GUEST: Why recent changes in the Buy-To-Let market could transform Children’s Residential Care

NCERCC welcomes an article by guest writer Tom Ellison.  This is the first in a series of articles about children’s residential care and, in particular, changes to the children’s residential care landscape.

Tom writes:

Someone once told me that the children’s residential sector is like a village because you tend to run into the same people again and again.  I liked the analogy, and it also reminded me of the phrase “it takes a village to raise a child”.  Which sounded good, healthy and wholesome.

The village has changed a bit over the years: smaller providers have made way for larger ones, but you still tended to run into the same faces in interviews and at conferences. Whether working for a large private equity backed provider or a family firm, the language, the values and the topics of conversation remained centred on how we can do a better job for children.

So, what has any of this got to do with the buy-to-let market?  Well, the village is changing.  Newcomers are moving in.   In recent years, buy-to-let landlords, finding margins squeezed and regulation increased in that sector are exploring alternative property uses, including the development of children’s homes.  Rising interest rates and broader economic uncertainties have driven landlords to become curious about alternative uses for their properties – and led them to our village.

Evidence of this trend is visible if you join the dots.  Ofsted is reportedly sitting on several hundred applications to open new homes, many in the North and Midlands, where there is not necessarily a shortage of residential care homes. I’ve had many recent conversations with recruiters and consultants around the sector who have stories of private landlords approaching them for advice on opening children’s homes. To quote one example, someone I work with told me that there were five private landlords at his gym all proposing to open children’s homes!

Moreover, I am told regularly that financial advisers and private wealth managers are now recommending that a children’s home should be a necessary part of any suitably diverse portfolio (this was discussed on The Rest Is Money Podcast, 15-22 September 23).

Does this matter?  The temptation is to be sniffy and question the motives of these new arrivals in the Village.

But are they any different from the private equity groups who’ve dominated the sector in recent years or even the individuals who set up care businesses in the 80’s and 90’s that have since sold to the PE types.

I suppose the answer is “I guess we’ll see” how the new neighbours conduct themselves.   They may well surprise us by becoming good citizens and exemplar providers.

In truth, like all newcomers, they will bring a mixture of blessings, but it would not be a surprise if the mass arrival of private sector landlords does not provide a interesting corrective in a sector deprived of supply in recent years.