How much does it cost to open a children's home?

Most guides to opening a children's home give you a list of costs: the house, the furniture, the staff, the Ofsted fees. The list matters, but it does not answer the question a provider, a lender or an accountant actually asks, which is how much money has to be in the bank before the first child arrives.

That figure depends less on what things cost than on when they are paid. A new home pays its manager, its rent and its bills for a year or more before it earns anything, then recruits a full team before the first referral, then waits for councils to pay in arrears. This guide works through those costs for a home in England, shows a month-by-month worked example, and sets out which assumptions move the answer most. The example comes from ARC's free children's home cost and viability calculator, which you can run with your own figures.

The short version

• With the calculator's default estimates, the one-off costs of opening a rented three-place home come to about £63,000: the Ofsted registration fee, adaptation works, furnishing, legal costs, company set-up and a contingency. Buying the building adds a deposit and Stamp Duty on top.
• The cash you need is several times that. In our worked example, a three-place rented home needs about £373,000 before its cash position stops falling, because it spends 14 months paying costs before the first child arrives.
• Staffing is roughly four-fifths of the running cost. Covering one rota of two day staff, a waking night and a sleep-in takes about 7.8 full-time equivalent staff before the manager and deputy.
• Ofsted asks most applicants for a business plan and a cashflow forecast showing projected monthly income and expenditure for the first 12 months of operation.^[1]
• The assumptions that move the cash figure most are how early the costs start, how long registration takes, how long the first referral takes and how quickly councils pay.

Why the cash you need is bigger than the start-up costs

A children's home does not open the way a shop does. Before Ofsted will register it, the provider needs the building, a registered manager and a staffing plan. Ofsted's application guidance says the business plan must show that there will be a manager and enough staff for the initial number of children.^[1] So the manager is usually on the payroll, and the rent is usually being paid, while the application waits.

That wait is open-ended. Ofsted says applications that meet its priority criteria and are ready to open will generally be processed within six months. For other applications it says it will process them when it has capacity, and that it cannot give a timeframe.^[1] The calculator's default is 12 months from start to registration. That is a planning assumption, not a deadline.

Registration is not the end of the wait either. A registered home still needs a referral that matches the home's Statement of Purpose, and the rota team has to be recruited, trained and paid before that child arrives. Each further place then fills over the following months. Councils generally pay in arrears, so the first fee lands after the first child does.

Add those stages up and the lowest point in the home's cash position usually falls well after registration. That low point, not the list of start-up costs, is the amount of funding to arrange.

One-off costs

These are the costs paid once, mostly at the start. The figures below are the calculator's defaults for a rented three-place home. Fees are from gov.uk. The rest are ARC planning estimates, which you should replace with quotes as you get them.

A home with four or more places pays a higher provider fee of £3,284, plus a registered manager registration fee of £910.^[2] An existing provider opening another home pays the provider fee again, because each home is a separate application. Planning permission is not in the default figures because requirements vary between councils. Check with the local planning authority before you commit to a building.

If you buy rather than rent

Buying replaces the lease costs with a deposit, Stamp Duty Land Tax and conveyancing. Lenders for this kind of property typically ask for a 25% to 40% deposit, and the calculator assumes 30% with £10,000 of legal and survey costs.

Stamp Duty is an easy line to get wrong. A company buying a house pays the residential higher rates, which add 5 percentage points to every band.^[3] A building that is used as a children's home, however, is not treated as a dwelling for Stamp Duty purposes, so non-residential rates may apply instead.^[4][5] On a £300,000 purchase the difference is large: £20,000 on the residential higher rates against £4,500 on non-residential rates. Which applies depends on how the building is used when the purchase completes, which is a question for your solicitor. The calculator lets you pick either basis, or enter a figure you have been quoted.

Running costs once the home is open

Once the team is in place and the home is settled at its target occupancy, the monthly costs fall into four groups: staffing, property, regulatory and everything else.

Staffing

Staffing is the largest cost by a distance, and the easiest to underestimate, because the question is not how many people are on shift but how many people it takes to fill the rota every hour of every day of the year.

Take a common pattern: two staff on long day shifts covering 15 hours, one waking night member of staff for the other nine, one sleep-in, and a 15-minute paid handover at each change. That is about 14,500 paid rota hours a year. A full-time member of staff on 40 hours a week does not supply 40 hours every week: after 5.6 weeks of statutory annual leave and an allowance of 5% for training and sickness, each one covers about 1,770 rota hours a year. Allowing 5% of hours for agency cover, the rota needs about 7.8 full-time equivalent staff, which means a headcount of eight.

