A government-backed audit has warned that a startling rise in the number of vulnerable children who are denied their freedom by the state is forcing more children into illegal housing at exorbitant costs to taxpayers.

Among the children are a seriously crippled child whose feeding tubes had been chewed by mice and a young woman who was forcibly restrained for a full day by personnel. Others have been discovered in caravans, Airbnbs, and bedsits that are watched over by security personnel.

Meanwhile, the huge demand for scarce placements now means the individual cost of caring for some children in care exceeds £1m a year.

At least 1,000 of Britain’s most vulnerable children are now being subjected to deprivation of liberty (DoL) orders, with the number of applications for their use more than doubling between 2021 and last year.

Speaking to the Observer, the children’s commissioner for England, Rachel de Souza, said about half of the children subject to an order were placed in unregistered or illegal provision. A lack of suitable care places is being blamed for fuelling the orders, which can involve the use of restraint, sedation, locks on rooms and other restrictions.

However, state authorities currently have no clear picture of how many children are in illegal homes, or where they are.

Sir Andrew McFarlane, the president of the family division of the high court, gave his backing to De Souza, who is demanding a sweeping overhaul of the care being provided and a reduction in the orders.

The Observer understands the government is preparing to set out plans to tackle the crisis this week. The education secretary, Bridget Phillipson, said she would be announcing measures “lifting the curtain on care providers profiteering from vulnerable children” and tackling unregistered placements.

Shortcomings have been confirmed in a new government-sponsored analysis in which affected children spoke to the children’s commissioner’s team. De Souza has now launched a detailed investigation into how many children are in illegal settings and how much their placements are costing.

She warned the escalating use of DoL orders was a red flag highlighting the crisis in children’s social care. “This is as serious as it gets,” she said. “There is an absolutely alarming rise in numbers of children deprived of their liberty. Our most vulnerable children are being placed in these inappropriate, illegal settings. They’re often being looked after by security guards and others – and costing a fortune. We’re putting profiteering above protection. It is a really sad, terrible story.

“These are children. We need to remember they could be our children. I have seen international examples where this does not happen and does not need to happen. The best interest of the child comes first and that’s what we’ve got to move to.”

McFarlane said: “The young people who are subject to deprivation of liberty orders are some of the most vulnerable in society. Judges have long highlighted, through judgments, the need to address the serious lack of registered secure accommodation. We welcome the much-needed attention this issue is now being given.”

In the new report, children spoke of being confused by the process and feeling powerless. One 17-year-old said: “I didn’t even know about it or what it was, to be honest … It was very, very quick. And then I moved to a worse, unregulated care setting.”

Another recalled: “I said: ‘Why’s the door locked?’ and they said: ‘Because you’ve been put on a three-month DoL order.’” Some of those deprived of their liberty by the courts were not even given the chance to speak to the judge involved.

“Caravans, Airbnbs. We found a child in such bad accommodation with disabilities that there were rats eating through their feeding tubes every night,” De Souza said. “We’ve had children in tents. It’s absolutely shocking.

Related: ‘Nowhere else is available’: how vulnerable children end up in illegal care homes

“They’re often hundreds of miles away from their families. Most of them are not in any sort of education or at best, receiving a very, very limited curriculum. Most of them are in solo placements, socially isolated. Children absolutely, universally said they wanted to be living closer to home, near family and friends.”

She is now calling for the forthcoming children’s wellbeing bill to restrict the use of DoLs, as well as put an end to profiteering in the care provided to children with the most complex needs. “Profit-making just feels so wrong in this area,” she said. “Local authorities have a lack of their own accommodation that they can use and a lack of secure beds. They are desperately looking around for someone to provide a solution and that is allowing profiteering to get totally out of hand. It needs to be stamped on.

“No child should be in an illegal children’s home, no matter their circumstances, and we need radical upstream investment in creating new and safe places for children to live. I want to see the law strengthened. We need children only to be deprived of their liberty for their own safety, not because there’s a shortage of appropriate accommodation.”

The father of one teenager subjected to a DoL order described how his severely autistic son, now 17, had been placed in a series of inappropriate settings since the age of three.

At one stage, he was placed in an Airbnb. “It had an open balcony and two sets of stairs,” he said. “It just wasn’t geared up for him whatsoever.” It took endless battles to find his son the right care, which was only achieved when he was 16.

Speaking to the Observer, Phillipson said: “Children who have been deprived of their liberty are facing the most heartbreaking experiences, with many being retraumatised by a system that can’t meet their needs. That is why on Monday I will confirm plans to break down the barriers to opportunity they are facing, including by developing new community-based provision to meet their needs and give children the best life chances.

“Our reforms will go even further to make sure we do better for vulnerable children, lifting the curtain on care providers profiteering from young people, tackling unregistered placements and shifting the focus back to earlier intervention to help children achieve and thrive.”