Use of illegal children’s care homes rises amid financial pressure, report finds

Local authorities are forced into using illegal homes when legal options for housing children are not available fast enough.

Researchers spoke to frontline workers, directors of children’s services and other sector experts. They found three trends that drove increased use:

• The rising complexity of cases, with children more likely to be exposed to the criminal justice system or experiencing mental health crises
• A shortage of specialist, secure supported placements for high-risk children
• Poor market incentives for registered homes to take high-risk children

Practitioners in the sector told researchers that cases of unregistered homes had changed from something they dealt with “once every six months” to something that they now see “at least once a week”.

Cases often involve children with complex needs. Researchers also found that the cost of UCHs were also often higher, with some placements costing up to £40,000 per week.

In January 2026, the Public Accounts Committee published a report that found nearly 800 vulnerable children had been placed in illegal homes through this system.

At the time, committee chair Sir Geoffrey Clifton-Brown said: “A dysfunctional system is forcing local authorities to routinely reach for solutions which will see our nation’s children regularly put at risk. This utterly unacceptable situation has become normalised, but there is nothing normal about this unsustainable state of affairs. 

“The oversight of the children’s social care system is similarly fraught, with the government not possessing clear line of sight into the financial circumstances of the majority of providers.

“Without a good understanding of the motivations, debt and potentially excessive profits of private providers, government cannot effectively oversee a market with players within it who could very well be over-leveraged with debt.

“Our most vulnerable children are a sector of our society often without the ability to easily make their voices heard, but it is clear from our committee’s scrutiny that they are currently being failed. We desperately hope, in those children’s interests, that this report sees the government urgently bring fundamental change to this broken system.”

The Hidden Children report stressed that the increased prevalence of UCHs is not an enforcement or compliance issue, adding that giving Ofsted more powers “could even make the problem harder to identify”. Instead, it highlighted a children’s social care system “that is financially and operationally stretched to breaking point”.

In a foreword to the report, Ashley Horsey, chief executive of Commonweal Housing, described his initial reaction to the findings as one of “disbelief” and “frustration” due to how little was known about the use of illegal children’s homes.

He added: “The findings reveal a lot, proving beyond doubt that structural issues and systemic pressures are leading councils to break the law by procuring illegal placements.

“As the report lays out, ‘We have built a system where local authorities can be forced to break the law in order to keep extremely vulnerable children safe, because the legal, regulated system cannot respond quickly or flexibly enough.’”

An Ofsted spokesperson said: “Too many children are being placed in unlawful settings where they’re at risk of harm. The use of these placements must stop.

“Ofsted is working hard to investigate unregistered children’s homes and compel them to either register or close. The test for prosecution is high, and gathering enough evidence to ensure a conviction can be a lengthy and expensive process.

“But we hope that measures in the Children’s Wellbeing and Schools Bill will allow us to act more quickly and help make sure all children are placed in safe, regulated homes that provide the care they need.”