I felt like I was a prisoner.
Five years after a legal ban, English councils are still placing roughly 800 of their most vulnerable children in unregistered, illegal homes — some costing taxpayers £2 million per child each year. The practice persists not from indifference alone, but from a deeper structural failure: a privatised care market that has doubled in size while tripling in cost, yet still refuses to accommodate the children with the most complex needs. It is a quiet crisis in which no single actor accepts responsibility, and the children least able to advocate for themselves bear the full weight of a system designed around investment returns rather than welfare.
- Around 800 children in England are living right now in illegal, unregistered homes — some with peeling walls, broken doors, and no books or toys — five years after the government banned the practice.
- The care market has been colonised by private equity and property investors who market children's homes as 'fully hands-off investments,' driving costs to £6,100 a week per placement while the most complex cases go unserved.
- Councils knowingly break the law because registered providers simply refuse the hardest children — those with violent histories, mental health crises, or court-ordered restrictions — leaving local authorities with no legal alternative.
- Ofsted's registration backlog stretches to 18 months, some providers are splitting billing across shell companies to disguise illegal operations, and no director of children's services has ever been held personally accountable.
- The government's proposed remedies — a new bill and £53 million in funding — are widely dismissed as far too small, while Wales has already moved to mandate non-profit-only new provision as a structural fix England has yet to attempt.
Five years ago, a government ban was meant to end the placement of children in unregistered homes. It has not. English councils are now placing more vulnerable children in illegal settings than ever — around 800 at any given time — with some placements costing local authorities as much as £2 million per child per year.
The conditions inside these homes are often deeply troubling. One unregistered bungalow, costing £13,000 a week, had peeling wallpaper, frayed carpets, and broken doors, with nothing for a child to read or play with. A council house nearby had been sublet to a company charging thousands weekly. A 12-year-old was placed in a caravan in Lancashire; a 14-year-old at risk of self-harm was housed above a shop in Portsmouth. One care leaver described being moved between holiday homes in Wales twice in a single week. 'I felt like I was a prisoner,' she said.
The paradox is striking: the number of registered children's homes has doubled in eight years, yet costs have tripled. Private equity and property investors have flooded the sector, treating placements as guaranteed income streams. The Children's Homes Association's chief executive has called it a 'Wild West.'
Councils break the law because the market fails a specific group — roughly 10 percent of children in residential care with complex needs: histories of abuse, mental health crises, behavioural challenges. Registered providers, even at fees of £30,000 to £40,000 a week, refuse them. The shadow of the Hesley scandal — where 106 children with learning disabilities were systematically abused while Ofsted received over 100 notifications before acting — has made providers deeply cautious about difficult cases. So councils, legally responsible for these children and unable to find lawful placements, turn to unregistered homes.
Ofsted's registration process compounds the problem, with waiting times of up to 18 months. Some providers have begun splitting billing across separate companies to obscure that they are running a children's home at all. No director of children's services has ever been held personally accountable for illegal placements — a standard routinely applied in financial services but not in child welfare.
The structural roots run deep. Eighty-four percent of England's children's homes are now privately run, compared with 17 percent in Denmark. This shift began in the 1990s and was accelerated by successive governments favouring commissioning over direct provision. The current government's response — new legislation and £53 million in investment — is widely seen as inadequate. Experts point to expanding non-profit provision, which makes up just 4 percent of UK homes but 29 percent in Denmark, or building publicly owned homes. Wales has already required all new providers to be non-profit. Until England follows, its most vulnerable children will continue living in conditions that would be considered unthinkable for any other population.
Five years ago, a government ban was supposed to end the practice of placing children in unregistered homes. It hasn't. Instead, English councils are now placing more vulnerable children than ever in illegal children's homes—around 800 cases—despite the law explicitly forbidding it. Some of these placements cost local authorities as much as £2 million per child per year.
The homes themselves are often shocking. One unregistered bungalow, where a teenage girl was placed at a cost of £13,000 a week, has peeling privacy film on the windows, flaking wallpaper, frayed carpets, and broken doors. There are no books, toys, or games. A few miles away, another illegal home operates from a council house that has been sublet to a company charging thousands of pounds weekly. In Lancashire, a 12-year-old boy was placed in a caravan; in Portsmouth, a 14-year-old at risk of self-harm was housed in a flat above a shop. One care leaver described being shuttled between holiday homes in Wales, sometimes twice in a single week. "It was an absolute nightmare," she said. "I felt like I was a prisoner."
