Why Councils Are Paying Up to £2 Million for Illegal Children’s Homes

To the casual observer, the bungalow in question bears little resemblance to a facility for child care. The privacy film applied incorrectly to a window is peeling away, while inside, the wallpaper is crumbling, carpets are worn thin, and doors hang broken. Despite these conditions, and the fact that the home is unregistered and therefore illegal, the provider is billing a council in a different part of the country £13,000 weekly to look after a vulnerable teenage girl. Her care requires three full-time staff members, yet the house contains no books, toys, or games.

Just a few miles away, another illegal operation is being conducted from a council house. The tenant is subletting the property to a firm that is simultaneously charging a different local authority thousands of pounds each week.

Five years ago, my investigations into these types of placements directly contributed to a government prohibition on the use of unregulated children’s homes in England. My reporting revealed that children as young as 11 were being housed in facilities not registered with or inspected by Ofsted. These locations ranged from squalid flats and tents to caravans, narrowboats, and a residence under police surveillance due to suspected gang activity. I also uncovered harrowing cases, including a girl trafficked directly from her home where she was sexually abused, and a boy kidnapped from a home to be used for drug selling. A Newsnight investigation further highlighted that teenagers were being left vulnerable to organized crime.

Although the 2021 ban on housing under-16s in such homes was intended to eradicate the practice, the reality is starkly different. Councils, facing immense pressure to accommodate children, are placing more youngsters than ever before into illegal homes, at a massive cost to taxpayers. I have now discovered unregistered placements costing as much as £2 million per child annually.

Dr. Mark Kerr, chief executive of the Children's Homes Association, describes the sector as a "Wild West." He states, "This is the culmination of 10 years of systemic failure to develop specialist provision for our most vulnerable children."

While most children in care are successfully placed in foster care, adopted, or housed in registered children's homes, local authorities have struggled to secure placements for children with complex needs, who are often the most costly to support. According to the Public Accounts Committee, councils in England have resorted to unregistered homes in approximately 800 cases, despite the existing ban.

This raises critical questions: Why are English councils continuing to place children in illegal, unregistered homes? How can the system be reformed to prevent this from persisting?

The Scale of the Crisis

Counterintuitively, as the use of illegal children’s homes has risen, the number of registered homes has also skyrocketed. According to Ofsted data, registered homes have doubled from 2,209 to 4,455 over the past eight years. This surge occurs despite only a 9% increase in the number of children in care during the same period.

Many industry sources attribute this expansion to a rush of new providers entering the market. Alongside private equity firms, property investors have also flooded into the sector. Even though many new providers lack prior experience in care, prices have escalated significantly. The amount councils in England spend on residential care for children has doubled in the last four years and tripled in the last eight. Four years ago, I found that some companies were generating profits of up to 40%.

For example, Staffordshire Council paid £2.6 million last year for the care of a teenage girl in a registered placement who required up to five staff members. The council cites a national shortage of specialist homes, noting that the NHS covers half the cost of the placement. Currently, the average placement in a registered home costs £6,100 a week, totaling £318,000 a year.

However, it is the unregistered homes—so openly operated that Ofsted even keeps a tally of them—that generate the most concern. Having visited many such facilities, I am continually shocked by the environments in which children, who have already endured appalling abuse and neglect, are placed.

Source: BBC News Generated at: 2026-05-20 23:10:10 UTC