The U.S. is short roughly 4 million homes, according to an analysis published by Realtor.com in early March. That’s led to “sustained home price growth and pushing homeownership further out of reach, particularly for younger households,” Realtor.com economists Hannah Jones and Danielle Hale wrote.

At the same time, the country is missing an estimated 4.2 million childcare slots, a September 2025 study by the Bipartisan Policy Center shows. That massive shortage is the result of years of underfunding compounded by the pandemic, which shuttered roughly 16,000 providers.

Both the housing crisis and childcare crisis are dire on their own. But many U.S. parents are experiencing both simultaneously. The costs of renting or owning, along with childcare, come due at the same time, on the same paycheck. Those who study these problems most closely say these problems no longer exist separately.

“Families with young kids are facing this double whammy,” Yuliya Panfil, director of the Future of Land and Housing Program at New America, told Realtor.com. “If they don’t pay for child care, then they can’t work, and if they can’t work, then they can’t pay rent. So it’s this vicious cycle.”

The math isn’t mathing

The childcare crisis is essentially a chicken-and-egg problem. The starting point is that the U.S. childcare market was never built to function like a normal one, Lulwa Bordcosh, senior director of California nonprofit Catalyst Family, told Fortune.

“The economics don’t work on their own,” said Bordcosh, whose organization operates more than 250 childcare sites. “It’s labor-intensive, highly regulated, and requires high staffing ratios, and [is] difficult to scale. If providers raise prices to cover costs, many families can’t afford it. If they don’t, they shut down. Many do.”

Even then-U.S. Treasury Secretary Janet Yellen in 2021 called childcare “a textbook example of a broken market.”

“An enormous body of economic literature finds that kids with access to quality child care end up in school longer and in higher-paying jobs afterward,” Yellen continued. “When we underinvest in child care, we forego that; we give up a happier, healthier, more prosperous labor force in the future.”

The result is a sector where prices are simultaneously too high for families and too low to keep providers in business. That’s a structural mismatch that has only widened since federal pandemic aid expired in 2023. Meanwhile, the average cost of care for two children now exceeds the average rent in all 50 states and the average mortgage payment in 45, according to Child Care Aware of America. A LendingTree analysis from February also found a two-child household would need to earn roughly $402,000 a year for childcare to meet the federal affordability benchmark of 7% of household income—but the average two-child household earns just about $145,000.

The link to housing

Where housing enters the picture is in what families are forced to give up to pay for care and where caregivers themselves can afford to live. Research from BabyCenter, an online media company that provides information on conception, pregnancy, and birth, has found that childcare consistently tops the list of first-year baby expenses. And the downstream effects on family budgeting are direct, Robin Hilmantel, executive director of editorial strategy and growth at BabyCenter, told Fortune.

One in five parents say they’ve postponed buying or moving into a home because of childcare costs, Hilmantel said, citing a BabyCenter survey of more than 1,500 respondents who are pregnant or have babies up to 1 year old. Another 13% moved in with parents or other family members, and an additional 13% took on more household expenses to afford a larger home or vehicle to accommodate their growing family. And 14% of families who responded to another 2024 BabyCenter survey said they currently spend more on childcare than they do on their rent or mortgage. That study showed families who use full-time childcare pay an average of $320 a week for one child, or more than $16,686 annually.

“Given that parents have to sacrifice paying off debts and acquiring homes to have children, and childcare tops the list of those expenses in the first year their child is born, childcare does have a significant impact on the amount of money families can put aside to afford a home,” Hilmantel said.

The pressure runs the other way, too.

Jessica Chang, CEO and co-founder of Upwards, a marketplace that connects employers and families to home-based daycare providers, said rising housing costs are quietly destroying the most affordable segment of the childcare market: family care homes, which she said run 30% to 40% cheaper than larger centers because of lower overhead costs.

“If families can afford to buy houses yet are being pushed out of their neighborhoods and cities, we can’t expect caregivers to do the same,” Chang said. “They pay rent and mortgage, too.”

