The widespread use of illegal children’s homes is one of the biggest scandals of the care system

The bleak truth is that local authorities gambled with children’s lives in a reckless punt on the market and lost.

The widespread use of illegal children’s homes is one of the biggest scandals of the care system, in a crowded field.

Children’s services are housing hundreds of vulnerable children and young people in accommodation that is not registered with Ofsted.

Unregistered accommodation can be a regular residential house but children have been sent to live in caravans, Airbnbs, holiday camps and house boats. They are not subject to Ofsted inspections, so what happens within the accommodation goes largely unseen by safeguarding professionals.

Running an illegal, unregistered children’s home is a criminal offence, and everyone involved with children’s services knows it. Despite this, hundreds of young people in care live in unregistered homes across the country. A new report by the consultancy Public First put the number of children at 680 in 2024-25, around one in 10 of all young people in some sort of children’s home. But this widely believed to be an underestimate. The reality is that nobody really knows how many children are involved.

Social workers say that they reluctantly turn to unregistered accommodation when other options have failed: there’s no foster family, no registered children’s home and no supported accommodation. Faced with no alternative, their bosses sign off the placement, ostensibly as a short-term arrangement until something more appropriate is found. But days turn into weeks and weeks turn into months. New cases emerge and priorities shift. Traumatised children are left stranded in accommodation that is wholly unsuitable, and breaking the law.

How has it come to this? It all comes down to profit. The bleak truth is that local authorities gambled with children’s lives in a reckless punt on the market and lost.

In the 1990s and early 2000s, responding to the clamour for lower council taxes and privatisation, LAs happily offloaded their children’s homes and safeguarding responsibilities to private companies, mimicking what was going on in water, rail and energy. If councils could outsource waste management, they could also outsource children’s social care.

Initially, the strategy appeared to work. Private companies delivered shiny modern children’s homes at a reduced cost. Councils pocketed a windfall from the sale of their ageing children’s homes for redevelopment. But, as with privatised water and energy, it was too good to be true.

Today, the catastrophic consequences are there for all to see. Private companies own more than 80 per cent of children’s homes in a highly dysfunctional market.

Private equity has captured what is now an industry, extracting vast profits. Homes are unevenly located in the cheapest parts of the country, often staffed by inexperienced teams on minimum wages. Children in care are moved hundreds of miles from home to home until they are old enough to be pushed out.

Over time councils have sought to counter the power of providers by increasing the use of supported accommodation, shifting young people out of costly children’s homes into flats and bedsits where they must cope with minimal assistance. This type of accommodation was mainly used for older teenagers but became a go-to for younger teens too.

Concerns over the young age of residents, as well as the poor quality of accommodation, led the Government to introduce new standards, to be enforced by Ofsted, and to restrict use of supported accommodation to over-16s.

Ofsted inspections of supported accommodation have already identified serious failures that expose young people to harm. Action against providers has included the removal of children who were too vulnerable to live in supported accommodation (a situation that is also illegal).

Increased regulation of supported accommodation is blamed for higher weekly charges and reduced capacity. Unsurprisingly, this has coincided with an increase in the use of unregulated illegal children’s homes, as yet another option for children in care becomes less available.

A dispiriting aspect is that the Government, and some commentators, claim that the root cause of this crisis is a shortage of foster carers. The reality is that fostering, and foster carers, are helping to manage the impact of this appalling situation, often by caring for children for whom fostering is not the right answer.  The strain is immense, both on children in care and the families they are sent to live with. Foster care can make a profound difference, but it also has limitations, particularly for the population of older teenagers who today are the biggest group coming into care.

The Government’s response is to appeal for more foster carers, with a target to create 8,000 new places for children by the end of this Parliament. Even if the Government met this target, which it won’t, would it solve the crisis in children’s homes? Probably not.

Foster care, children’s homes, supported accommodation and adoption are not interchangeable. Each can be the right option for different children at different times in their lives. The care system is already failing when the default solution for all children who are removed from their family is foster care.

The only solution is for Government and local authorities to retake control of the homes where children in care live. This entails investing in a network of children’s homes fit for the 21st century, located where children need them, and not where profits can be maximised. It requires investment in people to give them the skills to work in homes caring for vulnerable children. It means embedding children’s homes in local communities, not hiding them out of sight, forging meaningful partnerships with schools, the NHS and other local stakeholders.

Ultimately, it means ending profits from care and dismantling the market, not just trying to tame it. The Government knows this, but its current approach is too timid. Business will run ring around measures to curb ‘profiteering’, however this is defined. Regional care cooperatives, created to provide economies of scale in negotiations with providers, will fail to deliver savings and, ultimately, will suffer the same fate as strategic health authorities.

The end of the marketisation of children could create an environment more conducive to investment in by charities and other not-for-profits. These have mostly retreated from a sector that has been brutalised by big business. But going down the housing association route would simply replicate the problems we already suffer in social housing.

Leaders in children’s social care often appear overwhelmed by the scale of the task. In fact, in the national scheme of things, the numbers of the care system pale into insignificance. It really should not be beyond us to find legal homes for 600 children.

There are around 1,000 children in care in the whole of West Sussex, our local authority. That’s fewer children than the number who attend our foster daughter’s senior school. We personally know many of their foster carers and we have met many of the children. This is a relatively small yet vibrant community, not an overwhelming problem that can’t be managed or a risk to be mitigated.

Running an unregistered home is the law and a criminal offence. Those responsible for placing children in an unregistered home should also be prosecuted. There must be no room for ambiguity. We cannot remove children from their families because of bad parenting and then break the law as corporate parents without being held to account.