Hammersmith & Fulham Council is considering shutting Stamford House, one of London's two secure homes, leading to fears that other local authorities could follow suit.
A council spokeswoman said: "We have alerted staff to the possibility of closure because of changes in Youth Justice Board policy that may make Stamford House financially unviable."
There are currently 194 young offenders in three secure training centres, 297 in 30 local authority secure children's homes and 2,209 in 20 young offenders' institutions (YOIs).
Roy Walker, chair of the Secure Accommodation Network, said: "Our fear is that a number of units will close, reducing the choice for vulnerable youngsters." He added that any closures would also reduce the number of places for young people in local authority care.
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