Unique Considerations When Tenants Operate Daycare Services in Rental Units
California is in the middle of a childcare crunch—and lawmakers are scrambling to fix it. But rapid expansion comes with tradeoffs. Recent fraud controversies tied to childcare funding—most notably in Minnesota, and now drawing scrutiny in California—raise a familiar question: what happens when the system moves faster than its guardrails?
When the state can’t build childcare infrastructure fast enough, it turns to a more immediate solution: your rental property.
The cost of childcare is skyrocketing—outpacing inflation and putting real pressure on working families. In 2024, Child Care Aware estimated that care for two children averages nearly $40,000 per year. For many households, that’s clearly unsustainable. The result, unfortunately, is that demand for childcare now far exceeds supply.
As parents, we understand the importance of quality childcare. But as attorneys representing housing providers, we also recognize a harder question: Should landlords be required to accommodate daycare businesses inside their rental properties?
The Bigger Picture: Expanding Landlord Obligations
This issue doesn’t exist in a vacuum. It’s part of a broader trend—lawmakers increasingly relying on landlords to absorb social and economic pressures.
During the COVID-19 pandemic, housing providers were expected to house tenants for months or years without rent, while also helping them navigate rental assistance programs. More recently, landlords have been required to change locks at their own expense for tenants experiencing domestic violence, and to participate in programs that report rent payments to credit bureaus.
The role of a landlord has expanded well beyond providing housing. Increasingly, they’re expected to function as a backstop for broader societal needs.
Daycare is the next frontier.
California Law: Daycare as a Residential Use
California addressed this issue decades ago. Under state law, licensed family daycare homes are treated as a residential use—not a business use.
The Legislature made its intent clear: childcare should exist within normal residential environments. As a result, state law broadly preempts local rules that attempt to restrict or prohibit in-home daycare operations.
In practical terms, this means landlords often cannot say “no.”
What Landlords Need to Know
While the law favors tenants in this area, there are still important guardrails:
- Advance notice: Tenants must provide at least 30 days’ notice before operating a daycare
- Owner consent: Written consent is required for licensed daycare operations in rental units
- No discrimination: Landlords cannot refuse to rent—or evict—based on a tenant’s intent to operate a licensed daycare
But that’s just the beginning.
Daycare operations introduce a new layer of complexity:
- The number and age of children, including infants, can trigger different regulatory thresholds
- Staffing requirements may apply
- Enhanced safety standards—including smoke detectors, carbon monoxide compliance, and inspections—become critical
- Insurance, bonding, and liability exposure increase significantly
And while outright bans are off the table, landlords may still enforce reasonable rules around noise, hours of operation, and occupancy limits.
Proceed With Caution
When a tenant operates a daycare, the relationship shifts. This is no longer a standard tenancy—it’s a regulated environment involving heightened safety concerns, liability exposure, and overlapping legal frameworks. The stakes are higher, and the margin for error is smaller. If you’re navigating a situation involving in-home childcare, it’s worth getting ahead of the issue before it becomes a problem.
Of course, Bornstein Law is here to be a sounding board.