The £2 Million Price Tag: How Councils Fund Illegal Children’s Homes

To the casual observer, the unassuming bungalow does not resemble a facility for vulnerable youth. Outside, a sheet of privacy film is peeling off a window, having been applied incorrectly. Inside, the condition is equally poor: wallpaper is flaking, carpets are worn, and doors are broken. Despite these signs of neglect, the property is an unregistered, and therefore illegal, children’s home. Yet, a provider operating out of this substandard environment is charging a council in another part of the country £13,000 weekly to care for a vulnerable teenage girl. Her care requires three full-time staff members, yet the home contains no books, toys, or games.

Just a few miles away, another illegal operation is taking place within a council-owned house. The tenant is subletting the property to a company that is simultaneously billing a different local authority thousands of pounds every week.

Five years ago, my investigations into such placements directly contributed to a government ban on the use of unregulated children’s homes in England. My reporting revealed that children as young as 11 were being housed in settings unregistered and uninspected by Ofsted. These locations ranged from squalid flats and caravans to narrowboats and even a home under police surveillance for suspected gang activity. I also uncovered severe cases of abuse: one girl was trafficked directly from her home and sexually abused, while a boy was kidnapped from a care setting to be forced into 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 acute difficulties in accommodating children, are placing more youngsters than ever before into illegal homes, resulting in massive costs for taxpayers. I have now identified unregistered placements costing up to £2 million per child annually.

Dr. Mark Kerr, chief executive of the Children’s Homes Association, describes the sector as a "Wild West." He attributes this chaos to "the culmination of 10 years of systemic failure to develop specialist provision for our most vulnerable children." While most children are placed in foster care, adoption, or legal residential homes, local authorities have struggled to secure placements for those with the most complex needs. These children are often the most expensive to support. According to the Public Accounts Committee, councils in England have utilized unregistered homes in approximately 800 instances, despite the existing ban.

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

The Scale of the Crisis

Counter-intuitively, as the use of illegal homes has risen, the number of registered children’s homes has also doubled, increasing from 2,209 to 4,455 over eight years, according to Ofsted data. This surge occurred despite only a 9% rise in the number of children in care during the same period.

Industry sources indicate that this expansion was driven by a rush of new providers entering the market. Alongside private equity firms, property investors have also invested heavily. Many of these new providers lack prior experience in care, yet prices have skyrocketed. Consequently, the amount English councils spend on children’s residential care has doubled in the last four years and tripled over eight years. Four years ago, my research found that some companies were generating profits of 40%.

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

However, the most alarming developments involve unregistered homes. These facilities are often run so openly that Ofsted maintains a specific tally of them. Having visited many of these sites, I am continually shocked by the environments in which children—many of whom have suffered appalling abuse and neglect before entering care—are placed.

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