“When housing costs rise, it becomes impossible for them to open and sustain family care homes, which are the most affordable option for working families,” she continued.

The result, she said, is a paradox visible in many communities: childcare slots that exist on paper but go unfilled.

“In many communities, there are enough child care spots available, but they go unfilled because families simply cannot afford care,” Chang said. “Their entire paychecks go to rent, mortgage, and food.”

The toll on younger generations

The housing market is contributing its own drag. According to Realtor.com data published in March, nearly 1.82 million Gen Z and millennial households that would have formed historically simply haven’t, because they’re trapped by scarce supply and elevated borrowing costs.

“Over the past decade, many households, particularly younger ones, have delayed forming due to limited supply and worsening affordability,” Realtor.com senior economic research analyst Hannah Jones said in a statement. “Rather than establishing independent households, many young adults have remained with parents, lived with extended family, or shared housing with roommates.”

A staggering 84% of Gen Zers say they’re delaying major milestones like getting married, having children, and changing careers just to afford to buy a home, according to a Coldwell Banker report shared with Fortune in November. Gen Z and millennials are also forgoing financial protections like life insurance, with 63% telling Capgemini and LIMRA they have no immediate marriage plans, and 84% of single and married respondents alike saying they have no near-term plans to have a child.

The squeeze isn’t only an urban problem. 

“While costs are high in major cities, families in rural areas face a different squeeze, as they often live in ‘childcare deserts’ where there simply isn’t enough supply,” Hilmantel said. The Bipartisan Policy Center data backs that up: the childcare gap is 32% in rural areas, compared with 27% in urban ones.

Brookings urban economist Jenny Schuetz has also made the case in congressional testimony, arguing the U.S. faces both a persistent supply shortage and “high rates of housing cost burdens and instability” on the demand side. These are failures that federal policy has been slow to address, she said.

“The poorest 20% of households spend more than half their income on housing, leaving too little cash to pay for food, clothes, transportation, and other necessities,” she said in 2024 remarks.

What’s actually working

There are a handful of places where governments have started to treat at least one side of the “double whammy” of the housing and childcare crises. 

New Mexico became the first state to offer no-cost universal childcare on Nov. 1, 2025, removing income limits from its child care assistance program and waiving family copayments. The state expects to spend less than $600 million in the first full year of implementation, with funding in significant part from oil and gas revenue routed through its Land Grant Permanent Fund. Vermont, meanwhile, created a dedicated payroll-based funding stream in 2023 to support its childcare system. New York City has also rolled out universal 3-K and pre-K programs for families with 3- and 4-year-olds.

A growing number of states are also testing tri-share models, in which government, employers, and families each cover roughly a third of childcare costs, an approach Hilmantel said is being piloted in her home state of North Carolina. 

“[They’re] experimenting with programs in which the government, employers, and families split the cost of childcare equally to make it more affordable while keeping employees in the workforce,” she said.

Chang, of Upwards, said no single stakeholder can fix the problem alone. 

“The reality is we can’t solve this without all stakeholders: government, employers, families, and care providers working together,” she said.

“What these approaches have in common is long-term investment that supports both providers and families,” Bordcosh added. “Even states with strong investment, like California, can struggle with stability when funding changes year to year. That makes it harder for providers to plan and grow.”

She said the major fix would be to stop treating childcare as a private consumer expense.

“Closing the gap means treating childcare more like infrastructure,” Bordcosh said. “The key is consistent funding, realistic reimbursement rates, and support for the workforce. Without that, supply won’t keep up with demand.”

The housing side is similarly stuck. A Realtor.com analysis found that for housing to become broadly affordable again, mortgage rates would need to fall to 2.65%, median household income would need to rise 56%, or home prices would need to drop 35% — three shifts economists called “very unlikely.”

“We see the housing market remaining relatively stuck without major progress being made on affordability until we see income growth rapidly accelerate—unlikely—, mortgage rates decline very materially—unlikely—, home prices come down materially—unlikely,” Sean Roberts, CEO of offsite construction company Villa, previously told Fortune.