When talking to SDA Providers, the most common response when it comes to finding Participants is “We have the Participants, they are just not getting the funding”
This is no doubt true,,,,, but not according to the NDIA.
Over the past year, the amount spent on SDA supports rose from $271m in June 2022 to $365m in June 2023 to $470m in June 2024.
So why the mismatch? The probable answer is due to a combination of two factors: -
There is a lag between when an application is made and when Participants obtain their funding.
The applicant is either not or will not be eligible for SDA funding, or they are underfunded.
As to the first point, the NDIA states that 97% of “Home & Living” applications are finalised within 90 days, which is an improvement over the past few periods.
So, whilst there is a lag, it’s not a huge one, given that many Participants should be well underway through this process whilst your dwelling is under construction.
As to the second point, the applicant is not eligible for SDA, or is underfunded, it is worth noting a couple of points made by the NDIA:-
“The NDIS was designed to complement, not replace, other services for which the states and territories are responsible, including housing.”
“The average SDA payment per participant has also increased, by 17% per annum.”
Many applicant will either not receive SDA funding, and those that do, may be insufficient in number for the number of dwellings being registered within the particular location, remembering that SDA is intended for only a few Participants that need a “Specialised” home for them to be able to be able to live their lives to the fullest.
Whilst the average level of SDA funding has increased significantly, the average amount of SDA funding is only $14,400 per Participant, which is well below the lowest amount of funding that is expected by any investor in SDA.
The obvious reason for this low average payment is the number of Participants who are still in Existing and Legacy dwellings as a proportion of the total number of Participants obtaining SDA funding.
As of June 2024, there were 13,230 Existing and Legacy rooms still registered with the NDIA and 9,823 rooms that were classed as “New Builds”
In the review of the NDIS that was released in December 2023 (I suggest that you read our analysis of the review if you want to get a better understanding of the whole system and how it will affect SDA’s), it was a clear recommendation that the Existing and Legacy dwellings be replaced as soon as possible.
“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)
At present this is not happening very quickly.
Number of Existing and Legacy dwellings across Australia as of June 2024.
June 2023 4,107
March 2024 4,032
June 2024 4,029
So, it would seem that until the Existing stock is ‘pushed’ out of the market, the average SDA funding will continue to be relatively low, and the movement of Participants from Existing & Legacy dwellings to New dwellings will continue at a slower pace than otherwise expected. Fortunately, this ‘push’ is on the cards.
There were as of June 2024, 11,204 rooms under construction, up from 7,633 a year ago. This is a significant increase, so it is more important than ever to ensure that the location where you are looking to invest has a demonstrated shortage of supply and that the “pipeline” of new dwellings is in line with what is required, because it is far from uniform across Australia. (We can help you with that).
The last point to make is the large number of Participants that have SDA funding and are not using it:
The reasons given by the NDIA for the large number of Participants not using their plan are:
- SDA is newly included in their plan
- a participant is not yet ready to move from their current accommodation
- a participant is still exploring options or waiting to move when a vacancy becomes available
- a participant may be awaiting the completion of an (identified) new-build SDA dwelling
- a participant is yet to locate a suitable SDA dwelling – by location or SDA type/category.
It does seem strange that these reasons cover 31% of Participants who have gone to the effort of getting SDA funding.
Perhaps a survey of Participants and a percentage allocation to each reason would provide a longer list and a better explanation?
Conclusion
Contrary to popular belief, there is more money being poured into the system and into SDA in particular, however a more thorough knowledge by investors of the data as well as a better understanding of the complexity of moving Participants into a ‘New Dwelling’ will lead to more realistic expectations, better investment choices, and a successful investment in SDA.
