Children’s Homes: A Licence to Care, Not a Licence to Print Money
Why opening another children’s home without understanding local need could be a costly mistake — for providers, local authorities and
Everyone Seems to Want to Open a Children’s Home
There was a time when telling someone you worked in residential childcare was met with a mixture of admiration, curiosity and the occasional look of bewilderment.
These days, tell someone you’re involved in children’s homes and there’s a reasonable chance they’ll ask you how much it costs to open one. Or, more revealingly, how much money they could make.
I’ve seen a growing interest in children’s residential care from people who have never worked in the sector, have little understanding of the regulatory framework and, in some cases, appear to view opening a children’s home as another property investment opportunity.
Buy a house. Employ a manager. Recruit some staff. Register with Ofsted. Fill the beds. Watch the money roll in.
Simple, isn’t it?
Well, no. Not remotely. And the latest evidence about the growth of children’s homes in England suggests that we need to have a serious conversation about why new homes are being developed, where they’re being opened and whether they are actually meeting the needs of children.
Because there’s a fundamental difference between recognising a genuine need for more residential provision and recognising an opportunity to make money from vulnerable children. That distinction matters enormously.
Let me be clear from the outset. I’m not against independent providers, private investment or organisations making a reasonable profit.
The independent sector plays an essential role in providing residential care in England, and many providers deliver exceptional services. But children’s homes are not ordinary businesses. They are places where some of our most vulnerable children live. And anyone considering opening one needs to understand that responsibility before they start calculating potential returns.
I’ve managed to screen the majority of clients who don’t have the best of motives, but I’m sorry to say that I’ve had a client (no longer a client I might say) where it became clear that they were so focussed on the money rolling in that they forgot what it costs to get to that point (in time, effort, expertise as well as money). They wanted a ‘yes man’ that would guarantee the returns by cutting corners and putting profit over care. That’s not who I am and what this consultancy are about. Reputations are hard won, and mine is the result of over 25 years of doing things the right way and consistently getting the best outcomes for children. That’s what brings our clients their profit. There are ‘consultants’ out there that will tell you otherwise only to over promise and under deliver. As I said, that ain’t me guv!!!
So why do I care and why have I climbed up on my soap box about this (again)?
Let’s start with the numbers.
1. The Children’s Homes Market Is Growing at an Extraordinary Rate
According to Ofsted’s latest children’s social care statistics, England had approximately 4,750 children’s homes as at 31 March 2026.
That’s around 800 more homes than the previous year. Over five years, the number of children’s homes has increased by approximately 70%.
Registered places have also increased, reaching approximately 16,200 in March 2026, representing growth of 13% in a single year.
Those are remarkable figures. And they raise an obvious question.
Are we opening children’s homes because children need them, or because the market has become attractive to investors?
Of course, the answer isn’t the same for every provider. Some organisations are developing carefully planned services in response to clearly identified gaps in provision. Others may be entering the market because they’ve seen the headline placement fees and concluded that residential childcare represents an attractive commercial opportunity.
The difficulty is that simply increasing the number of homes does not necessarily increase the availability of suitable placements. In fact, the evidence suggests that the relationship between supply and demand is considerably more complicated. A country can have more children’s homes than ever before and still struggle to find appropriate placements for children.
That is precisely the situation England is experiencing.
2. More Homes Doesn’t Necessarily Mean More Suitable Placements
In July 2026, the Department for Education published research examining the sufficiency of children’s social care provision. One of its central findings was that sufficiency is not simply about the number of available beds. It is about having appropriate placements that can meet children’s needs, in suitable locations, with the right workforce and safeguarding arrangements.
The research also highlighted that children’s homes are becoming smaller, many have unfilled places, and providers continue to experience significant recruitment challenges.
Think about that for a moment. We have more children’s homes than ever before. Lots of these homes have empty beds. Yet local authorities are still struggling to find suitable placements. That tells us something important.
The problem isn’t necessarily that we need more children’s homes everywhere. It’s that we need the right children’s homes in the right places, providing the right care.
A three bed home that is unable to meet the needs of the children requiring placements is not necessarily contributing to local sufficiency.
It may simply be adding another three beds to a market that already has the wrong type of provision. And that’s where proper due diligence becomes absolutely essential.