The paradox is stark: while the number of registered children's homes has doubled in eight years—from 2,209 to 4,455—the number of children in care has risen only 9 percent. Costs have surged anyway. The average placement in a legal home now costs £6,100 a week, or £318,000 annually. Councils spend twice as much on residential care as they did four years ago, and three times what they spent eight years ago. Property investors and private equity firms have flooded into the sector, treating children's homes as investment vehicles. One online middleman markets conversions as "fully hands-off investments with guaranteed income and no ongoing headaches." The sector has become, in the words of the Children's Homes Association's chief executive, a "Wild West."
Why do councils break the law? The answer lies in a specific, difficult cohort: roughly 10 percent of children requiring residential care have complex needs—histories of abuse, exploitation, mental health crises, behavioral challenges. Some are violent and require restraint. Some must be locked up under court orders for their own safety. Registered homes refuse to take them. Managers say that even at fees of £30,000 to £40,000 per week, the risk is not worth it. They would rather leave beds empty. The shadow of the Hesley scandal—where 106 children with learning disabilities in Doncaster were systematically abused, punched, hit with a dog lead, and left outside in winter while Ofsted received over 100 notifications before finally closing the homes in 2021—has made providers extremely cautious. After Hesley, Ofsted became more responsive to safeguarding alerts, triggering inspections that providers now fear. So councils, unable to find legal placements and responsible for these children, turn to unregistered homes.
Ofsted's registration process has become a bottleneck. Waiting times stretch to 18 months. Some providers say this forces them to open illegally or face financial ruin from rent and startup costs. Meanwhile, some unregistered providers have begun billing councils separately for accommodation and staffing through different companies, attempting to obscure that they are running a children's home at all. Ofsted said it was unaware of this practice but confirmed it does not change the illegality.
The structural failure runs deeper. Eighty-four percent of England's children's homes are now privately run, compared with 17 percent in Denmark. This shift began in the 1990s, when abuse scandals drove councils and charities away from direct provision. New Labour's push to "commission" rather than provide, followed by David Cameron's call to "release the grip of state control," accelerated privatization. No government has successfully held local authority directors personally accountable for placing children in illegal homes—a standard applied in financial services but not in child welfare. And no single actor accepts responsibility. Local authorities blame the market; providers blame Ofsted; Ofsted says it lacks enforcement power.
The current government's response—the Children's Wellbeing and Schools Bill, £53 million in new investment, and plans for 10,000 additional foster places—is widely dismissed as insufficient. Experts point instead to solutions like expanding non-profit provision (which accounts for only 4 percent of UK children's homes but 29 percent in Denmark) or building publicly owned homes, though both require sustained central government funding that local authorities, financially strapped, cannot provide alone. Wales has already mandated that all new providers be non-profit. Until the system changes, the most vulnerable children in England will continue to live in conditions that would be unthinkable for any other population.
Notable Quotes
This is the culmination of 10 years of systemic failure to develop specialist provision for our most vulnerable children.— Dr Mark Kerr, chief executive of the Children's Homes Association
It's a situation akin to removing the sickest patients from hospitals and placing them in backstreet clinics.— Anders Bach-Mortensen, associate professor of social care at Roskilde University
The Hearth Conversation Another angle on the story
Why would a council knowingly place a child in an illegal home? Aren't they breaking the law?
They are, and they know it. But they're in an impossible position. They have a child with severe behavioral needs, a history of trauma, maybe violent episodes. No registered home will take them. So the council faces a choice: break the law or have nowhere to put the child at all.
But there are registered homes. The number has doubled.
Yes, but those homes have become risk-averse. After the Hesley scandal—where children were systematically abused for years while regulators looked away—providers decided it wasn't worth it. They'd rather leave beds empty than take a difficult child and face scrutiny.
So the system created the problem it's trying to solve.
Exactly. The more Ofsted cracks down on safeguarding, the more providers retreat. The more they retreat, the more councils turn to illegal homes. And the illegal homes are often terrible—no oversight, no inspection, children in caravans and flats above shops.
What about cost? These placements are supposed to be cheaper.
They're not. Some cost £2 million a year per child. The real issue is that the registered market has become a speculative investment. Property investors see children's homes as the new buy-to-let. Prices have tripled in eight years. There's no incentive to build capacity for difficult cases when you can make more money with easier placements.
What would actually fix this?
You'd need public homes, non-profit providers, and government willing to fund it properly. Denmark does this. But in England, we've privatized almost everything. No one wants to admit they broke the system, so nothing changes.