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A recent report by Ofsted reveals that nine out of ten councils in England are placing children in care homes that are not officially registered. These unregulated homes sometimes charge fees as high as £30,000 per child each week. Despite the fact that the total number of registered children’s care homes has reached an all-time high, local authorities are often unable to secure places in these legitimate facilities that meet the specific needs of children in their care.
In the 2024/25 period, there were 4,010 registered children’s care homes operating in England—a 15% increase from the previous year and the highest figure on record. Nevertheless, Ofsted pointed out a persistent imbalance driven by some providers establishing homes in areas where property prices are lower, rather than where the demand for placements is greatest. For instance, 26% of these homes are located in the north west of England while only 18% of children in care reside in that area. Sir Martyn Oliver, Ofsted’s chief inspector, criticized this profit-driven trend, saying, “The rapid growth in the number of homes masks very significant problems with location, affordability and suitability.”
The shortage of suitable places in registered settings has created a shadow market where illegal care homes operate and impose exorbitant fees. Over the past year alone, Ofsted initiated 870 investigations into such establishments, uncovering 680 unregistered homes. Operating a children’s home without registration is a criminal offense, but currently, the regulatory body can only issue warning letters rather than impose fines. This situation is expected to improve with forthcoming legislation included in the Children’s Wellbeing and Schools Bill, which aims to strengthen Ofsted’s enforcement powers.
Financially, local councils are facing an intensifying crisis, with spending on children in care homes surging from £3.9 billion in 2015-16 to £8.1 billion in 2023-24. Sir Martyn labelled the situation a “crisis,” wherein council budgets are struggling to keep up with the “spiralling costs.” Calls have been made for the government to work closely with local authorities to eliminate the use of unregistered care homes altogether. The Local Government Association emphasized that the high costs reduce funds available for early intervention and preventative support, and stressed the importance of collaboration across government bodies, Ofsted, healthcare, and providers to ensure sufficient appropriate placements for children. Dr Mark Kerr, chief executive of the Children’s Homes Association, described unregistered homes as a symptom of “a failed system” needing improved government support, especially for children with complex and high-risk needs. He stated, “Those ‘exorbitant fees’ are the crash-landing of a system that hasn’t been planned or funded properly.
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