The sinking feeling is familiar now, says Anna*. It’s Friday, the clock is ticking, and there is a vulnerable child in her care for whom – despite hitting the phones for days – she cannot find a place. Once the foster carers have been exhausted, and the registered private children’s homes begged, there is nothing for it but to look elsewhere.

“It always seems to be on a Friday that you are struggling to place a child,” says the social worker. “They need somewhere safe tonight. You’re calling everywhere, already knowing the answer will be, ‘we haven’t got any spaces’. And then you’re left with what’s left of a hotel, a caravan … somewhere you know isn’t right, but you don’t have a choice.”

A report has revealed that the number of children being placed in “emergency” illegal settings alongside agency staff – sometimes houses, sometimes rapidly rented Airbnbs or holiday camps – has increased by more than 370% in the last five years. In 2020 it was 144 children – by 2025 it was 680.

Another former social worker told the Guardian that the youngest child she had placed in an unregistered, and hence illegal, setting was five, and on one occasion the only available accommodation she could find was a barge.

“You are constantly having to do the wrong thing because that is the least worst option, and that is just soul-destroying,” she says. “Social workers are being forced to break the law because they have no other choice.”

These settings are not registered – as they should be by law – with Ofsted. They are meant to be temporary, but a recent report by the children’s commissioner found the average placement lasted six months – one child had been in a “holiday camp/activity centre” for almost nine months.

The children being put in these homes are some of the most at-risk children in England. They are more likely to be involved with gangs, county lines, serious violence, exploitation, or have experienced severe mental health crises, according to the report by policy analysts Public First, for the charity Commonweal Housing.

They are young people such as Nonita Grabovskyte, who was struck by a train on 28 December 2023, two weeks after turning 18. An inquest into her death heard that, before she took her own life, she was put in unregistered privately run supported accommodation. The teenager was autistic and had a history of mental ill health, disordered eating and self-harm. The operations director of the home she was placed in had no social work qualification, no training in autism and last attended safeguarding training in 2021 or 2022.

Or like Alice*, an at-risk 15-year-old, who, in 2024, was moved 300 miles from her home to escape sexual exploitation. A court heard she was plied with alcohol and sexually assaulted by two ex-soldiers who had been paid by a private firm to care for her in an unregistered house, LBC and the Bureau of Investigative Journalism reported.

So, why are some of the most at-risk children in England being placed in illegal settings? An increasing population of looked-after children, coupled with a shrinking supply in settings that can cater for complex cases, is part of the problem. The number of looked-after children has risen by nearly 20% over the past decade, with about 83,600 children now looked after by the state. There are now 14,840 more children in care than there were in 2014, but 2,165 fewer fostering households, according to the Institute for Government.

Some experts blamed the shortage of available places for children with complex needs – in foster homes and residential homes – on the dominance of the private sector in child social care.

“We as the local authority have a legal obligation to look after children in our care,” says one social worker. “But there is no legal obligation on private providers to accept them.” The report reflects this, stating that some registered settings are anxious that taking “high-risk” children could damage their Ofsted rating.

While Wales has legislated to eliminate profit-making from children’s social care services, and Scotland is trying to limit for-profit operators, in England more than 80% of child residential homes are for profit.

Recent analysis for the Guardian found that nearly a quarter of foster places in England are provided by private equity-backed firms. In 2022, the Competition and Markets Authority warned that some children’s home owners were making excessive profits while carrying too much debt – exposing children and councils to unacceptable risks.

One former service manager said a critical shortage of fostering places – half of which are run by private providers – was a key problem. “They’ve ruined it for children,” they say. “You will be over a barrel. They’ll say, ‘Yeah, I got a foster carer, how much are you prepared to pay?’”

A private foster care provider – who said unregulated settings gave a bad name to all companies in the sector, including those acting legally and ethically – told the Guardian that responsible providers did sometimes turn down young people with complex needs because it was “more important to have young people who we can care for rather than having young people to fill beds”.

Costs have also spiralled. Councils’ spending on child residential care has almost doubled in five years, according to the National Audit Office, totalling £3.1bn in 2023-24, with each child costing an average of £318,400 a year. One interviewee told the report that the cost of placing a child in an illegal care setting could reach as high as £30,000 or £40,000 a week, and that £20,000 “was not an unusual figure”.

One former director of children’s services said the majority of illegal placements were “low frequency, high risk, high cost”, adding that local authorities were hampered by a “quasi market with overdemand and undersupply” where the state was the only customer. “No DCS lightly makes the decision to do something that is unlawful,” he says. “But on occasion we have no solution – the alternative is we walk away, we fail in our legal duty and we leave that child on the street.”

Government minister Josh MacAlister, who led an independent review of child social care and is now in charge of overhauling the system, has vowed to crack down on profiteering. The government insists the children’s wellbeing and schools bill will give Ofsted stronger powers to stop unregulated providers, while a £88m recruitment drive aims to generate 10,000 new foster places.

But government figures also quietly acknowledge they cannot, in the short term, stop profit in the sector: there would simply be nowhere for children to go. The government has consulted on setting up a national register of foster carers, which “would be an immediate and practical solution”, says Sarah Thomas, chief executive of the Fostering Network. “Not everyone wants this level of transparency, but in our view a register should always best serve the interests of the children,” she says.

For now there are no easy fixes. Anna says many of her colleagues have left child social work because they felt undervalued and unsupported. “The hardest part is it doesn’t have to be this way – a lot of it could be avoided if carers and staff were properly supported and valued,” she says. “But they aren’t. So children pay the price.”

* Names have been changed