Responding to reports that young people are being left to "fend for themselves" in these care settings - which have seen a 70 per cent increase in their use by councils - the Association of Directors of Children's Services (ADCS) said total regulation would limit the flexibility offered by unregulated accommodation in the care market.
Around 5,000 looked-after children in England are living in 16+ supported accommodation, up from 2,900 since 2009, according to figures from the Department for Education.
Research carried out by the all-party parliamentary group (APPG) for missing children and adults highlighted concerns from more than 25 police forces about the vulnerability of young people over 16 being placed in this type of accommodation.
Charlotte Ramsden, chair of the ADCS health, care and additional needs policy committee, said unlike children's homes, which are registered with Ofsted and inspected regularly, minimum standards for unregulated 16+ provision were not set out in law.
"If used well, they can provide appropriate and flexible options, but we recognise and share the concern that this is not always the case," said Ramsden.
The ADCS highlighted the distinction between using unregulated care settings as part of a considered move for a young person compared to using it to deal with a crisis when no other accommodation was available.
"We recognise the role unregulated provision can play within the care placement market and the flexibility it offers when linked to a clear plan based on the needs of a young person and a clear support plan," said Ramsden.
"Total regulation would limit this flexibility, so we are keen to see all providers take their responsibilities seriously, and welcome increased expectations around standards and transparency as to how those will be delivered."
Councils should ensure a young person's needs are matched to the services and take steps to assess that they are being met and the accommodation is suitable, she added.
"This should be done via a proper plan as well as quality assurance and monitoring.
"This will include health and safety considerations, auditing staff DBS checks and assessing the suitability of landlords, plus conducting unannounced visits and providing support plans for young people."
She said councils could choose to work together to hold providers to account and address poor practices by putting in place improvement plans.
They could also stop commissioning services where previously identified actions had not been resolved, she added.
The APPG, which wrote to 43 police forces in England and Wales of which 34 responded, shared its findings with BBC's Newsnight.
The group's chair, Ann Coffey MP, said the investigation had revealed a picture of "dumping children in a twilight world and leaving them to fend for themselves and take their chances".
Forces such as Cambridgeshire Police said these unregulated care settings were often "well known to local criminals" and seen as "an easy target location for recruitment of new children".
Hertfordshire Police reported examples of young adults being targeted and that "girls have been groomed and trafficked to other areas".
Appearing on the programme last night, Coffey described unregulated care settings as a "business" that should be subject to regulation.
"Of course there is a profit to be made - it is a business and they know they are going to get an endless supply of young people.
"If that is to work, it is absolutely essential that the market is regulated in a way that meets the needs of children," she said.
However, Andrew Neilson, director of campaigns at the Howard League for Penal Reform, said: "Given the increase in the use of unregulated provision, DfE should be reviewing the situation urgently and considering how best to regulate accommodation and support children."