On top of the rota sit the registered manager and, in most homes, a deputy, both salaried and off the rota, and the Responsible Individual. For a first home the RI is often a director's time or a part-time arrangement, which the calculator costs at £1,500 a month. For comparison, the Department for Education's workforce census found an average of 9.5 full-time equivalent staff per private children's home.^[6]

Pay assumptions that drive the total:

• Hourly rate. The calculator assumes £14.50 an hour. The National Living Wage for workers aged 21 and over is £12.71 from April 2026, and the calculator warns you if you go below it.^[7] The DfE census found care staff were paid £13.06 an hour on average.^[6]
• Sleep-ins. Since the Supreme Court's 2021 ruling in Royal Mencap Society v Tomlinson-Blake, time when a sleep-in worker is permitted to sleep does not count as working time for minimum wage purposes.^[8] Sleep-ins are usually paid as a flat allowance, which the calculator puts at £65 a night.
• Employer costs. Employer National Insurance is 15% on pay above £5,000 a year per employee, and the Employment Allowance can reduce the bill by up to £10,500 a year.^[9] Only one claim is allowed per employer or connected group, so a second home in the same group usually gets nothing extra. Auto-enrolment pensions add at least 3% of qualifying earnings.^[10]
• Agency. Agency staff often cost around double the employed rate. A small allowance is prudent even if you aim for none.

Property, regulatory and the rest

Rent for a children's home is usually higher than the same house would let for to a family, because landlords price in the use. The calculator starts from the Office for National Statistics' local rent for a house of four or more bedrooms and adds a planning premium of 25%. No reliable national figure exists for that premium, so treat it as a number to test against real quotes.

Regulatory costs are the Ofsted annual fee, which is £5,390 a year for a home of up to three places, plus £536 for each place from the fourth to the eighth,^[11] and the monthly Regulation 44 independent visitor. Our guide to management oversight covers what that visit is for.

Everything else is utilities, council tax or business rates, vehicles, insurance, maintenance, training, recruitment and DBS checks, and care recording software, plus food, household costs, allowances and activities for each child. These are smaller lines individually, but together they come to nearly £6,000 a month in our example.

A worked example: a three-place home

The figures in this section come from running the calculator with its default assumptions for a new provider opening its first home. The only inputs given were three places, a rented house at £1,500 a month before the use premium, and a weekly fee of £5,500 per child. It is an illustration of how the costs stack up, not a prediction for your home.

Here is how the cash goes, month by month:

• Months 0 to 11: waiting for registration. The one-off costs go out in month 0. After that the home pays the manager, the Responsible Individual, the rent and the building's running costs at about £11,800 a month. By the end of month 11 the provider is about £204,000 down.
• Months 12 and 13: registered, recruiting. Registration comes at month 12, the first annual Ofsted fee falls due, and the rota team starts two months before the first child. Monthly costs jump to over £40,000 with no income yet. The position reaches about £293,000 down.
• Months 14 to 16: the first children. The first child arrives at month 14, but with fees paid a month in arrears the first payment lands at month 15. The second child arrives at month 16. The home's cash position reaches its lowest point here, at about £373,000.
• Month 17 onward: settling. Fees for the second child start to arrive, and from month 19 the home averages its target of 80% occupancy, which over three places is 2.4 children across a year. Income is then about £57,400 a month against costs of about £43,500 in most months. The table's £43,938 is slightly higher because it spreads the Ofsted annual fee across the year, while the month-by-month view charges it once a year. The surplus of roughly £13,900 a month starts paying back the cash that went in. It is month 46, almost four years after the start, before the cumulative position returns to zero.

Two figures in that table are worth separating. The cost per occupied place per week, £4,213 here, is also the break-even fee: at 80% occupancy, a weekly fee of £4,213 covers the cost of each child. The break-even occupancy runs the other way: at the fee you expect, how many children does the home need to cover its costs? Here it is 1.8 children, so the home covers its costs with two of its three places filled, and loses money with one.

What moves the number most

Changing one assumption at a time in the same example shows which decisions matter. Every other figure stays at its default.

A few things stand out:

• Timing beats price. Every month that the manager and the property are paid before they are needed costs around £10,000 in this example. Getting registration-ready faster, and not taking on the building earlier than you must, does more than shaving any single cost line.
• Plan for slow payment. Councils' payment terms vary. Running the calculator with a three-month lag as a downside case is a sensible stress test before you speak to a lender.
• The fee changes the outcome more than the cash figure. At £4,500 a week the cash needed rises only slightly, but break-even occupancy rises from 61% to 75%, and the home struggles to pay back its start-up funding.
• Some savings are not yours to choose. Night cover, the number of staff on shift and the number of places should follow the needs of the children described in your Statement of Purpose, not the spreadsheet. Ofsted will judge the staffing plan against those needs.

