Devon councils spending millions placing children in ‘illegal’ homes

The soaring cost of care and a shortage of registered homes means dozens of vulnerable Devon children and young people are being placed in ‘illegal’ accommodation at a cost of millions of pounds.

Competition for limited Ofsted-registered places in the county means councils outside Devon are snapping them up, while many local children have to be found placements outside the West Country.
Councils say they are working with providers to create affordable placements closer to home, but an influential government watchdog says the system is ‘broken’. Local authorities say the current situation means they have to take placements wherever they can find them.
They say their over-riding priority is to place children in safe and suitable accommodation, but such homes are expensive and in short supply. Prices can be as high as £40,000 a week for the children who need the most care.
A recent report by the Guardian highlighted the fact that across the country councils are paying more than £125million a year to place vulnerable children in unregistered care.
The government says that any such care setting not registered with Ofsted is illegal, but the investigation carried out with the Bureau of Investigative Journalism found a ‘booming industry’ around the placements. Almost every council in the country uses them.
More than 480 private companies have been paid £250million for 1,800 unlawful placements of children over the past two years, the investigation found. Nearly one in 10 children in residential care is in an unregistered placement, according to government figures.
Councils point out that such arrangements can also include children staying in private fostering settings or with family or trusted adults in addition to those in unregistered care homes.
But the shortage of available placements has created a marketplace in which providers can command exceptionally high fees, particularly for specialist residential and therapeutic provision.
A recent report to a meeting of the Torbay Council cabinet confirmed a spend of £5million on ‘unregistered’ placements in the financial year 2025/26. Cllr Nick Bye (Con, Wellswood), the Torbay Council Cabinet Member for Children’s Services, said the bay’s most vulnerable children were ‘at the mercy of the market’.
During the year 30 individual young people had a total of 58 periods in ‘unregistered’ provision.
The council struggles to find placements anywhere near the bay. The report noted that unregistered placements were more likely to be closer to Torbay, but the council wants to ‘urgently cease’ using them.
In a snapshot at the end of March, Torbay had nine young people in unregistered children’s homes due to a lack of suitable accommodation.
A council spokesperson said: “Demand for specialist placements continues to outstrip supply, particularly for children with complex needs, leaving councils with limited options when seeking safe and appropriate care.”
The government’s consumer protection regulator the Competition and Markets Authority has highlighted concerns around the profits made by private companies from the children’s residential care market. But despite increased national attention on the issue, provision has not yet grown to meet demand.
“Many local authorities continue to experience significant placement shortages and rising costs,” said the Torbay spokesperson. “These pressures are compounded by placement instability, with some providers issuing terminations under short notice. This can require local authorities to identify alternative accommodation urgently to ensure children’s safety and welfare, and this can further reduce capacity.”
Changes to the regulations, which mean homes must register with Ofsted, have also affected placement availability.
“Torbay Council’s priority is always to ensure that children are placed in safe, suitable accommodation that meets their individual needs,” said the spokesperson. “In the rare circumstances in which a registered placement is not immediately available, alternative arrangements are subject to robust scrutiny and oversight.
“Each case is subject to enhanced monitoring, regular review and multi-agency involvement to ensure that children’s needs are met and risks are appropriately managed.”
Torbay is currently actively seeking high-quality, Ofsted-registered children’s home providers, and says opportunities will be advertised to open two-bed homes locally.
A planning application has just been submitted to Torbay Council by a private care company to convert a four-bedroomed family home in Paignton into an Ofsted-compliant ‘residential institution’.
The building is already being used to house a child with a team of carers, and neighbours have spoken of issues including noise, disturbance and emergency services being called on a number of occasions.
The applicant for the house in Paignton says it will be registered with Ofsted and will be home to a maximum of two children.
In its application it says: “Every local authority in England is currently struggling to secure sufficient regulated placements for children in its care. The market for children’s residential placements has failed, prices are rising sharply, and vulnerable children are being placed far from home, moved between placements too frequently, or held in unregulated arrangements that do not meet their needs.
“Repeated placement disruption is one of the strongest predictors of poor outcomes in adulthood, including involvement in the criminal justice system, poor mental health, homelessness, and difficulty forming stable adult relationships. The link between placement instability and later criminal justice involvement is well established.
“This is not a distant policy issue. It is a live, present day problem for Torbay.”
Devon County Council says the majority of children and young people in its care, who are considered for statistical reasons to be in unregistered accommodation, are in reality being accommodated by family members or with responsible, trusted adults who are already well known to the individual.
Private fostering arrangements are also classed as being ‘unregistered’.
A spokesperson said: “Every child deserves a safe, stable home where they can feel secure, build relationships and get the support they need to thrive. Like many local authorities, Devon continues to face challenges in finding the right homes for some children with the most complex needs.
“We have made significant progress since 2023 in reducing the number of children living in temporary arrangements while longer-term homes are identified. While current data shows 14 children aged under 16 within this wider category, only four are living in unregistered homes.
“Where suitable provision is not immediately available, children’s safety, care and wellbeing remain our priority, with arrangements subject to regular review and oversight.
“These days it’s extremely rare for us to be in a position where we need to temporarily place a child in unregistered accommodation.”
Devon is investing in more local children’s homes and foster care so that more children can remain closer to their families, schools and communities.
The government’s public accounts committee says the fact that hundreds of children are being placed in illegal homes is ‘unacceptable’.
In a report published earlier this year it said: “It is illegal to run a children’s home or supported accommodation that is not registered with Ofsted. Such unregistered settings cannot be routinely inspected, meaning a lack of checks to ensure children receive high quality care and that they and the wider community are safe.”
Local authorities only use these homes when no registered settings are available, but the hundreds of children placed in such accommodation in 2024 stayed an average of around six months each, rather than on a short-term emergency basis.
The Department for Education is trying to improve the situation by increasing foster carer numbers but has had little success so far.
The report describes a system that is placing children in homes that do not meet their needs.
Costs to councils have almost doubled over five years in England and in 2022, the fifteen largest providers of children’s social care had average profit rates of 22.6 per cent for children’s homes, and their prices increased by an average of 3.5 per cent above inflation each year.
The public accounts committee’s inquiry raised concerns about the high levels of profits made by some private providers of children’s social care.
Chair Sir Geoffrey Clifton-Brown said: “The stated purpose of the children’s social care system is to provide care for those who need it so that they grow up and thrive with safety, stability and love.
“For the hundreds of children highlighted in our report living for months in illegally unregistered homes, a lack of oversight means we cannot know whether their circumstances are indeed safe, stable, or loving.”
He described the current system as ‘dysfunctional’ and said it was forcing local authorities towards solutions which will see children regularly put at risk.
“We desperately hope, in those children’s interests, that this report sees the government urgently bring fundamental change to this broken system,” he said.