Vulnerable children aged under 12 should be housed in specialist care homes rather than in foster care, according to a groundbreaking investigation into residential childcare.

If the recommendations of The National Residential Childcare Initiative (NRCCI) are adopted it will amount to the biggest shake-up in the sector for two decades.

Councils teaming up to provide specialist children’s homes for under-12s would end the presumption that foster care is the best option for younger children.

Romy Langeland chaired the initiative, which was launched in spring 2008 by Children’s Minister Adam Ingram to carry out a root-and-branch investigation of residential care for children who are looked after away from their family homes.

The review also calls for specialist provision for children with mental health problems, “challenging” teenage girls and short-term residential care for families who are struggling with parenting.

Ms Langeland said the argument about whether more children should be taken into care was outside the initiative’s remit, but that there was a need to be much more strategic about what was provided to those who did need to be looked after in residential settings.

Traditionally there has been an assumption that residential childcare is not suitable for under-12s, and they have tended to be placed in foster care in the first instance.

However, many end up in residential care regardless, often after a series of failed foster placements. About 10% of children in residential care are 12 or under.

Ms Langeland said earlier entry to residential care might be desirable for children as young as five or six. “If you say under-12s shouldn’t be in residential care you are not going to properly address their needs,” she said.

Currently the vast majority of residential care for children in Scotland is generic. Specialist

help would address other anomalies in the system, she said – such as the fact that teenage girls with histories of neglect, abuse or exploitation regularly find themselves accommodated in units alongside boys who have a pattern of offending, including some deemed “sexually aggressive”.

Short-term residential care for families might help avoid the cost of dealing with crises later on, Ms Langeland added.

“We can’t take more and more children into care and have to find ways of keeping them in the community,” she said. “Some projects have successfully engaged with parents, and if that crossed the boundary into care there might be more you can do – especially for chaotic substance misusers.”

The NRCCI review has delivered five reports in total, covering issues including the sector’s workforce, the types of children’s homes and units that are needed, and the way they are commissioned.

Council Isabel Hutton, spokesperson for education, children and young people for Cosla, said local government was supportive of all the recommendations and would seriously consider how to meet the NRCCI’s aim.

Children’s minister Adam Ingram acknowledged the economic context, but said this should not be a reason to disinvest. “This is a false economy. We all know about the long-term costs to individuals and society of poor outcomes in childhood,” he said.