2024, the Guidepost Montessori School in Loudoun County, Virginia, closed its doors after Higher Ground Education missed two rent payments. A company spokesperson cited financial difficulties and ongoing negotiations with the landlord to repay the owed amount with interest. The landlord, however, proceeded with a lockout without prior warning, causing significant disruption for families and staff.
2. Similarly, in May 2024, two Guidepost Montessori schools in Portland, Oregon—the Tigard and Lloyd District locations—were closed for at least three months. These closures followed unionization efforts by the staff, with the company citing sudden administrative resignations as the reason. Employees and families were left scrambling to find alternative arrangements, raising concerns about the company's management practices amid its rapid expansion.
3. This has culminated to Guidepost missing rent payments, calls on their guarantee, and delays in opening brand new construction schools due to operational challenges.
Affordability and Access Challenges:
Pew Research data indicates U.S. families spend an average of $10,000 annually per child on care, with costs significantly higher in urban areas. This affordability crisis limits workforce participation and widens socioeconomic disparities.
Over 30% of families live in “child care deserts,” where access to quality care remains insufficient, further exacerbating the issue.
Tuition rates are rising, and revenue is up year over year due to increasing operational costs, inflation, and demand for high-quality early childhood education.
Demand for child care has declined as the supply of available child care spots has increased, combined with a shrinking 0-5 age population, largely due to the pandemic-related birth rate dip.
Closures and Workforce Strain:
The expiration of stabilization grants has placed 70,000 providers at risk of closure, potentially affecting millions of children. Rising operational costs and staff shortages add to the sector’s struggles.
5. Development Costs and Their Impact
o The rising construction costs has become a significant barrier to the development of new child care centers, restricting supply in a market already strained by limited access. Factors such as increased materials costs, labor shortages, and stricter building regulations (Think Lee County after the hurricanes) have driven up the expenses associated with constructing new facilities.
o This financial burden has deterred developers and operators from expanding capacity, further intensifying the issue of “child care deserts.” The limited pipeline for new centers places additional pressure on existing facilities, which are already grappling with operational costs.
o These challenges, combined with rising tuition fees for parents, have created a feedback loop where costs spiral upward, making it even harder for families to afford care while providers struggle to remain sustainable.
Performance and Analytical Data by Provider
The table below summarizes key performance indicators for five major child care providers based on November 2024 data:
Expectations for 2025 Under Trump Presidency
Proposed Tax Revisions:
Former President Trump has promised to introduce tax credits and deductions designed to reduce child care costs for working families, particularly middle-income households.
Employer-Based Child Care Expansion:
Incentives for businesses to establish on-site child care facilities could improve accessibility and support workforce participation.
Market Impacts:
These policies may attract private sector investment in child care infrastructure, benefiting both large-scale providers and innovative smaller centers. However, questions remain about the reach and sustainability of these measures for underserved communities.
Conclusion
The U.S. child care industry stands at a critical juncture, marked by strong demand and significant challenges. To ensure sustainability and accessibility in 2025, stakeholders must navigate dynamic market conditions and evolving policy landscapes. A Trump presidency promises new opportunities for families and providers through tax reforms and employer-driven initiatives, paving the way for a reimagined child care ecosystem.
Sources:
White House Council of Economic Advisers on Stabilization Grants
User-provided Excel datasets (Day Care Complist 22-24.xlsm)
7. Guidpost Montessori Net Lease Advisory Group, Fox 5 DC, Northwest Labor Press
Ernst & Young (EY Parthenon Analysis)
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