Sector shifts

The children’s social care sector significantly expanded in 2025, with the number of registered children’s homes in England increasing by 15% to 4,010 homes. This growth reflects both the rising demand for residential care and the challenges local authorities face in securing sufficient foster placements.

Last year, we also saw a rise in the number of local authorities seeking to bring residential children’s services in-house. With ring-fenced budgets, several authorities in England and Wales acquired operational homes and properties suitable for conversion last year, and a sufficiency report published in December 2024 revealed that 77 local authorities plan to open their own children’s homes by the end of the 2026/27 financial year.

A major change effective in 2025 was with the Landmark law in Wales to end profiteering from childcare in care; the Health and Social Care (Wales) Act 2025 became law on 24 March 2025. Wales has become the first UK nation to introduce legislation that phases out private sector ‘for-profit’ children’s residential and foster care providers. In the future, care for looked-after children will be delivered solely by not-for-profit organisations, charities, and public bodies.

In 2025, 18,040 looked-after children (22% of all looked-after children) were placed more than 20 miles from home and 69% were placed within 20 miles. To tackle this, in October 2024, the Government introduced the Looked After Children (Distance Placements) Bill, which will require local authorities to publish statistics about the number of looked-after children who are living 20 or more miles from their home because of a lack of placements within their local authority area. The last update on this was in March 2025, and live updates can be sourced via the Parallel Parliament website, here.

Alongside this, the Department for Education is working in partnership with local government to develop Regional Care Co-operatives (RCCs), which will plan, commission, and deliver care places in fostering, children's homes and secure homes. The Department will provide £3.46 million in funding to two pathfinder regions up to 2026. Bids were received from all local authorities, and Greater Manchester and the South East were selected. It could be viewed that larger providers will have an advantage over smaller providers.

Transactional activity

Similar to 2024, market activity across the sector was moderate in 2025, as the supply of operational assets remained stark due to many operators retaining and expanding their existing businesses to meet the demand for services.

For those homes brought to the market, buyer interest was strong, particularly for high-quality operational businesses, well-located vacant properties, and those with C2 use and CLD. A competitive marketplace supported resilient pricing in the sector.