The care home sector is consolidating around fewer, larger homes while providers are increasingly relying on private-pay residents to remain financially viable, according to the latest annual assessment from the Care Quality Commission (CQC).
In its ‘State of health care and adult social care in England 2025 26’, published today, the regulator said the adult social care market is undergoing significant structural change, with more care home beds concentrated in large-scale facilities and a growing presence of institutional investors in the sector.
The watchdog warned this is leading to provision being reshaped "by accident rather than by design" as operators respond to economic pressures, commissioning challenges and funding constraints.
Data analysed by CQC shows the overall number of care homes has fallen by 8 per cent since 2019, while total bed numbers have remained broadly stable, due to capacity being increasingly concentrated in larger facilities, with homes of 50 beds or more now accounting for 70 per cent of all care home beds, up from 59 per cent in 2012.
However, the number of beds in care homes is being outpaced by an ageing population, the watchdog warned, which is leading to a fall in relative capacity. For example, there were nearly 450 fewer care home beds per 100,000 adults aged 65 and over in April 2026 than there were in April 2019, the report said.
This shift towards larger homes "is most marked" in nursing homes, according to the CQC's analysis, with those with 50 or more beds growing from under four in ten (39 per cent) to more than half (51 per cent) in the 14 years between 2012 and 2026, while
small-sized services with up to 10 beds dropped from 5 to 4 per cent in the same period.
Leadership concerns
Overall, the watchdog’s report showed that seven in 10 assessed care homes were rated good or outstanding overall.
However, it said that leadership in the sector is a key area for improvement, reporting that around a third of homes were rated requires improvement or inadequate under the regulator's ‘well-led’ assessment area.
This compares to around 9 in 10 care homes rated as good or outstanding for providing caring (89 per cent) and responsive (88 per cent) support.
It said the lower ‘well-led’ ratings were underpinned by concerns around governance, accountability and management oversight, with more than half of relevant assessments (55 per cent) finding shortcomings in these areas.
Care Quality Commission adult social care and integrated care chief inspector Chris Badger said the market was experiencing “sharply divergent trends”.
"In social care, we're seeing sharply divergent trends, with more of the available care home beds concentrating in large homes, alongside a recent increase in institutional investors acquiring care homes," he said.
"This reshaping is happening largely by accident rather than design," he added.
Funding pressures and self-funders
The report also highlights growing financial pressures across the system, with providers increasingly targeting self-funding residents as the funding gap between care costs and local authority budgets widens.
CQC estimates that more than half (52 per cent) of care home residents now fund their own care, rising from 48 per cent in March 2024.
Meanwhile, its analysis showed that the number of homes operated by the five largest providers increased by 26 per cent in the two years to September 2026, driven largely by transactions involving US-based real estate investment trust Welltower.
Regional variation
The watchdog’s analysis revealed wide variation in the quality of care homes across England.
It said homes in the South West and London were found to have the best ratings for quality of care, with around eight in ten homes rated overall as good or outstanding in both areas.
It added the North West had the poorest overall ratings for care homes, with only 56 per cent of all assessed services rated as good and 2 per cent as outstanding.
Better commissioning
The regulator said local authority commissioning had a strong impact on care quality and market sustainability, with examples such as Wigan Council, rated outstanding, demonstrating where collaborative market shaping and investment in local provision helped reduce reliance on out-of-area placements.
Mr Badger said forthcoming reforms must include sustainable funding, stronger commissioning and improved leadership if the sector is to develop around people's needs rather than market pressures.
"Ten years ago, we warned that adult social care was approaching a tipping point," he said.
"Successive governments have not resolved the issue of long-term funding for the sector.
"Now, this government's renewed focus on social care offers an important opportunity for meaningful solutions in social care that improve outcomes across the whole health and care landscape."
CQC chair Baroness Julia Neuberger said pressures across health and social care were increasingly interconnected, adding that providers, commissioners, regulators and government would need a collective response to tackle widening inequalities and growing demand.
