Attempts to recruit more foster carers have not kept pace with their exodus as a program shuttling vulnerable children through motels, hotels and caravan parks at huge taxpayer expense comes to an end.
The use of these types of unaccredited emergency accommodation in NSW - in the absence of foster-care arrangements - has been slammed in multiple reports as recently as August.
Examples of children not being properly fed or clothed have been highlighted, while other criticisms include the lack of properly trained staff and the annual costs of up to $2 million per child.
Families Minister Kate Washington told a budget estimates hearing on Tuesday alternative care formed part of an increasing reliance on costly emergency arrangements the government would try to end.
For-profit providers and labour-hire companies involved in the system were not required to meet safe-care standards and faced limited oversight.
Accredited carers will continue providing other types of emergency accommodation under a revised system that will include a ban on alternative-care arrangements by February.
That time will allow for the safe relocation of 39 children still in the system, by reuniting them with their parents or placing them in an intensive, therapeutic-care environment.
Some 100 children have already been shifted out of the system since November.
The use of accredited emergency accommodation would also be reduced over time, Ms Washington said.
But more foster parents were needed despite almost 200 emergency carers being recruited so far, she said.
Opposition families spokeswoman Natasha Maclaren-Jones said the Department of Communities and Justice lost almost 800 carers in the year to June while hundreds more left the wider non-government system.
Ms Washington said that exodus came from the former coalition government leaving behind a broken child-protection system that did not support or value foster carers.
Adopt Change chief executive Renee Leigh Carter said the incoming ban on alternate care was a relief, but she called for more support for the sector.
"Our top priority is to see children and young people placed in stable homes, where they can receive the support and care they need to experience a positive childhood and heal over time," she said.
The Advocate for Children and Young People recently found children felt unsafe, unsupported and disconnected in the temporary arrangements, with health and schooling often affected.
One boy likened himself to "a doggy in the pound ... moving from cage to cage", while girls raised concern about their risk of abuse.
In a 2022 court case, two brothers' near-perfect school attendance plummeted after a care agency receiving $2600 a day regularly dropped them off late and failed to properly feed and clothe them.
The "last resort" placements have cost about $500 million in the past six years.
Hotels and motels have also been used for out-of-home-care placements in Victoria, where a children's advocate in 2019 found such instability harms children and young people.
About half of the children in NSW's emergency care arrangements are Indigenous.
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Kids Helpline 1800 55 1800 (for people aged 5 to 25)
