A recent House of Lords Library bulletin has revealed the scale of the crisis facing children's residential care in England. With over 81,000 children currently in local authority care and costs soaring by 96% in just four years, the demand for suitable properties has never been greater.

For property investors looking to make a meaningful social impact whilst securing stable, long-term returns, this sector presents a compelling opportunity.

The Scale of the Challenge

According to the parliamentary bulletin, the numbers tell a stark story:

• Over 81,000 children are currently looked after by local authorities in England
• Approximately 9,500 are in secure homes and children's homes
• The number has increased from 78,140 in 2019 to 83,840 in March 2023
• Local authority costs for supporting these children in residential care increased by 96% between 2019-20 and 2023-24, reaching £3.1 billion

This dramatic rise in both demand and costs has put enormous pressure on local authorities, who are struggling to find suitable placements at sustainable prices.

The Problem with Current Provision

The bulletin highlights several critical issues facing the sector:

• Shortage of Local Placements

A high number of children are being placed outside their local authority's boundaries, far from their families, schools, and support networks. This not only impacts the children's wellbeing but also makes it harder for social workers to provide consistent support.

• Unsustainable Costs

The National Audit Office noted the "widely recognised" challenges in providing "the right residential care, in the right locations, and at the right cost." The 96% increase in costs over four years is simply not sustainable for local authorities already facing severe budget pressures.

• Availability Challenges

The Local Government Association has been clear that councils face significant challenges around the availability of suitable residential and fostering placements. There simply aren't enough appropriate homes in the right locations.

Government Response and Reform

The government has recognised the severity of the situation. The 2024 Labour manifesto committed to working with local government to support children in care, and several initiatives are underway:

• Developing proposals to combat profiteering in the sector
• Looking at ways to unlock investment in new children's homes
• The introduction of the Children's Wellbeing and Schools Bill in December 2024
• A House of Commons Public Accounts Committee inquiry into the financial stability of children's care homes

These reforms signal that the government is actively seeking solutions, and private sector involvement will be crucial to addressing the shortage of suitable properties.

The Opportunity for Property Investors

This crisis presents a significant opportunity for property investors who want to combine ethical investment with stable returns:

• Consistent Demand

With over 81,000 children in care and numbers rising, the demand for suitable residential properties is not going away. Unlike some property sectors that fluctuate with economic conditions, the need for children's residential care remains constant.

• Long-Term, Stable Income

Properties leased to care providers typically come with long-term lease agreements, often spanning 10-20 years. This provides income stability that's rare in the property market, with rent payments often backed by local authority funding.

• Government Support

With the government actively looking to unlock investment in new children's homes and working to create a more sustainable market for residential placements, investors entering this sector are aligning with government priorities.

Meaningful Social Impact

Beyond financial returns, investing in children's residential care offers the satisfaction of knowing you're providing safe, stable homes for some of society's most vulnerable young people. Many of our members cite this as one of the most rewarding aspects of their investment strategy.

What Type of Properties Are Needed?

The bulletin's findings align with what we see in the market. Care providers are typically looking for:

• Standard 3-4 bedroom family homes in residential areas
• Properties with gardens and outdoor space
• Homes in established communities with good transport links
• Properties near schools, healthcare facilities, and amenities
• Adequate parking for staff vehicles

Importantly, the trend is moving away from large institutional settings towards smaller, more homely environments. This means standard residential properties are increasingly in demand, making it accessible for many property investors to participate.

Understanding the Regulatory Environment

It's important to understand that children's residential care is highly regulated by Ofsted. Properties must meet strict safety and care standards, and care providers must demonstrate they can offer stable, nurturing environments.

For property investors, this means:

• Properties should be in good condition with appropriate safety features
• You'll be working with experienced, registered care providers who understand the requirements
• Long-term lease arrangements provide stability for both the children and your investment
• Professional property management ensures properties are well-maintained

The Financial Reality

The parliamentary bulletin reveals that local authorities are spending £3.1 billion annually on residential care for looked-after children. While the government is working to create a more sustainable pricing structure, the fundamental economics are clear: local authorities need suitable properties and have budget allocated to pay for them.

For investors, this translates to:

• Rent backed by local authority funding rather than individual tenants
• Typically higher yields than standard buy-to-let
• Long-term lease agreements reducing void periods
• Maintenance responsibilities often shared or covered by the care provider

A Crisis That Needs Your Help

The Lords Library bulletin makes clear the scale of the challenge facing children's residential care in England. With 81,000 children needing stable, nurturing homes and local authorities struggling to meet demand, the property sector has a crucial role to play in the solution.

For property investors, this represents more than just a financial opportunity. It's a chance to provide homes that genuinely change lives, offering vulnerable children the stability and security they need to thrive.

The combination of consistent demand, long-term income stability, government support, and meaningful social impact makes children's residential care one of the most compelling property investment sectors available today.

If you're interested in learning more about investing in properties for looked-after children, we're here to help. Our team has extensive experience in this sector and can guide you through every step of the process.

Get in touch at hello@supportedlivinggateway.com to find out more about how you can be part of the solution.

Source: House of Lords Library, 'Looked after children', December 2024, https://lordslibrary.parliament.uk/looked-after-children/