Hundreds of the UK's most vulnerable children are being placed in illegal, unregistered care homes for months at a time, with MPs branding the children's social care system as 'dysfunctional' and routinely putting young people at risk.
A Shadow Market of Illegal Placements
A damning report from the Commons Public Accounts Committee (PAC) reveals that in September 2024 alone, nearly 800 children in England were living in accommodation that was unregistered and therefore illegal. This figure represented roughly one in ten of all children in residential care at that time.
Instead of being used for short-term emergencies, these placements lasted for an average of six months. Sir Geoffrey Clifton-Brown, chairman of the PAC, stated the severe lack of oversight meant it was impossible to know if these children were in a 'safe, stable, or loving environment'.
Exorbitant Costs and a Failing System
The committee's findings, published in January 2026, follow a separate alert from the inspectorate Ofsted in December 2025, which highlighted that fees for places in these unlawful homes can reach an astonishing £30,000 per week for a single child.
Ofsted itself reported beginning close to 900 investigations into potential unregistered homes in the year to March 2025. It noted these settings 'often charge exorbitant fees to local authorities that have run out of options', describing a 'shadow market' created by a critical shortage of proper, registered specialist care places.
The National Audit Office has previously warned of a 'market failure', with local authority spending on children in residential care soaring from £1.6 billion in 2019/20 to £3.1 billion in 2023/24.
Calls for Urgent Fundamental Change
The PAC blamed systemic failures, including delays in Ofsted's process for registering new homes, though the watchdog has now set an 18-month target. The report also highlighted that almost half (49%) of children in care are placed more than 20 miles from their family home, causing further disruption.
Among its key recommendations, the committee urged the Department for Education to commit to reducing the number of children in unregistered homes to zero by the end of 2027 and to outline a concrete plan to achieve this.
Sir Geoffrey Clifton-Brown delivered a stark verdict: '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.' He called for the government to 'urgently bring fundamental change to this broken system'.
The Local Government Association, representing councils, said no authority wants to use unregistered settings but a lack of choice forces their hand. Mark Kerr, chief executive of the Children’s Homes Association, stated: 'Illegal children’s homes are local authorities purchasing danger at high costs.'
