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2023 has the potential to be a massive year for Specialist Disability Accommodation (SDA). There are a number of big events planned, including:
- The completion of the SDA Price Review
- The NDIA’s release of the very first NDIS Home and Living Policy
In this article, Brent talks about the outcomes we need to see to allow the SDA market to flourish in 2023.
The current market: High housing prices and limited choice and control
Since the beginning, SDA has been – and it continues to be – a complex proposition. And not only for the brave investors and developers, but also for the people that wish to explore what SDA could look like for their home.
The complexity for investors and developers lies in working out what type of SDA should be delivered, in what location, and at what scale. This complexity has been magnified in the past 2 years by the rapid increase in land values, building costs and, more recently, the gradual yet persistent ratcheting up of interest rates. These factors have led to a significant quantity of SDA being delivered in locations and/or styles that do not match the preferences of the person whose home it will be or the amount of funding in their NDIS plans.
We plan to do a deep dive into SDA data in the first quarter of 2023, but in the meantime, much of the data that is available illustrates that the design of a lot of SDA is being driven by financial viability pressures dictated by market forces and the SDA Pricing Arrangements, rather than people’s preferences about how and where they would like to live.
Similarly, people embarking on the SDA journey are faced with constantly changing and inconsistent application of the SDA Rules, making SDA eligibility an arduous and stressful process. An SDA eligibility outcome might also not align with a person’s preferences and/or may be accompanied by daily living support funding that is less than what is necessary for the person to live safely within their preferred style of home.
As a result, it is often possible that a person may be found eligible for SDA only to find there are simply no matching types of SDA available in their location. Safe to say, the SDA market is in a bit of a mess at present!
What could help?
SDA Price Review
One of the big (no, huge) positive steps that could be taken this year would be to significantly increase SDA prices to reflect the unprecedented increase in input costs. Right now, it is simply not viable to deliver SDA in some styles and design categories in many locations across Australia. The financial returns simply do not justify the risks for investors and developers. If you think all the way back to mid-2016, the NDIA made it clear that the SDA Pricing Framework was designed to provide “better than market” returns to investors – this simply is not the case right now.
So, what does a “significant increase” mean? Well, across many design categories and types of housing, an increase well north of 10% would be necessary to encourage the market to respond.
Submissions to the SDA Price Review closed in December 2022. We understand that many submissions contained compelling and real data that supports a significant SDA price increase.
Home and Living Policy
In the 2022 article “SIL: Broke or Broken?”, we talked about how the NDIS is moving towards individualised funding for people’s supports at home. This is creating a need for people and providers to shift their thinking away from the “brands” of support that we all know (e.g., SIL, ILO, etc). For SDA, this means there is little value in delivering properties that do not support individualised support funding. These considerations have created a significant complication for SDA delivery over the past 2 years.
The release of the Home and Living policy, coupled with appropriate implementation support for people and providers, has the potential to finally bring much needed clarity as to how Home and Living funding will be determined in the future. It could provide valuable insights into what housing models will be financially sustainable.
The NDIA could also address the question of whether Home and Living support providers will need to be separate from SDA providers, which would greatly assist organisations and market participants to understand the limitations of their operations in the future.
Timing?
If you attended one of our workshops in 2022, you most likely remember my saying that we may even see the Home and Living policy just before Christmas 2022. Well (insert red face), that obviously didn’t happen. However, we have heard from a number of reliable sources that the second quarter of 2023 is likely.
The SDA Price Review time frames are more predictable because they have a hard deadline of 1 July 2023 for the new prices to take effect. Therefore, it is likely that any revised SDA prices and corresponding price review report will be released in the later part of the second quarter.
Is 2023 the year for SDA?
The SDA data from Quarter 1 2022/23 suggests that there are now a total of 7,334 enrolled SDA dwellings, of which 5,723 are new-build SDA. The enrolled SDA dwellings provide space for 19,753 people, but at the same point in time there were 20,920 people with active SDA funding. Moreover, it is estimated that 6% of the NDIS cohort is eligible for SDA. This equates to roughly 33,600 people, meaning we currently have only just under 60% of the necessary SDA places.
In addition to the undersupply of SDA is the fact that a significant percentage of existing SDA places are within old basic or legacy housing that will need to be replaced in the coming decade.
For the past 2 years, there has been subdued activity in the SDA market as investors reacted to the many challenges we have outlined earlier. This means there will likely be a slowdown in new SDA enrolments in the coming years, creating a significant opportunity for investors and developers wishing to enter the SDA market.
