Residential Care: Demand, supply and sufficiency

Derren Hayes
Tuesday, November 30, 2021

Department for Education figures published in November show that 14 per cent of the 80,850 children looked after by local authorities live in residential care settings, the same proportion as the year before.

Pebbles Care has spent £50,000 redeveloping Amble Cottage, with young people playing a key role in the property’s renovations
Pebbles Care has spent £50,000 redeveloping Amble Cottage, with young people playing a key role in the property’s renovations

The vast majority of these children live in residential children’s homes in placements commissioned, and in some cases provided, by local authorities.

Ofsted data shows the growth in the number of children’s homes and places gathered pace in 2020/21. An additional 346 homes providing 1,155 more places were created in the year to 31 March, a rise on the previous 12 months (see graphics). When factoring in home closures over theyear, there were net gains of 251 homes and 703 places.

All regions saw a rise in the number of homes, while six regions – the North East, Yorkshire Humber, East Midlands, North West, South West, London and East of England – recording rises greater than or equal to the 11 per cent national increase. The East Midlands, North West and East of England saw the greatest rise in places. There is still a huge regional divide in where homes are located, with nearly a quarter in the North West and just four per cent in London.

Most of the new homes and places were created by private providers, who now run 2,032 homes providing 7,555 places, around four-fifths of the overall total. Local authorities also created more new provision than the national averages and now run 14 per cent of homes and 16 per cent of places. Voluntary providers saw their share of the overall market fall.

Newly registered homes tended to be smaller, with more than 80 per cent providing one to four places and only six per cent approved for more than seven beds. This continues the trend of recent years as best practice has shifted towards caring for fewer children in residential settings. The average new home provided 3.3 places, while the average for a closing home was 4.7.

Full inspections of social care providers were suspended in March 2020 due to the Covid-19 pandemic. Monitoring and assurance visits continued however, with around 60 per cent of homes of all types receiving one of these. Of those that received a monitoring visit, 80 per cent were judged “good” or better, 17 per cent “requires improvement” and four per cent “inadequate”, which is in line with the overall inspection profile for the sector. Of the 861 assurance visits carried out, 12 per cent were found to have “serious, widespread concerns”, with 40 per cent of these previously judged good or better.

The State of the Nation report from the Independent Children’s Homes Association (ICHA), shows the proportion of providers reporting a rise in both referrals and occupancy levels had fallen in the year to November 2020. The report, compiled for the ICHA by Revolution Consulting, states: “Taken altogether this picture is the first sign in several years that the runaway trend of ever accelerating referral rates has slowed in 2020, and it appears to feed through to the associated occupancy rate trend with immediate effect.”

Despite these findings, local authorities consistently report experiencing problems in finding a residential care placement that fits the needs of the child. In its response to the recent interim report on children’s social care by the Competition and Markets Authority (CMA), the Association of Directors of Children’s Services (ADCS) blamed the shortage on the fact that “the offer from independent providers has not developed in line with children’s needs, creating a mismatch between supply and demand” (see expert view).

The ICHA points to the fact there is more than 9,500 places in residential care homes and that around 8,000 children need a bed at any one time, means that theoretically there is not a shortage. However, its recent report The Sufficiency Enigma highlights how the impact of a complex set of factors – including commissioning practices, location of homes and needs of children – has led to the current situation. The high cost and regulatory requirements of establishing new homes are also barriers for smaller providers which still make up the bulk of the sector, the report states.

The ICHA also points to a change in the cohort of children that live in residential care – they now tend to be older and have more complex needs – and society undervaluing the cost of high-quality care as other factors affecting sufficiency (see expert view).

Health of the sector

Local authorities in England spend over £1bn annually on purchasing children’s home placements from private and voluntary sector organisations. Analysis by Revolution Consulting for the Local Government Association (LGA) shows that in 2019/20, councils spent 29 per cent more on residential care provided by the independent sector than two years previously.

The analysis, published in June, also shows that the influence of the largest children’s social care providers is growing – the 10 largest private children’s home operators own a third of all homes run by the independent sector. In addition, the 20 largest social care providers made a profit of £278m from income of £1.5bn in 2019/20, which has led to accusations of excessive profiteering.

The ADCS has said: “Local authorities are the sole purchasers of placements, yet excessive profits are being made by some providers on the backs of vulnerable children. This is wholly wrong and not in the best interests of these vulnerable children and young people.”

The situation prompted Josh MacAlister, chair of the Independent Review of Children’s Social Care, to say that the placement “market” is broken and refer the issue to the CMA. The CMA decided against launching an investigation into the sector citing no evidence of disparity in the outcomes delivered by private sector providers – Ofsted data shows four out of five private children’s homes are rated good or better.