3. The Danger of Local Market Saturation
Let’s talk about saturation. I don’t believe it would be accurate to suggest that the entire children’s homes market is saturated. There are still significant shortages of appropriate provision, particularly for children with complex needs. However, there is growing evidence of substantial geographical imbalances.
Ofsted’s 2026 statistics show that the North West has approximately 1,250 children’s homes, accounting for around 26% of all homes in England. Yet only around 18% of looked-after children originate from that region.Meanwhile, other parts of the country have considerably fewer homes.
The Department for Education’s sufficiency research also identified that provision often develops in areas where property is cheaper rather than necessarily where children’s needs are greatest. And the Institute for Government reported in 2026 that some local authorities have substantially more residential places within their boundaries than they use for their own children, while others have far fewer.
Now, that doesn’t mean every home in an area with a high concentration of provision is unnecessary. Children are placed across local authority boundaries for various reasons, and some specialist services appropriately meet wider regional or national needs.But it does mean that opening another home in an already heavily populated area without understanding the local market could be a very expensive gamble.
Imagine purchasing a property, spending considerable sums adapting it, recruiting staff, appointing a registered manager and navigating the Ofsted registration process. Then, after months of preparation, discovering that the local authorities you expected to work with don’t actually need another home offering the service you’ve developed. Or that they need specialist provision your staffing model cannot safely deliver. Or that the area already has several established providers competing for the same referrals. Suddenly, those attractive projected occupancy figures begin to look rather optimistic.
And unfortunately, when the financial pressure starts mounting, the consequences can extend far beyond the business owner. They can affect staffing decisions, placement matching, care quality and ultimately the children living in the home.
4. The Eye-Watering Cost of Residential Placements
One of the reasons children’s residential care attracts commercial interest is the extraordinary sums involved.
The National Audit Office reported in September 2025 that local authorities spent approximately £3.1 billion on children’s residential care in 2023–24.
The average annual spend per child in a children’s home had risen to approximately £318,400, equivalent to around £6,100 per week.
That compares with approximately £239,800 per year, or £4,600 per week, in 2019–20, adjusted to 2023–24 prices.
The Local Government Association has also identified exceptional placements costing as much as £63,000 per week. Yes, you read that correctly. Sixty-three thousand pounds! For one week!
These exceptional figures understandably attract attention, but they must be interpreted properly. The £6,100 figure is an average measure of local authority spending, not the profit a provider makes from each placement. It is also important to understand that this figure is a national average and there are significant variations between local authorities as well as regional differences.
The £63,000 example is an extreme case, not a typical placement fee. That said, Oxonia Care Consultancy has carried out FOI requests of all local authorities and we are aware of other such super inflated placement fees, both for regulated and more worryingly, unregulated placements.
Children’s homes have substantial costs. Staffing, recruitment, training, property, maintenance, insurance, management, regulatory compliance and specialist support all require significant investment. Higher-needs placements may require additional staffing and highly specialised arrangements. But there’s another side to this.
The Children’s Commissioner reported that the average weekly cost of placements in illegal children’s homes during 2025 was approximately £10,500, with an estimated annual public cost exceeding £353 million. Those figures relate to a particularly vulnerable group of children and should not be confused with the average cost of registered residential care. Nevertheless, they illustrate just how expensive the consequences of insufficient suitable provision can become.
High placement costs should be a reason to ask serious questions about value, quality and outcomes — not an invitation to see children as lucrative income streams.
Public money spent on children’s residential care should deliver high-quality, safe and effective care. Children deserve that. Local authorities deserve that. And taxpayers are entitled to expect it.
5. A Children’s Home Is Not a Buy-to-Let Property
I appreciate this might sound obvious to people who have spent their careers in residential childcare. But apparently, it needs saying.
A children’s home is not a property investment with a few care workers thrown in.
You are not simply purchasing a building and generating income from the rooms. You are establishing a regulated care service for children who may have experienced abuse, neglect, trauma, rejection, instability and repeated placement breakdowns.
Some children will have complex emotional and behavioural needs. Some will struggle to trust adults. Some may present risks to themselves or others. And many will need extraordinary levels of patience, consistency, understanding and professional skill.
Running a successful children’s home requires far more than a suitable property and a competent registered manager.
It requires a genuine understanding of residential childcare.
It requires effective leadership.
