The National Disability Insurance Scheme (NDIS) is a critical program in Australia, providing essential support to people with disabilities. However, like any extensive system, it has its strengths and areas needing improvement. Recently, a final review of the NDIS was conducted to assess its effectiveness and propose necessary changes. This review is particularly relevant for investors in the Specialist Disability Accommodation (SDA) sector, as the recommendations and reforms outlined in the NDIS Review Report have significant implications for current and future investments. Understanding these changes is crucial for making informed decisions and optimising investment strategies in this evolving landscape
We need to be clear about this; the NDIS Review Final Report is about taking a holistic view of the successes and failures of the current scheme and determining how it can better serve persons with disability and their broader community. To skip to Recommendations 8 and 9 in the final review report, those that deal with SDA specifically, will only give you a narrow perspective of what the changes are about and how this is likely to affect you as an investor when all the dust settles.
This review goes well beyond the NDIS (who was to know that there are persons with disability that don’t qualify for NDIS support?), it will require significant cooperation from a number of State and Federal bureaucracies, new funding commitments and significant legislative changes. There are 26 recommendations and 139 actions that all tie in with one another.
Get a cup of coffee and let’s get started – when this report is fully understood, dear investor, opportunity will knock.
Key Takeaways for investors in SDA
The accelerated “retirement” of Basic and Legacy stock will be prioritised : This stock does not meet the basic criteria of any of the SDA categories or meet the needs of SDA Participants and needs to be retired or repurposed as soon as possible. Currently this stock comprises 14.2% of all dwellings.
One bedroom dwellings will be discouraged: This stock promotes isolation and poor outcomes for Participants, and makes it difficult to provide shared services. Excluding Basic stock, 47.2% of dwellings within the physical disability categories are 1 bedroom dwellings.
There is no longer a need for Group houses: These dwellings have 4 or more Participants and will no longer be a category. Excluding Basic stock, 14.9% of all dwellings are currently Group houses.
The Improved Livability category will be replaced: This category will be replaced with a similar SDA category that allows for greater wheelchair access and allow for a wider range of Participants and provides better value. Excluding Basic stock, 9.1% of all dwellings are Improved Livability.
No one will be forced to move: No matter what the current living arrangement is, or what the current SDA housing level has been assessed at, it will remain.
“Try before you rent” will be introduced: Funding will be provided to Participants to enable them to trial new living arrangements before they commit to them, making a transition to SDA far less daunting.
Why the NIDS Final Report Review?
Perhaps the best answer to the question is that it was time for a review. The scheme has been fully rolled out for 3 years and many of the shortcomings are well known.
What is the Gist of the Proposed Reforms?
There are 2 recurring themes:
The poor integration of the NIDS with mainstream services (P57)
Access to the NDIS should be based first and foremost on significant functional impairment and need, and only on secondly on medical diagnosis (P38)
Importance of Integration with Mainstream Services
Concentration of Funding in the NDIS
The NDIS was intended to be one of many levels of support for people with disabilities, yet 93% of all disability funding (2021 – 2022) has now been rolled into the NDIS. This has left a number of people who don’t qualify for NDIS without any support denying them much needed services and leaving them far more vulnerable.
Mainstream Services
The NDIS is not, by design, able to work in well with other bureaucracies that deal with persons with disability such as transport, child protection, the justice system, education, hospitals, aged care, and the mental health system. These services are called “mainstream services” and fall outside the Participant’s NDIS budget. If the budget is increased for these services, there will be better support outcomes and efficiencies.
Focusing of Functional Impairment
A New Approach to Budget Allocation
The best way to put this is as follows:
A Medical Diagnosis perspective is Disability A + Disability B + Disability C = $x in your budget.
A Functional Impairment perspective is “Given your total disabilities and your particular circumstances, you will need $x in your budget to live your best possible life.
Prioritising Functional Impairment
As the Review puts it, “Access to the NDIS should be based first and foremost on significant functional impairment and need — and only secondly on medical diagnosis. (P38) and the “NDIS budgets should be set at the whole-of-person level, rather than built line by line for each support need.” (P40)
Flexibility and Fairness
This should also make the system fairer. With this comes a whole raft of new titles and roles to replace old titles and roles.