However, its market study interim report concluded that the system is “failing”. The study, due to be completed by March 2022, provisionally found that there is “evidence of a shortage of appropriate places for children and that high prices are often being paid to place them”. It states that there are “too often no placements available, in children’s homes…that fully meet the needs of children – with some being too far away or requiring siblings to be separate”.

It finds that “considerable time pressure” faced by local authorities to find an appropriate placement “inherently weakens” their position in the market. “This means they are often paying private providers for those placements at prices that are higher than they would otherwise be,” the CMA states.

New figures from the interim report show that in 2020, for the largest providers of children’s homes, the average weekly price was £3,830.

Creating more placements

The CMA’s analysis suggests the relatively small numbers of children each local authority is placing is a key factor in the issues identified in the study as “this means they are limited in their ability to purchase placements in larger numbers and plan for future needs, which could drive up prices and make it harder to place children in appropriate accommodation”.

It also raises concerns over “particularly high and increasing levels of debt” being carried by private equity-owned firms in the sector which could “leave them vulnerable to financial distress and ultimately having to unexpectedly exit the market”.

The CMA indicated it was looking at a number of possible solutions including moving to national and regional commissioning arrangements, better demand forecasting, and removing barriers to creating extra capacity.

In the Care Review’s Case for Change report, published in August, MacAlister wrote that he was concerned about the impact of the current system on children, adding that a “pragmatic re-think” was needed. The work around what this might look like is ongoing with the review set to publish its final recommendations in the spring.

Some councils however are not prepared to wait and have already begun reducing their reliance on independent sector providers. For example, Liverpool City Council is working with Barnardo’s and developing its own homes to increase placement capacity, a move that dovetails with a regional initiative to place children from the area in local homes provided by not-for-profit organisations (see practice example). Other authorities are doing similar, and the Department for Education recently announced £19.5m of capital funding would be made available to councils to develop local schemes.

Workforce challenges

When looking at the impact of Covid on residential care, much of the attention has understandably been on adult services. The pandemic has presented significant challenges for children’s homes too. Providers and settings have had to grapple with ensuring children complied with lockdown requirements, maintained education during periods when schools were closed, introduce stringent and expensive infection control measures, support children having to self-isolate and cope with staff being unable to work due to illness. It is difficult to say what impact the pandemic has and will have on the residential child care workforce, but there are initial signs that the shortage of workers across many sectors of the economy is making it harder for providers to recruit.

A recent ICHA survey of members found employers having limited results from using recruitment agencies with some giving examples of staff being pouched. Respondents also reported a change in attitude and perspectives from prospective employees since the pandemic, describing a shift to an “employee’s market”. This is most starkly seen in the difficulties many providers face to recruit registered managers. One care sector consultant told CYP Now that they had seen annual salaries of £55,000 for children’s home managers being advertised, while a local authority officer in the North West reported having to raise the salary for a children’s home manager by nearly 25 per cent to attract applications for the post.

However, some providers say the correction in salaries is long overdue. Writing recently on the social network LinkedIn, Kevin Gallagher, managing director of Amberleigh Care, said he’d raised salaries by up to 10 per cent to reflect the demands of the role. “[Working in residential care] can be hugely rewarding and also offer working patterns that can suit many people’s lives. It’s equally demanding – physically and emotionally – highly specialist and technical, not for everyone. Not all the people who could do it want to, not all the people who want to are necessarily suited to it either,” he wrote.

Recruitment difficulties

There is no annual count of the children’s residential care workforce, so an accurate figure on the number of vacancies in the sector is not available. An evidence review on the children’s home workforce, published in July and undertaken by Government Social Research on behalf of the DfE, cited figures from a 2013 census which found that 54 per cent of managers had difficulty recruiting staff with appropriate skills, with most candidates lacking experience and qualifications. A 2017 survey of the workforce in Wales found that four in 10 left their jobs within two years. It left the researchers to conclude that “more evidence is needed to understand recruitment and retention issues in both England and Wales.”

The DfE research was carried out to explore the potential for introducing a registration of children’s home staff. It cited 2015 DfE data that showed that around 20,000 people worked in children’s homes in England, with the average home having 12 staff. Hourly levels were £12 for council-run homes and £8.50 in the private sector. Similarly, managers and supervisors in local authority run homes were paid £16.33 an hour against £11.38 in private homes. With salaries rising across the board and the impact of Brexit on the labour market set to increase over the coming year, the difficulties in recruiting will likely increase further.