It requires sound safeguarding arrangements
It requires a stable, appropriately trained workforce.
It requires a culture built around children’s rights, dignity and wellbeing.
And it requires a willingness to make difficult decisions that put children’s needs before commercial interests. Sometimes that means declining a placement. Sometimes it means investing in additional staffing or specialist support. Sometimes it means accepting that a home should not operate at full occupancy because the needs of the children already living there must take priority. And sometimes it means recognising that the business model you originally developed simply isn’t appropriate for the children who need care.
Those decisions can be commercially uncomfortable. But they are fundamental to responsible residential childcare.
If the financial model only works when every bed is occupied, regardless of whether the children can safely live together, then I would suggest there is something seriously wrong with the model.
I once also produced a financial forecast for a client only to be told that they (the company director who also owned the property where the home was being developed) wanted a five figure monthly rent from their own care company. Who bears the burden of such financial chicanery and greed? The placing authorities and ultimately you, the tax payer!
6. Do Your Homework Before You Buy the House
For anyone considering opening a children’s home, my advice is straightforward.
Do the research before you spend the money.
And I don’t mean a quick Google search followed by a conversation with an estate agent. I mean proper, detailed and evidence-based due diligence. Before purchasing a property or committing to a business model, prospective providers should be asking some fundamental questions.
What do local authorities actually need?
Speak to commissioning and sufficiency teams.
Understand their placement pressures, commissioning priorities and anticipated future requirements.
Review published sufficiency strategies and market position statements.
But remember that a local authority expressing a need for provision is not the same as guaranteeing referrals or agreeing to purchase placements.
What provision already exists?
Research the number, type and capacity of children’s homes operating locally.
Understand the services they offer and the children they are registered to accommodate.
Consider recent and planned developments.
Look beyond the number of homes to understand what those homes actually provide.
What type of care is genuinely required?
Is there demand for long-term residential care?
Short-term assessment provision?
Support for children with complex trauma?
Services for children with disabilities?
Specialist provision for particular groups of children?
The answers should inform the service model, staffing arrangements, property selection and statement of purpose, not the other way around.
Can you recruit the right people?
The availability of a suitable property does not guarantee the availability of a suitable workforce.
Registered managers, experienced residential care workers and specialist practitioners are not always easy to recruit.
And opening multiple homes in an area with an already stretched workforce may simply result in providers competing for the same limited pool of staff.
Is the business financially sustainable?
What happens if registration takes longer than anticipated?
What happens if occupancy is lower than forecast?
What happens if a child requires additional staffing?
What happens if a placement ends unexpectedly?
What happens if the home needs to operate below full capacity to protect the wellbeing of the children already living there?
A responsible business plan must account for these possibilities. It should not depend on unrealistic occupancy assumptions or accepting placements that the home cannot safely meet.
7. Local Authority Need Must Come Before Commercial Convenience
One of the most frustrating aspects of the current market is the geographical mismatch between where provision is developed and where children need placements.
The National Audit Office reported that, in March 2024, approximately 67% of children living in children’s homes were placed outside their home local authority. Almost half were living more than 20 miles away.
Of course, distance alone does not determine whether a placement is appropriate. There will be occasions when an out-of-area placement is necessary, beneficial or specifically in a child’s interests. But we should not underestimate the importance of local connections.
Children may have relationships with siblings, family members, friends, teachers and trusted adults. They may attend schools where they feel settled. They may have established relationships with health professionals or community organisations.
Moving children considerable distances from these connections can create additional challenges. And while the placement itself may be safe and well managed, we must still ask whether a more suitable local option should have been available.
This is why I believe prospective providers should engage with local authorities at the earliest possible stage of development. Not simply to ask whether they might purchase placements, but to understand what services would genuinely help them meet their sufficiency responsibilities.
A provider who develops a home in response to a clearly identified local need is starting from a very different position from someone who purchases a cheap property and hopes the referrals will follow.
The starting point should be the needs of children, not the availability of inexpensive houses.
8. The Hidden Risk of Chasing Occupancy
One of the greatest dangers associated with poorly planned residential provision is the pressure to fill beds.