Introduction of Foundational Supports
“Foundational disability supports are disability-specific supports that are available to all people with disability and, where appropriate, their families and carers. They are available outside of individualised budgets. As the name suggests, they are the supports that set the foundations for a good life that should — by right — be available to all people with disability. They are also foundational to the sustainability of the NDIS and therefore are foundational to this Review” (P34)
Mainstream Services and Foundational Supports
The vast majority of people with disabilities should only require “mainstream services” and “Foundational Supports”, which are almost entirely funded outside of the NDIS. The NDIS is there to fund individualised supports only.
How Does This New Philosophy Affect SDA Housing?
There are two underlying points when it comes to housing:
Housing and Living Supports should “promote choice, recognise rights and be consistent with the long-term sustainability of the scheme (P44)
The supply of Specialist Disability Accommodation (SDA) is not always meeting the needs of participants. To enable the delivery of best practice sharing of living supports and stop ‘closed system’ houses operated by support providers, there should be a new category of SDA (P44)
Housing and Living Supports
This first point is again, taking a more holistic view of the Participant’s needs rather than focusing on their disability. The intent is to have an open discussion with the Participant and determine what housing arrangement best suits them. This should promote a bit more fluidity in the type of housing each Participant ends up moving into.
SDA and the Needs of the Participant
This is the big one and consists of two main points:
There are 41,000 Participants receiving 24/7 living supports, that “…require at least eight hours of active support and/or supervision with activities of daily living and some level of support for the remaining hours of the day while at home, including overnight assistance (whether active or passive). (P 138). As of September 2023, this figure includes 32,973 Participants that receive SIL supports, but only 23,277 that receive SDA supports.
Many of those that do not get SDA support end up in houses that are rented by the SIL’s and sub-let to Participants. This leads to a number of problems such as:
Housing that is not secure for the long term.
Housing that is not modified for people with disabilities.
Housing that is in short supply.
Housing that is tied to the SIL i.e. a “closed system”. (if you don’t like your SIL, you have to find a new house)
Additional Points Raised in the Review
There are a few other points that have been raised in this review:
“There is a critical shortage of affordable and accessible housing in Australia. To address this, Australian Governments should publish a targeted action plan for housing under Australia’s Disability Strategy. This should include a requirement to build all new social housing to Gold Level Liveable Housing Design Guidelines or equivalent” (P44)
“While single living arrangements with no sharing of supports are needed in specified circumstances, they can lead to isolation and poor outcomes for participants” (P139)
“At the end of June 2023, over half (55 per cent) of SDA enrolled places were in either group homes with four to five residents or legacy stock (dwellings designed for six or more long-term residents).” (P146)
“The Improved Liveability category of SDA should be removed as it does not represent value for money.” (P150)
What Are the Intended Changes to SDA?
Retirement of Basic and Legacy Stock
The “retiring” of Basic and Legacy stock will be prioritised. “The strategy should set out timetables for upgrading or repurposing ageing stock that does not meet the basic criteria of any of the SDA categories (Basic), and of stock that houses 6 or more Participants (Legacy), and transitioning participants to appropriate housing in line with their needs and preferences.” (P154). As of 30th September 2023, there were 1,188 dwellings across Australia that meet this criteria in the physical disability categories. (14.2% of all dwellings).
Discouragement of One-Bedroom Dwellings
One-bedroom dwellings will be discouraged. This is in part due to the difficulty in providing shared services, but also due to the isolation and poor outcomes for Participants. Excluding ‘Basic’ stock, there are currently 3,948 dwellings across Australia that meet this criteria in the physical disability categories. (47.2% of all dwellings).
Limiting Future Dwelling Sizes
“Given that reasonable and necessary funding would typically be based on an average shared support ratio of one support worker to three participants (while ensuring flexibility in line with a needs-based assessment process), there is therefore no longer a need for new SDA dwellings of four bedrooms or above, other than where this is the choice of participants.” (P150). This will limit future dwelling sizes to 2 or 3 Participants only. Excluding ‘Basic and Legacy’ stock, there are currently 1,246 dwellings across Australia that meet this criteria in the physical disability categories. (14.9% of all dwellings).
Removal of the Improved Liveability Category
“The Improved Liveability category of SDA should be removed as it does not represent value for money.” (P150) As noted within the Report, “Following the 2022-23 review of SDA prices, the price of Improved Liveability SDA is now only marginally cheaper than Fully Accessible SDA, despite the latter having more specialised design features that can support a wider range of participants. This statement is absolutely correct, and the size of the increase in the payment in July 2023 caught many by surprise. The reason given by the NDIA for this increase was to promote more investment in this category. Excluding ‘Basic and Legacy’ as well as 1-bedroom stock, there are currently 764 dwellings across Australia that meet this criteria. (9.1% of all dwellings).