It is not just pay rates that are a factor in recruitment and retention. In recognition of the challenging nature of the role, initiatives have been developed to improve the support offered to staff. To reflect the increasingly therapeutic nature of the support staff provide for traumatised children, St Christopher’s Fellowship has developed a training course for workers that not only boosts their practice skills but also improves their understanding of their own mental wellbeing. In addition, Manchester Metropolitan University has developed a Wellbeing Charter that providers are signing up to and that recognises the demanding nature of the job and enhances workplace support (see research evidence).

Regulation storm clouds

In September, the government introduced a ban on the use of semi-independent unregulated accommodation for under-16s. The move affected around 500 children placed in unregulated settings each year and was brought in after a consultation on measures to tighten the regulations on suitable accommodation. Care campaigners had also argued for the ban to be extended to 16- and 17-year-olds, saying such settings were often inappropriate for vulnerable young people. The government rejected this, preferring instead to develop quality standards for unregulated accommodation, which are yet to be published. There is also a pending legal challenge over the government’s decision not to extend the ban on unregulated settings to all under-18s.

Latest DfE data shows 6,050 looked-after children were living in unregulated settings on 31 March 2021, seven per cent lower than a year earlier. ADCS president Charlotte Ramsden recently told the education committee’s inquiry into children’s homes that the ban on use of unregulated accommodation for under-16s was “acting as a pressure cooker” for councils that are struggling to find alternative placements.

In fact, Ramsden told MPs that such accommodation is still being used by councils for under-16s in “a case of desperation” because of a “serious lack of appropriate provision to meet the needs of these really complex young people”.

She added: “What’s happened with the ban is that it’s acting as a pressure cooker really so in the absence of suitable alternatives, the solutions to avoid the use of unregulated have not been provided so it is a pretty challenging situation.”

Ofsted has also recently published new guidance to allow children’s social care providers to make one registration application for up to four buildings, accommodating up to six children – previously, homes have had to register each of the buildings where they provide care and accommodation separately. The regulator called the move a “real step forward, allowing homes to work more flexibly, creatively and to provide more options for children”.

In a blog, Yvette Stanley, Ofsted’s national director for regulation and social care, said: “The average children’s home can look after three or four children. Our new approach allows for a slightly larger arrangement, bringing more capacity, but keeping numbers within sensible limits to make sure there can still be effective leadership, management, and oversight.”

Ofsted says the move strikes the right balance between protecting children and giving flexibility, but campaigners have warned that it could see more children regularly moved between settings.

Providers and councils will be studying the changes closely to see if it will alleviate some of the current pressures in the system. Further proposals will almost certainly emerge from the education committee’s inquiry, the Care Review and CMA study over the coming year. Some sector experts are calling for the consideration of radical ideas like removing placement finding from councils and creating a national care service. With children’s needs rising and the impact of the pandemic set to exacerbate that, urgent action is needed as the pressure in the system shows no sign of abating.


By Charlotte Ramsden, ADCS president 2021/22

The Competition and Markets Authority (CMA) has recently published an interim report of the children’s social care market study. This has been much anticipated and I hope that through the study some of the concerns the ADCS has been raising, such as the ability of independent providers to make significant profits, and the increasing prevalence of private equity in the sector, will be addressed head on. It is clear from the interim report that the CMA share some of our concerns, particularly about risk and the impact of a large provider failing or withdrawing from the market on children, as well as the staff working in these homes.

While the CMA study is focused on the market, we can never forget that at the heart of this are children and young people. For me, one of the key issues is how far the available “offer” from independent residential care services meets the needs of the cohort of children who need care today, particularly adolescents who may have more complex needs placing them on the edge of hospitalisation, criminalisation or a welfare secure placement.

We need to bring together social care and health services to meet the therapeutic needs of children and young people as close to their home as possible. The Department for Education’s £19.5m Children’s Homes Capital Programme provides an opportunity for those successful authorities to put into practice some of the innovative, new care models that they and partners have been exploring. However, we need a greater level of cross government commitment to make sure this is a reality across the country rather than just pockets of practice. Children’s lives don’t fit in nice little boxes and we need policy makers to develop policy that reflects the realities of our children’s lived experience. The Department of Health and DfE, to name just two, must overcome departmental boundaries and have a greater level of integration in the planning and resourcing of services for children, something which could then be replicated at the locality level. Additional funding announced in the Spending Review for development of the right placements makes this even more of an imperative.

If we are to offer rapid, flexible and even multi-agency care, that wraps around children, a new system of regulation that underpins this approach is needed. This is where we get into Care Review territory. One of the three dilemmas the chair has spoken about is the balance between freedom and responsibility and the potential for children’s homes regulatory reform clearly sits in this space. The regulator is doing all it can to support the sector within the parameters it operates but the legislative framework is more than 20 years old. The ADCS believes that registering providers to provide services rather than registering physical settings could provide some of the flexibility needed to better meet the needs of children now and in the future.