A children’s home with significant fixed costs can quickly become financially vulnerable if occupancy is lower than anticipated. Staff salaries still need to be paid. The mortgage or rent still needs to be covered (hopefully your landlord won’t be expecting £15,000 a month!). Insurance, utilities, maintenance and management costs continue. And investors may be expecting returns (maybe on top of the rent they’re charging you!).
In that environment, the temptation to accept placements that are not entirely appropriate can become significant. This is where commercial pressure can collide with professional judgement.
A referral arrives.
The child has complex needs.
The existing group of children may not be compatible.
Staff may lack some of the specialist skills required.
But the home has an empty bed.
And the placement fee is attractive.
A responsible provider must be able to say no.
Not because the child is too difficult.
Not because the child is undeserving of care.
But because the home cannot confidently demonstrate that it can meet their needs safely and effectively.
That is not a failure. That is good safeguarding and sound professional judgement. The alternative can be devastating. Poorly matched placements can contribute to increased incidents, instability, placement breakdowns and further trauma. They can also affect the experiences of children already living in the home. No child should be placed in an unsuitable environment simply because a business needs the income.
9. Profit Isn’t the Problem. Priorities Are.
I want to return to something I said earlier. I am not opposed to private providers making a reasonable profit.
A financially sustainable organisation can invest in its workforce, maintain its properties, develop specialist services and provide children with stability. Financial strength can support good care. But profit must never become the primary measure of success.
The National Audit Office has highlighted significant weaknesses in the functioning of the residential care market, including limited visibility of provider costs and profitability and the difficulties local authorities face in securing appropriate placements.
These concerns should not be interpreted as suggesting that every independent provider is exploiting the system. That would be unfair and inaccurate.
Many independent providers are deeply committed to children and invest substantial resources in delivering excellent care. But the sector must be willing to challenge business practices that place financial returns ahead of children’s welfare.
And prospective investors must understand that residential childcare is a long-term commitment. It is not a quick commercial opportunity. It is not a guaranteed source of high returns. And it is certainly not a business where corners can safely be cut when the financial projections don’t work out.
If someone approaches children’s residential care primarily asking how quickly they can recover their investment, I would encourage them to reconsider their motivations.
The first questions should be about children, quality, safeguarding and need. The financial questions are important. But they should follow a clear understanding of the responsibility being undertaken.
10. The Cost of Getting It Wrong
Opening a children’s home is expensive but opening the wrong children’s home can be considerably more expensive.
There are the obvious financial consequences. Property costs, refurbishment, recruitment, registration, staffing and ongoing operational expenditure can quickly consume substantial resources. If the home struggles to attract appropriate referrals, the financial pressure can be severe. But the less obvious consequences may be far more significant.
A poorly planned service may struggle to recruit or retain staff.
It may experience repeated management changes.
It may be tempted to accept inappropriate placements.
It may become reliant on expensive agency staffing.
It may struggle to maintain a consistent culture and ethos.
And ultimately, children may experience instability in a service that was supposed to provide them with security.
We should also consider the wider impact on local authorities. When new provision fails to meet actual commissioning needs, it does little to address the placement pressures councils face.
When providers develop homes in already heavily supplied areas, they may increase competition for a limited workforce without meaningfully improving local sufficiency. And when poorly matched placements break down, the consequences can be costly both financially and emotionally.
The most expensive children’s home isn’t necessarily the one charging the highest weekly fee. It may be the one that repeatedly fails to meet children’s needs.
11. What Does Responsible Development Actually Look Like?
So, what should someone do if they’re genuinely interested in developing a children’s home? My answer is not to abandon the idea.
We need good providers. I LOVE working with good providers. We need experienced, committed people entering and strengthening the sector. And we need appropriate new provision in areas where children and local authorities genuinely need it. But development should be careful, informed and purposeful.
A responsible approach starts with a clear understanding of local and regional sufficiency. It involves meaningful engagement with commissioners and other relevant professionals. It considers the needs of children before identifying the property. It develops a realistic model of care supported by appropriate staffing, leadership and therapeutic input where required. It includes detailed financial planning, realistic contingency arrangements and an understanding of the regulatory responsibilities involved. It also requires honesty.
Honesty about what the home can provide.
Honesty about the limitations of the service.
Honesty about financial pressures.
And honesty about whether the proposed development is genuinely needed.
