Illegal Children’s Homes & £30,000 Fees — Ofsted Warns of “National Crisis”
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England is facing a crisis in children’s residential care that watchdogs describe as a “national scandal.” According to Ofsted’s latest annual report, nine in 10 councils are placing vulnerable young people in unregistered homes, some charging as much as £30,000 per week for a single placement. Despite new homes opening nationwide, inspectors say a dangerous “shadow market” has emerged, driven by profit motives, poor planning and urgent demand.
Ofsted chief inspector Sir Martyn Oliver says the situation is now “an ongoing national scandal,” one that is leaving children without suitable support and forcing councils to spend at unprecedented levels. A lack of safe and properly regulated placements means local authorities are being pushed into decisions that undermine the stability, safety and welfare of the children they are responsible for.
Record Numbers, Wrong Locations
On the surface, England’s children’s residential care sector appears to be expanding. There are now 4,010 registered children’s homes across England, a 15 per cent increase in just one year and the highest figure ever recorded.
However, Ofsted warns that this growth “masks very significant problems.” Providers are choosing where to set up based primarily on property costs rather than need.
- 26% of all children’s homes are located in the North West
- but only 18% of looked-after children live in that region
This imbalance means children are often taken far from their communities, schools, familiar adults and support services. Sir Martyn says the “strong profit motive… bends the system out of shape,” leaving families and professionals struggling to find placements that truly meet the needs of a child.
A Hidden Surge in Illegal Homes
One of the most concerning developments is the rise of unregistered homes operating outside the law. According to Ofsted:
- 870 investigations into suspected unregistered children’s homes were launched in the past year
- 680 were found to be operating illegally
Running a children’s home without registration is a criminal offence. Yet, at present, Ofsted can only issue warning letters. The watchdog has no power to fine providers or immediately shut down illegal operations.
This gap in enforcement has enabled a surge in providers exploiting urgent demand, often without trained staff, safeguarding procedures or specialist support. Sir Martyn says:
“The government must work with local authorities to drive out all use of unregistered children’s homes.”
New powers in the Children’s Wellbeing and Schools Bill are expected to allow Ofsted to issue fines and take stronger action. But inspectors say legislation cannot come soon enough to protect vulnerable young people placed in these settings today.
Skyrocketing Costs
The financial strain on councils is becoming increasingly unsustainable.
Spending on children in care homes has more than doubled in eight years:
- £3.9bn in 2015–16
- £8.1bn in 2023–24
This rapid rise, Ofsted warns, amounts to a “crisis.” When legitimate placements cannot be found, councils often turn to emergency accommodation, last-minute private contracts or one-to-one specialist supervision — all of which come with “exorbitant fees.”
A Local Government Association spokesperson said:
“The astronomical cost of children’s homes means there is less money to help children before they reach care.”
They also warned that “a lack of choice means provision is not fully meeting children’s needs,” leaving councils with no alternative but to fund unsuitable or overly expensive placements.
Causes and Consequences
Sector experts say the crisis is not simply about cost — it is about planning, policy and capacity.
Dr Mark Kerr, chief executive of the Children’s Homes Association (CHA), says unregistered homes are a symptom of deeper system failure:
“Those ‘exorbitant fees’ are the crash-landing of a system that hasn’t been planned or funded properly.”
Kerr says the current situation is driven by:
- Long delays in registering new homes
- Patchy regional planning
- Inflexible planning rules
- A lack of specialist provision for complex and high-risk needs
According to Kerr, “geography follows bureaucracy, not children’s needs.”
Impact on Children
Behind the data are real young people, often with long histories of trauma, disruption, exploitation or neglect. Placement breakdowns can have long-lasting effects on wellbeing, education and identity.
Children placed far from home can lose:
- Consistent schooling
- Access to therapeutic support
- Trusting relationships with youth workers and carers
- Important family contact, including siblings
In unregistered homes, risks are even greater:
- Staff may lack essential training
- Safeguarding checks may be incomplete
- Spaces may not meet required safety standards
- There is little or no regulatory oversight
These children require stability, qualified care, and long-term support — not ad-hoc emergency placements driven by cost and availability.
What Needs to Change
Ofsted, the Local Government Association and sector experts are calling for a national strategy to address root causes. Priorities include:
1. Regional Placement Planning
Homes must be developed where demand exists, not simply where property prices are lowest.
2. New Enforcement Powers
Ofsted must be able to fine and close illegal homes swiftly.
3. Investment in Specialist Services
Children with complex needs require skilled staff and therapeutic provision, not short-term supervision.
4. Faster Registration and Planning Processes
Legitimate providers should be supported to open safe, suitable homes without lengthy delays.
5. Early Intervention
Resources must shift upstream to reduce demand for high-cost residential placements.
A spokesperson from the Local Government Association said:
“It is absolutely vital that the entire sector works together — central and local government, Ofsted, the NHS and providers in all sectors — to ensure we have enough homes that can truly meet children’s needs.”
Ofsted’s findings highlight a critical turning point for children’s social care in England. Record numbers of registered homes have not translated into safety, stability or choice. Rising demand, profit-led decisions and weak regulatory powers have created a sprawling shadow market where too many children end up in unregistered, unsuitable and sometimes unsafe placements.
With spending rising faster than councils can sustain and hundreds of illegal homes operating nationwide, the need for coordinated national action has never been clearer. Children’s wellbeing, safety and futures depend on a system that prioritises their needs — not the availability of cheap property or last-minute emergency contracts.
Until that happens, England’s residential care system will continue to operate in crisis mode, with young people bearing the greatest cost.