The market study and the Care Review have the opportunity to achieve great things and I am hopeful that they will deliver for the children and young people who are central to all we do.


  • A hot tub is one of the features included in Amble Cottage, redeveloped by Pebbles Care through a £50,000 investment. The home for three young people between the ages of seven and 16 is located between Penrith and Keswick and has spectacular views over Blencathra and the surrounding fells. Young people living there have played a key role in choosing the décor and layout of the property, including the recent installation of a hot tub. It takes the company’s footprint in the region to five homes and the number of vulnerable children it is supporting to 15. It is planning to recruit seven staff including a registered manager, deputy manager and residential workers.

  • Wakefield Council has announced plans to set up three small residential children’s homes and one specialist setting in 2022 as part of its strategy to move away from running larger children’s homes. The move follows the success of its two existing two-bed homes in Hemsworth and South Elmsall, which were rated “good” by Ofsted earlier this year. Both homes provide care and accommodation for up to two children and young people whose plan is to live in a medium or long-term residential setting. Inspectors said that the children living in both homes had made good progress and had developed positive relationships with each other and staff.

  • Children’s charity Kibble has opened Forest View Residential Houses (pictured above) to provide nurturing accommodation for children aged five to 12. The two individual houses, Ness and Tay, provide four- and five-bedroom accommodation for children with experience of trauma. Set in Lochwinnoch, a semi-rural village in the west of Scotland, Forest View is surrounded by trees, rugged landscapes and stunning wildlife. The home is next door to the Forest View School which is also built on trauma-informed principles and uses outdoor education and animal therapy. It also provides Systemic Family Therapy, where everyone around the child or young person works together under the support of a family therapist.


By Liz Cooper, deputy chief executive, the Independent Children’s Homes Association

Lack of sufficiency in the residential childcare sector is not a myth, it is, however, a complex issue. The Competition and Markets Authority interim report supports the ICHA findings that on paper, there are sufficient beds to meet accommodation needs, however, there are a number of factors that that mean that these are not being used optimally and are unlikely to ever meet current demand.

The market has been shaped over the years by government actions, regulation and commissioning.

Government actions have decimated frontline support designed to keep families together. The complexity of children’s need has increased significantly as without early intervention, adverse childhood experiences go unchecked, and complexity of need grows. These children arguably experience intervention too late and struggle to accept and access services, leading to multiple placement breakdowns – compounding their complexity and the specialist care required to help them. It is becoming increasingly difficult to properly help these children in “regular” communal homes.

Regulation has caused homes to become smaller until the average number of beds is now 3.4. This has rightly been driven by requirements for homely environments, single bedrooms, and sufficient living space to enable all children to be afforded a degree of privacy. This lessens availability as matching becomes paramount.

The ICHA found that a surprisingly high number of providers left beds empty rather than risk being downgraded because of their inability to match the needs of their current children with any newcomer. Regulators could be more supportive of homes agreeing to care for more complex children, and placing authorities have to be better at sharing risk. At the current time, the risk is on providers and arguably the child, who stand to lose much more than any placing authority, if things go wrong.

The sector is facing significant staff shortages with registered managers becoming a scarce and expensive resource. Changes to regulation that enable the portability of registration between companies will help, with the establishment of a separate registering body and continual professional development as in the case of nurses. Professionalising the sector through registration and the development of career pathways for all grades will raise the sector’s profile, benefit children and push up standards.

We know that current commissioning frameworks don’t deliver. The drive to control the market has resulted in a lack of engagement from providers and a growth in spot purchasing. At the same time, there is pressure on providers to develop more bespoke placements including solo or dual-occupancy homes, which cost more.

Changes to grading from those of “adequate” to “requires improvement” has led to risk-averse commissioning, where some are reluctant to place in “requires improvement” homes despite meeting standards.

Furthermore, the regulators’ increased focus on provider’s matching processes, has resulted in more risk averse homes. This has inevitably added to sufficiency problems.

Homes are still last choice. Early use of homes linked to fostering will reduce costs and increase placement stability but there is a reluctance to change entrenched views.

There is no one solution and these are just a few of the current contributing issues. Regulation must be reviewed, and governments must lend their support to increasing the sector profile and significantly increasing early intervention services. Some commissioners are working towards models of shared risk and co-production to start to make a shift in the current sector conditions but none of these will work in isolation. The CMA has shown that pricing and outcomes are equitable across the sector. Maybe, we just need to stop blaming and use what we have.

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