What weekly fee to plan around

The weekly fee is the one number the calculator will not guess, because fees vary so much with the needs of the child. For context, two councils' recent published figures put their average fee for a children's home placement at about £6,900 to £7,700 a week: Devon gives £7,710 for 2025-26, and Suffolk £6,870 as at March 2026. The range around the average is wide. Suffolk's placements ran from £3,950 to £16,660 a week.^[12][13] These averages include children with very complex needs, so they are context, not a target. The worked example above uses £5,500, deliberately below them, so that it does not depend on high-cost placements. Talk to the commissioning teams in the councils you expect to work with, and plan around what they tell you.

Occupancy matters as much as the fee. The DfE's workforce census found that about three in four registered places were filled, and the most common reason for an empty bed was a home waiting for a suitable referral.^[6] The calculator assumes 80%. If your plan only works at 100%, it does not work.

What Ofsted asks for about money

Unless you are a local authority or an NHS trust, your application to register a children's home must include:^[1]

• a business plan covering, at least, the background, marketing, finances and operations, and showing a manager and enough staff for the initial number of children
• a cashflow forecast estimating projected monthly income and expenditure for the first 12 months of operation
• your last two years of annual reports and accounts, unless the company is new

Ofsted also asks for a Statement of Purpose for the home and a location assessment showing why the home is needed where it is.^[1] Its guidance says there is no set format for a location assessment.

The calculator's month-by-month table is a good starting point for that forecast, because it already separates staffing, property, regulatory and other costs and shows when each starts. Your accountant will want to adapt it to your company's accounting and VAT position, but you will be starting from a model that matches the shape of a real opening rather than a flat 12-month average.

Scrutiny of providers' finances is increasing. The Children's Wellbeing and Schools Act 2026 gives the Secretary of State a financial oversight scheme for providers that meet conditions to be set in regulations, such as size and market share, and a backstop power to limit providers' profits after consultation.^[14] A clear, sourced financial plan is worth having from the start.

How to use the cost and viability calculator

The calculator is free, takes about 15 minutes, and does not ask for an account or an email address before it shows you the result.

1. Tell it about the home. Choose whether this is your first home or an additional one, give the postcode and the number of places, and say whether you will rent or buy.
2. Describe the rota. Staff on shift in the day, the day shift pattern, waking night and sleep-in staff. The calculator turns that into rota hours, full-time equivalents and headcount, with employer National Insurance, pensions and the Employment Allowance worked out for you.
3. Enter your weekly fee. You can give a different fee for each place. Published council averages are shown beside it for context.
4. Read the result. You get the cash needed and the month the low point comes, break-even occupancy at your fee, the break-even fee at your target occupancy, the monthly running costs and a month-by-month table.
5. Change anything. Every assumption is editable, and the result updates. A changed figure shows what it was changed from, so you can see what you have overridden.

Every number carries a label saying where it came from. gov.uk facts such as Ofsted fees and the National Living Wage are dated and sourced, and cannot be edited. Local data is rents from the Office for National Statistics, house prices from HM Land Registry and interest rates from the Bank of England, each with the period it covers. ARC estimates are typical sector figures you can change. Your inputs are the things only you know. When you take the result to an accountant or a lender, they can see which numbers are evidence and which are assumptions.

If you save the estimate, you can come back to it and change your figures, send a copy to a business partner, accountant or lender, and download it as a dated PDF.

It is just as clear about what it does not do. It is not a profit calculator and does not forecast profit or margin. It is not financial, legal or tax advice. It covers England only, and single-building homes only.

Where ARC fits

ARC is care recording and compliance software for children's homes in England. It appears in the calculator as one line, at its published price of £149 a month for a home of one to three places.^[15]

Before registration, the Prepare plan costs £29 a month per home. It lets you set up staff records, the rota and on-call, policies, the Statement of Purpose and the competency matrix while you wait for Ofsted, so the home is not starting from nothing on the day it is registered. The child features unlock when you move to the full plan. Two other free tools help with the application itself: the Registration Readiness Checker shows what is missing from an application, and the location assessment tool helps with the Regulation 46 assessment Ofsted asks for. If you are comparing systems, our buyer's guide to children's home software explains what to look for.

Common questions

How much does it cost to open a children's home in England? With the calculator's default estimates, the one-off costs for a rented three-place home come to about £63,000, but the cash needed is much larger because the home pays its manager, rent and running costs for months before any income arrives. In our worked example, a three-place rented home needed about £373,000 before its cash position stopped falling. Your figure depends heavily on timing, staffing and the fee you can expect.

