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The number of registered children’s homes in England has risen to a record high, but providers are increasingly prioritising profit over care needs, Ofsted has warned.
The watchdog said new children’s homes were proliferating in areas of the country where housing was cheapest, suggesting the rise was driven mostly by profit and this was “bending the system out of shape”.
“This is an ongoing national scandal,” said Ofsted’s chief inspector, Sir Martyn Oliver. “The most vulnerable children in our society deserve loving and stable homes but the profit motive is increasingly dictating the location and ownership of children’s homes. As a society, we are failing these children.”
Ofsted’s annual report said 4,010 children’s homes were registered by the end of March this year, a rise of 15% (520) from the previous year. This is the highest number on record, but there were growing issues with “location, affordability and suitability”, the report said.
Of the new registered children’s homes, 160 were in the north-west, which is now home to more than a quarter of all children’s homes in England, although just 18% of looked-after children live there. Ofsted believes providers are attracted to the region due to cheap housing.
The report highlighted “stark regional differences” in children’s services, with 88% of local authorities in London graded good or outstanding compared with 46% in the north-west.
Oliver said: “As a system, we’re putting more stress and pressure on an area that’s already struggling, and that’s why I say this is a scandal that is bending the system out of shape. It impacts everything. It’s one compounding issue after another and we need to put a stop to it now.”
The report said local authority spending on looked‑after children rose from £3.9bn in 2015-16 to £8.1bn in 2023-24, taking the average annual cost for each looked‑after child to £97,200.
Unregistered children’s homes providers were charging increasingly exorbitant costs, up to £30,000 a week in some cases, the inspectorate said.
The watchdog, which inspects schools and children’s homes, said it had begun nearly 900 investigations into potential unregistered homes during the 12 months to March.
“This shadow market only exists because there aren’t enough of the right kinds of places in legitimate registered homes to take the children who most need specialist support,” the report said.
Almost nine in 10 local authorities told Ofsted they had placed children in unregistered homes because of being unable to find a place in a registered home suitable for their needs.
Ofsted said this was a “crisis both for children and for local councils, whose budgets cannot hope to keep pace with the spiralling costs” and urged the government to work with councils “to drive out all use of unregistered children’s homes”.
The report said that 84% of children’s homes were privately owned and operated, and the top 10 largest owners account for nearly 20% of all children’s homes, meaning if any company was to become unviable it would have an “enormous impact” on the sector.
The government has previously announced a crackdown on profiteering in the children’s homes sector, including a “backstop” law limiting profits, which will be brought in if providers do not voluntarily put an end to profiteering.
The inspectorate also said the number of child protection concerns for children’s homes had risen for the latest 12-month period to 510, up from 364 the previous year – although the rise was expected because of the growing numbers of homes.