Sometimes, the most responsible decision a prospective provider can make is not to open a particular home. Perhaps the location is wrong. Perhaps the proposed service doesn’t reflect local demand. Perhaps the workforce isn’t available. Or perhaps the financial model is simply too fragile.
Only last month, I had one of my best clients come to me to commission a pre-planning report for a home that they were opening and had already invested large sums of money into the project. The issue is that another development was given planning permission near to the property that we deemed to be incompatible with a children’s home. He made the decision to put his efforts into another property where the risks of the children living there could be more safely managed. This is what a good and responsible children’s home company director does.
Walking away from an unsuitable development may be disappointing. But it is considerably better than opening a service that cannot deliver what children need in a safe manner.
12. The Future: Better Provision, Not Simply More Provision
The growth of children’s homes in England is likely to remain a significant issue for providers, commissioners and regulators.
The challenge is ensuring that future development improves the availability of suitable care rather than simply increasing the number of registered beds. That requires a more sophisticated approach to understanding demand.
It requires closer working relationships between local authorities and providers.
It requires better workforce planning.
It requires investment in specialist provision.
It requires prospective operators to understand that opening a children’s home carries responsibilities that extend far beyond ordinary commercial considerations.
We should be asking whether new provision helps children remain connected to their communities.
Whether it supports meaningful relationships.
Whether it meets identified needs.
Whether it is staffed by skilled and supported professionals.
Whether it is financially sustainable without compromising care.
And whether it contributes something genuinely valuable to the local children’s social care system.
Those questions should be answered before the property is purchased. Not after the home has opened.
My Conclusion: Children First. Business Second.
I have spent enough time working in residential childcare to know that running a good children’s home is demanding, challenging and sometimes emotionally exhausting.
It can also be one of the most rewarding things a person can do. But it requires commitment. It requires resilience. It requires professional knowledge. And above all, it requires a genuine belief that children deserve the very best care we can provide.
There is nothing inherently wrong with developing a financially successful children’s home. In fact, financial sustainability is essential if a provider is going to deliver consistent, high-quality care over the long term. But financial success should be the consequence of running a good service. It should not be the reason children are placed within it.
As the number of children’s homes continues to grow, I would urge anyone considering entering the sector to approach the decision with caution.
Research the market.
Understand local authority need.
Speak to commissioners.
Invest in expertise.
Build a realistic financial model.
And be prepared to walk away if the evidence suggests your proposed home is not needed or cannot be delivered safely and sustainably. Because children are not commodities. Placements are not simply revenue streams. And a children’s home is not a licence to print money. It’s a licence to care.
How Oxonia Care Consultancy Can Help
At Oxonia Care Consultancy, we support individuals and organisations considering the development of new children’s homes, as well as established providers looking to strengthen their services.
Drawing on extensive operational and strategic experience in residential childcare, we can provide practical, independent support with:
Feasibility studies and local market research.
Children’s homes business planning and development.
Local authority sufficiency and commissioning considerations.
Statements of purpose and service model development.
Ofsted registration preparation.
Regulatory compliance and quality assurance.
Recruitment, leadership development and staff training.
Our approach is straightforward.
We believe new children’s homes should be developed because there is a genuine need for the care they can provide — not simply because the financial projections look attractive.
If you’re considering opening a children’s home, speak to us before making significant financial commitments.
A little independent advice at the beginning could save a great deal of difficulty later.
More importantly, it could help ensure that the service you develop makes a genuine and lasting difference to children’s lives.
Oxonia Care Consultancy — putting children, quality and professional integrity at the heart of residential care.
Sources and Further Reading
Ofsted — Children’s Social Care in England 2026. Published October 2026. National statistics on children’s homes, places and regional distribution.
Department for Education — Understanding Children’s Social Care Sufficiency in England. Published July 2026. Research into placement availability, workforce pressures, suitability and geographical distribution.
National Audit Office — Managing Children’s Residential Care. Published September 2025. Analysis of residential care costs, commissioning and market pressures.
https://www.nao.org.uk/reports/managing-childrens-residential-care/
Institute for Government — Fixing the Children’s Social Care Market: Available Placements Do Not Meet the Needs of Children in Care. Published 2026. Analysis of regional supply and demand imbalances.
Children’s Commissioner for England — Rise in Million-Pound Placements. Published 2026. Research into costs and risks associated with illegal children’s homes.
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