How long does Ofsted registration take? Ofsted says applications that meet its priority criteria and are ready to open will generally be processed within six months. For other applications it says it cannot give a timeframe. Plan for the wait and cost it, rather than assuming a date.

What financial information does Ofsted ask for? Unless you are a local authority or NHS trust, a business plan, a cashflow forecast of projected monthly income and expenditure for the first 12 months of operation, and your last two years of accounts. New companies do not need to submit accounts.

How many staff does a three-bed children's home need? It depends on the children's needs and your rota. For two staff on shift in the day, a waking night and a sleep-in, the rota alone needs about 7.8 full-time equivalent staff once leave, training and sickness are allowed for, before counting the registered manager and deputy.

What weekly fee do councils pay for a children's home placement? There is no single national figure. Recent council figures put average fees at about £6,900 to £7,700 a week (Devon £7,710 for 2025-26, Suffolk £6,870 in March 2026), with individual placements far above and below that. Fees depend on the child's needs, so ask the commissioning teams you expect to work with.

Is opening a children's home profitable? The calculator deliberately does not answer that, because profit depends on things no model can know: which children you care for, what each council pays and how quickly you fill. What it shows is break-even: the occupancy you need at your fee, the fee you need at your occupancy, and how long the home takes to pay back the cash it needed to open. In our example that was almost four years.

Do sleep-in staff have to be paid the minimum wage for the whole night? No. Following the Supreme Court's 2021 decision in Royal Mencap Society v Tomlinson-Blake, time when a sleep-in worker is permitted to sleep does not count as working time for minimum wage purposes. Time spent awake and working does count.

Is the cost calculator free? Yes. It needs no account or email to show your result. Giving your details is optional and only needed if you want to save the estimate, send it to someone or download the PDF.

Sources

1. Ofsted and Department for Education, Apply to register a children's home (updated 10 July 2026). https://www.gov.uk/government/publications/how-to-open-a-childrens-home/apply-to-register-a-childrens-home Checked 30 October 2026.
2. Ofsted, Registration fees for children's social care services (from 1 April 2026). https://www.gov.uk/government/publications/become-a-childrens-social-care-provider-registration-fee/registration-fees-for-childrens-social-care-services Checked 30 October 2026.
3. GOV.UK, Stamp Duty Land Tax: residential property rates. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates Checked 24 October 2026.
4. GOV.UK, Stamp Duty Land Tax: non-residential and mixed rates. https://www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-rates Checked 24 October 2026.
5. Finance Act 2003, section 116 (meaning of residential property). https://www.legislation.gov.uk/ukpga/2003/14/section/116 Checked 30 October 2026.
6. Department for Education, Children's homes workforce census: stages 2 and 3 (29 May 2025). https://www.gov.uk/government/publications/childrens-homes-workforce-census-stages-2-and-3 Checked 24 October 2026.
7. GOV.UK, National Minimum Wage and National Living Wage rates. https://www.gov.uk/national-minimum-wage-rates Checked 30 October 2026.
8. Royal Mencap Society v Tomlinson-Blake; Shannon v Rampersad [2021] UKSC 8, judgment of 19 March 2021. https://caselaw.nationalarchives.gov.uk/uksc/2021/8 Checked 30 October 2026.
9. HM Revenue and Customs, Rates and thresholds for employers 2026 to 2027. https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027 Checked 30 October 2026.
10. GOV.UK, Workplace pensions: what you, your employer and the government pay. https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay Checked 24 October 2026.
11. Ofsted, Annual fees for children's social care services (from 1 April 2026). https://www.gov.uk/government/publications/childrens-social-care-annual-fees-for-providers/annual-fees-for-childrens-social-care-services Checked 30 October 2026.
12. Devon County Council, access to information disclosure on residential placement costs, 2025-26. https://www.devon.gov.uk/accesstoinformation/?p=17414 Checked 30 October 2026.
13. Suffolk County Council, freedom of information response 26988 on regulated children's homes (fees as at 11 March 2026). https://www.suffolk.gov.uk/asset-library/councillor-assets/foi-responses/26988-Regulated-childrens-homes.pdf Checked 30 October 2026.
14. Children's Wellbeing and Schools Act 2026, sections 16 (financial oversight) and 17 (power to limit profits). https://www.legislation.gov.uk/ukpga/2026/21/section/16 and https://www.legislation.gov.uk/ukpga/2026/21/section/17 Checked 30 October 2026.
15. ARC, Pricing. https://arccare.co.uk/pricing Checked 30 October 2026.