What Does the NDIS Mean for the Property Industry?

A new housing market specifically for people with disability is emerging across Australia. In July 2016, the National Disability Insurance Scheme (NDIS) introduced a funding stream to build new accessible and affordable housing for 28,000 Australians with disability.

The NDIS will be making payments to these housing providers that covers the costs incurred and provides a return on investment at market rates (5-12%).

NDIS participants with very high support needs will receive an annual payment towards the cost of their housing. With payment rates benchmarked against market costs, this approach harnesses the role of the market to meet people’s housing needs. This is a market moving rapidly from infancy to maturity. If the NDIS’ housing funding works well in every Federal electorate in Australia more than $75 million will be spent to create more than 60 new dwellings. Providers in this market will need to access an additional $5 billion in capital over the next five years.

PWC and the Summer Foundation have recently released a paper called NDIS Specialist Disability Accommodation Pathway to a mature market link to be provided that provides a vision of a mature, properly functioning disability housing market and discusses the pathways that need to be in place to reach it.

Grocon is one of the first movers in this new housing market. Grocon is partnering with Summer Housing Ltd to deliver housing for people with disability in its next housing project in Fairfield, Victoria. Greenwich Fairfield will include 10 apartments designed for people with disability throughout a medium-density, 77-unit, private development.

The Greenwich development is 7km from the Melbourne CBD and located adjacent to a train station, shops and community facilities. Smart Home technology will be a key feature of this project enabling tenants to maximise their independence and privacy. The dwellings will be designed to achieve Platinum level certification under Livable Housing Design Guidelines.

Grocon’s Executive Design Manager David Waldren’s perspective is that people with disability are a significant part of the market. “If we don't go down the path of providing housing for people with disability we're saying to ourselves, we'll preclude 14 per cent of the population from being able to live here. That's pretty dumb.” Waldren said.

Waldren sees significant opportunities for the property industry flowing from the NDIS. “Greenwich Village is one example. There'll be others over time, it will just become par for the course.”

Grocon's Greenwich Fairfield developmentSpecialist Disability Accommodation
▲ Grocon's Greenwich Fairfield Development Specialist Disability Accommodation

The NDIS will fund housing for people with disability who have very high support needs. This will be delivered through an ongoing subsidy for people with disability to access housing, Specialist Disability Accommodation (SDA) payments. The NDIS approach to housing relies on a market-driven model where providers create and maintain housing for people with disability across the country. The NDIS has an annual recurrent budget of $700m for SDA.

The specialist disability accommodation policy is an ambitious initiative. It requires the market to find an additional $5 billion to build housing over the current $5 billion stock. The policy is also transformational. It turns the previous system of rationed institutional and government-owned housing on its head.

By providing people with disability funding for housing, it creates a user-driven market. It empowers people with disability to decide where they live and who they live with.

This housing funding is designed only for people under 65 with very high disability-support needs. This is around 6 per cent of all NDIS participants. They receive a package of support that includes annual funding to pay for the cost of their housing. The participant has a separate amount in their package to pay for the attendant care supports they need to live independently in the community.

Key stakeholders involved in the SDA, courtesy of PWCNDIS
▲ Key stakeholders involved in the SDA. Image: PWCNDIS

Housing Payments
The specialist disability accommodation payment from the NDIS is a standardised yearly amount that is calculated based on the dwelling’s location, size and level of accessibility. Specialist disability accommodation providers will only be paid for dwellings that are occupied by NDIS participants. Critically, the provider bears the vacancy risk should they be unable to find a tenant.

In addition to the SDA payment from the NDIS, the SDA provider will also receive a Reasonable Rent Contribution (RRC). The contribution is paid by the tenant and is limited to 25 per cent of the Disability Service Provider (DSP) related amounts, in addition to any Commonwealth Rent Assistance (CRA).

It is anticipated that the specialist disability accommodation pricing framework will continue for 20 years and at the end of this period the property will revert to the general market. This returns capital to the specialist disability accommodation is an amount that enables a competitive market return on the property. When combined, the revenue from specialist disability accommodation payments, the reasonable rent contribution and proceeds from the sale value of the property should sufficiently cover the initial investment, all maintenance, and outgoing and management costs, as well as providing an "institutional" return on equity.

Consumer Driven Market
Five years after the start of the National Disability Insurance Scheme, we are seeing a housing market develop for people with disability that will radically transform thousands of lives. The current status of the disability accommodation market is fragmented and underfunded. As a result, it is an inflexible market where consumers have limited choice in their housing options.

Australia is turning away from segregated and institutional disability housing and moving towards genuine choice and community inclusion through NDIS’ SDA market. In this market based system, people with disability have genuine choice over where they live, who they live with and how they are supported. In other words, people with disability will have the same housing choices as every Australian.

In the SDA market, housing providers will compete to deliver the best outcomes for tenants. There is a risk that some developers will initially look to maximize profits by building segregated housing for people with disability with SDA payments on inexpensive land on the outskirts of communities. Proximity to shops, transport and other services is critical to enabling people with disability to easily get out of their home and have a meaningful life. These dwellings may attract people with disability and SDA apartments in the short term. However, as the market matures, providers of poor quality housing that is not well located are likely to have high vacancy rates for an asset with a life of 20-30 years.

Ultimately providers of quality and innovative housing will be recognised and rewarded.

Developing the Market
Developers interested in entering this market can find out more through the PWC and Summer Foundation paper NDIS Specialist Disability Accommodation: Pathway to a mature market.

The NDIS’ website also has more information about SDA payments.

The Summer Foundation will also be releasing a Design Guide on how to build specialist disability accommodation properties that both enhance people’s independence while simultaneously providing a home-like environment.

It is only through more providers building SDA that young people in aged care, and those at risk of entry, will be able to live in the community. Summer Foundation looks forward to continuing to support this market grow and reach scale.

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Article originally posted at: https://theurbandeveloper.com/articles/ndis-mean-property-industry