No-One Will Be Forced to Move
No-one will be forced to move. No matter what your current living arrangement is, or what your current SDA housing level has been assessed at, it will remain. Those living in ageing (legacy and basic) stock, as well as new participants to the scheme, should be assessed according to their level of need and be funded for an alternative category of SDA (which could include the new shared support SDA category). (P150)
Introduction of a New Low-Cost Category of SDA
“Access to a new low-cost category of SDA should also be introduced for participants sharing living supports who do not require the specialist design features of other SDA categories.” (P149). This category is intended to provide housing for the many Participants that obtain SIL support but have not up until now qualified for SDA support. These houses, together with all new social housing are to be built to Gold Level Liveable Housing Australia Design Guidelines (P44). This new category will potentially expand the number of Participants that will be eligible for SDA by as many as 9,696 Participants (41.6%).
Funding for Trial Living Arrangements
“Participants requiring 24/7 living supports should receive funding to trial new living arrangements before they commit to them, and vacancy management arrangements should allow more time for residents to choose who they live with.” (P142) This will enable potential Participants to “try before you rent” and thus making any potential transition to a new SDA home far less daunting for the Participant.
Potential changes in SDA stock by room count and design category
Note:
What Are the Potential Consequences of These Changes for SDA Investors?
Increased Demand for New SDA Dwellings
First of all, it is important to note that the proposed changes are multi-dimensional and certain reforms have to be in place before others can be contemplated. This will take time and until then the status quo remains. Further, the NDIA desperately needs SDA investment as current supply of new dwellings is barely keeping up with the increase in the number of Participants that are joining the scheme, let alone providing sufficient dwellings for the ‘back-log’.
“These reforms are significant. Taken together, they represent wholesale reform of the disability ecosystem. To work, they need to be implemented as a package, with careful sequencing to ensure the most important foundations are in place before other reforms occur. That’s why “the implementation process will take time and require further engagement with people with disability, the sector, and all levels of government” (P50).
Addressing the Shortage
The intended accelerated retirement of so many Basic and Legacy rooms will greatly increase the number of Participants looking for new SDA dwellings. There are 1,495 Basic and Legacy dwellings, which adds up to 6,598 rooms. Couple this with the potential 9,696 new “SIL Participants” that are currently not supported within the SDA framework, and the number grows to over 17,000 new SDA rooms required. This does not even take into consideration the number of SDA Participants that are currently looking for their first SDA home.
It is also worth noting that of the 8,354 dwellings referred to in the table above, only 2,550 dwellings would be approved going forward. (30.5%).
Incentives for Investors
To house so many people will be a mammoth task, will take quite some time, and require a significant incentive for investors to encourage them to deliver these homes.
The number of so many new Participants will in itself reduce the risk of vacancy, as will the new “try before you rent” plan which will be coupled with a more generous ‘vacancy management arrangement’. This in itself will encourage more investors to invest in SDA as the number one question for most investors is “Can you fill my house?”. However, as history has proven, the returns have to be attractive enough to warrant entry into the SDA space. Fully Accessible, High Physical Support and Robust, specifically 2 and 3-bedroom dwellings, will hardly be affected by the proposed changes and as such the current funding regime will no doubt remain as is. The category that is most affected is Improved Liveability (I.L.).
How Does The NDIS Review Impact Improved Liveability?
Impact on Current I.L. Participants
It is important to note that those Participants that currently have I.L. in their plan, or will have before any proposed reforms are implemented, will always keep that level of funding for as long as they require it. “In implementing this change, there should be no change to the living arrangements for those currently living in Improved Liveability SDA.” (P150).
It is currently estimated that there are 10,735 Participants with I.L. in their plan, however, there are only 4,698 I.L. rooms, of which 2,746 were built before the advent of SDA, and 649 are currently ‘under construction’.
Future of I.L. Dwellings
The question arises as to what happens in the future if an I.L. Participant leaves? Can another Participant with I.L. move into that vacant room, or will the room revert to the funding offered in the new category? This, I don’t believe anyone can answer at this point in time.
Value for Money
The level of increase in funding for I.L. dwellings announced in July 2023, came as a surprise, and it is no wonder that the report stated that I.L. does not represent value for money, because it probably doesn’t.
