Health and Care update: Setting up a children’s home

Setting up a children’s home can seem like an attractive option when, compared to some sub-sectors of social care, the financial barriers are relatively low, and the financial rewards can be high.

An undertaking to look after children with additional needs, however, should not be taken lightly; the following article highlights some of the challenges that a new entrant to the market faces and the areas to consider before committing to this new venture.


The sector is highly regulated and you need to satisfy a strict criteria before you can operate. We understand that, at the moment, the average length of time from application to registration is 17 weeks.
There are three stages to the OFSTED registration process:

  1. Complete and upload an SC1 with all of the required documents attached
  2. OFSTED carry out further checks and may ask for more information. This will include looking at your DBS, GP health assessment and send out requests to your referees.
  3. OFSTED will interview you and your responsible individual and manager so you/they can demonstrate suitability and that the registration criteria has been met.
  4. Once registered, Ofsted will inspect the provision twice a year. A poor inspection report can impact the likelihood of receiving referrals from placing authorities.


You will need to consider the type of property that is required, where it is (from the perspective of safety for the children and taking into consideration neighbours) and if planning permission is required. OFSTED cannot register you until you have the required permissions for your property, and this needs to be evidenced.

Regulation in respect of planning is a moving feast and we would always recommend engaging a planning consultant to ensure you have the correct permissions to operate as a children’s home.


It typically takes longer to open a children’s home compared to other types of care businesses due to the in-depth regulation process. As a result, the set-up costs are likely to be higher and you will need sufficient capital to take you to a point where you start accepting children. It is crucial that you have a robust and realistic business plan/financial forecast and OFSTED are likely to look at it in detail. It is sensible to engage with an accountant that has experience in the sector to give credibility to your plan/forecast.

Operating from a freehold property increases the attractiveness of the opportunity to lenders and will likely improve chances of securing funding.


You will need to demonstrate to OFSTED that you have sufficient staff with the relevant experience and qualifications to look after children. There will not be an expectation of a full compliment of staff from the outset, but enough to open the home and accept your first child. The registered manager is a critical role, and it is vital that they have the right qualifications, experience and skills.  The registered manager will be interviewed as part of the OFSTED registration process.

The looked after children sector faces the same staffing issues as the wider social care environment, so the challenges around finding high quality staff should not be underestimated.

There have recently been a number of press articles highlighting the morality of profiteering from the care of vulnerable children. The Competition and Markets Authority have also recently investigated the profits being made by large corporate groups.

It is likely that this will put further pressure on local commissioners which will, in turn, result in further scrutiny of the financial and operational practices of the providers.

We would strongly advise that anyone considering entering the children’s residential services market carries out considerable research and have realistic expectations. There is useful information here.

Yvette Stanley, OFSTED’s National Director for Social Care has written a blog covering top tips for registering children’s homes here. 

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