momentojpegNine out of 10 councils across England are placing children in unregistered homes which can charge up to £30,000 per child per week.
The findings, published in Ofsted’s annual report, show that despite the number of care homes being at a record high, local authorities are often unable to find space in registered homes to meet children’s needs.
Ofsted’s chief inspector Sir Martin Oliver described the situation as an “ongoing national scandal”.
The Children’s Homes Association (CHA), which represents residential child care providers, said there is no clear national plan and it is up to the government to “fix the system”.
There were 4,010 registered child care homes across England in 2024/25 – an increase of 15 per cent on the previous year and the highest on record.
But Ofsted said there is a “persistent imbalance” as some providers choose to open care homes where homes are cheaper, regardless of local demand.
Twenty-six per cent of children’s homes are in the North West of England, but only 18 per cent of looked after children live in this area.
Sir Martin says this “strong profit motive… throws the system into disarray”.
“The rapid increase in the number of homes is creating very significant problems with location, affordability and suitability,” he said.
According to Ofsted, the lack of available places in legitimate settings has led to the creation of a shadow market of illegal care homes that charge “exorbitant fees”.
In the last year, Ofsted launched 870 investigations into these settings, of which 680 were found to be unregistered.
It is a criminal offense for providers to operate a home without registration.
Currently, Ofsted can only issue warning letters and does not have the power to issue fines.
However, this is expected to change under new legislation as part of the Children’s Welfare and Schools Bill.
Total council spending on children in care homes is set to rise from £3.9 billion in 2015–16 to £8.1 billion in 2023–24.
Sir Martin described it as “a crisis”, with the council’s budget unable to keep pace with the “rising costs” of children in care.
“The government should work with local authorities to stop all use of unregistered children’s homes,” he said.
A spokesman for the Local Government Association said the “astronomical cost” of children’s homes means there is less money to help children before they reach care.
It says, “It is extremely worrying that in many cases, a lack of choice means provision is not fully meeting children’s needs.”
“It is absolutely vital that the whole sector works together to ensure we have enough homes to meet children’s needs. This includes central and local government, Ofsted, the NHS and providers across all sectors.”
CHA chief executive Dr Mark Kerr said unregistered homes are the result of a failing system and he wants more government support for the most complex and high-risk children.
“Those ‘excessive fees’ are the crash-landing of a system that has not been planned or funded properly,” he said.
“If ministers want homes in different locations, they need to change planning rules, fix registration delays and produce a credible regional plan. At the moment, geography follows bureaucracy, not the needs of children.”
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