Having said that, the criteria for I. L. dwellings assume that all I.L. Participants are ambulant and as such will never require wider doors, wider corridors, or larger bathrooms. Feedback from those involved in the disability sector report that this is not always the case. I.L. Participants can and do have bad days where they can’t walk and require a wheelchair, which in effect prevents them from being able to freely move around in their home.
So, it’s not so much that I.L. dwellings do not represent ‘value for money’, but rather they are not entirely fit for purpose. Gold Standard Liveable Housing Australia (L.H.A.) design guidelines address these shortfalls in design requiring the dwellings to be far more wheelchair-friendly.
Attracting Investment
It has been shown in the past that returns of around 12% for investors were insufficient to entice any significant investment in I.L. dwellings. Most investors would rather outlay more money and obtain the higher returns in the other SDA categories, or not invest in SDA at all. When the returns for I.L. were raised it may have spurred more I.L. investment (it was too short a period to tell), but it certainly made for a wider ‘safety net’ for Fully Accessible and High Physical Support investors.
If there is a push to retire Basic and Legacy stock, then there will be a tremendous need for L.H.A. dwellings, which will not be filled by spill-over from the other categories. It will be interesting to see what returns will be offered to entice investment in this new much-needed category. The Report hopes that it will be “low cost”, but a reasonable bet would be that it will have to be higher than 12%, otherwise it again will be ignored by investors. When the Report states that the I.L. category does not represent value for money, the market has already made it quite clear that neither does a 12% return.
Implementing The Changes in The NDIS Review
Cooperation and Coordination
The focus of this response to the Report has been the philosophy behind the Report and the proposed changes to the system that will affect SDA and its investors. There are so many other issues that have been covered within the Report which this analysis has not gone into. To implement the proposed changes will require a lot of cooperation in every direction, from State, Territory and Federal politicians (and opposition parties), other Government agencies, the disability community, numerous service providers, investors, etc. It will require restructuring of government departments, businesses, and an agreement to change the funding model between States, Territories, and the Federal Government.
“We also recognise that people with disability, their families, carers, Disability Representative Organisations, workers, and disability service providers are exhausted by never-ending change. There is significant reform fatigue, and everyone craves consensus and certainty around the transition to a better future for the NDIS.” (P269) And we haven’t even started.
Legislative Changes
The Report states quite glibly that “Some of our proposed reforms will require changes in relevant legislation”. (P270) Appendix D – Legislative Changes, runs from Page 306 – P310. It’s a very long list!
In Conclusion
Focus on Participants
As stated at the outset, the focus of the Report is about changing the system to better serve the needs of the disabled community. Housing is just one small part of this.
Complexity and Timeline
The changes are complex, involve a lot of players and will take every bit of the 5 years that is planned.
Goals for Housing
When it comes to housing, what this Report wants to see is:
More power to the Participants.
More Participants supported by SDA housing.
Housing that is more ‘fit for purpose’ and hence better value.
Significant Changes for Participant Benefit
Most of the significant changes are for the benefit of the Participant, that is the fast tracking of the retirement of Basic and Legacy dwellings. One-bedroom dwellings are in the crosshairs in part due to cost (the difficulty in sharing supports), but also due to the poor outcomes and isolation of Participants. Four and five-bedroom dwellings (group houses) are in the firing line, although interestingly the Report does not exactly make it clear why.
Improved Liveability and New Categories
Improved Liveability is different, at it is essentially being replaced with another category that will provide “better value”, which is, Gold Level – Liveable Housing Australia dwellings. Essentially the difference between the two is accessibility for wheelchairs. So, the question is, does “better value” mean lower returns, or more ‘fit for purpose’, or a combination of the two? It is clear however that LHA Gold houses will cost more to build than I.L. houses but given that they will fit within the preferred model of 2 and 3-bedroom dwellings and will be more ‘fit for purpose’ coupled with the desperate need for this category to be supported by investors, it would be a reasonable bet that the returns will be in line with Fully Accessible and High Physical Support.
Real Cost of Housing and Living Supports
The real cost of the ‘housing and living’ supports is not the capital cost of the house, but the cost of running the house, and this essentially remains the same whether the Participant is in a non-SDA dwelling or an SDA dwelling. “SIL payments alone were $8.8 billion, representing a quarter of total scheme payments.” (P138)
Positive Outlook for Investors
This Review should be seen in a positive light by all potential investors; however, it would probably be prudent to stick to 2 and 3-bedroom dwellings, and if you choose to build an Improved Liveability dwelling, ensure that it also meets the criteria for Liveable Housing Australia – Gold standard.
