Home & Living
NDIA announces positive pricing changes for the SDA market
Specialist Disability Accommodation Pricing Review 2022-23 Outcomes
Hooray! On June 16, the NDIA finally released the results of the Specialist Disability Accommodation (SDA) Pricing Review, along with the results of the broader NDIS Annual Price Review. This article will focus on all things SDA pricing. (Please refer to DSC’s Breaking News Article: New Price Guide for details on the broader price review outcomes).
SDA Pricing Review Process
In accordance with the SDA Pricing and Payments Framework, the NDIA launched the five yearly review of the SDA prices, and importantly, the underlying assumptions that are applied to derive SDA prices. This was intended to inform the NDIA CEO and Board of any changes recommended to continue to attract and sustain the level of investment required to deliver the forecast level of SDA. Or, to put this another way, confirm whether the money is right so that enough of the right dwellings can be built to house all people found eligible for SDA.
The NDIA appointed Ernst and Young to assist in undertaking independent technical research and analysis to support the pricing review process. A number of further technical specialists were also appointed to assist. More detail on the terms of reference, technical reports and final reports can be found here.
It is vital to note that this is the most comprehensive review and analysis of the SDA pricing construct undertaken since SDA was created back in 2016. Accordingly, the outcomes should be largely reflective of very detailed analysis, as well as careful consideration of the 46 sector submissions received, and the more than 100 organisations/individuals consulted during the Review.
Importantly, early responses from the good practice SDA market have been largely positive in response to the outcomes. Let’s take a deep dive into some of those now.
SDA - A Force for Good
It seems the government has finally cottoned on to the fact that good practice, contemporary SDA is actually good for Scheme sustainability, good for our healthcare and aged care systems, as well as being crucial for some participants, stating on page 45 of the report that SDA is:
“a crucial support as it helps with Scheme sustainability...That is, SDA is a capital investment by the Scheme that is intended to reduce the lifetime support costs of an individual. Investment in SDA is, over the long term, intended to lower costs in the Scheme. SDA is also a key enabler for the Agency to meet the Government’s commitments with respect to reducing bed blockage in hospitals by people with disability and assisting younger people with disability to exit residential aged care, as the provision of suitable alternative accommodation is crucial in both these cases. Moreover, SDA should be considered as an investment in Scheme sustainability rather than only as an expenditure by the Scheme. That is, the expenditure on SDA is offset by savings elsewhere in the Scheme rather than being additional expenditure by the Scheme.”
On the face of it, this appears to be more than just propaganda. It is supported by the (mostly) increased SDA pricing, and recent SDA Alliance experiences with relevant government representatives. We are genuinely encouraged by the new NDIA leadership focus on understanding ‘what works’ and more viable pricing.
The SDA prices in most cases have received significant increases (yay!), more than double in some specific examples. There are significant increases across all improved liveability (IL) and robust design category dwelling types, and for 2 and 3 resident houses across all design categories. Existing and legacy stock pricing has also increased by 7% in nominal terms, and the average increase across all new build prices is 18.5% in nominal terms or 11.5% in real terms. Exhibit 28 on page 44 of the report provides a summary table of the new build increases. New build price tables are also included in Appendix A of the report.
Determining exactly what SDA price is applicable to each dwelling has become a little more complicated. This is mostly due to the welcomed change that sees SDA prices from 1 July 2023 take into account the GST position of the delivery of each dwelling (for dwellings enrolled on or after 1 July 2023). As a result, there are now four main SDA new build price tables. We presume (but not yet confirmed by the NDIA) that some of these tables will also be applicable to SDA dwellings enrolled pre 1 July 2023. Where an across the board assumption has been made that the owner of the dwelling claimed GST input tax credits for the GST paid on the purchase price, or on the construction costs, of the dwelling.
There have also been changes as to how the cost associated with the provision of fire sprinklers are considered which has added to the number of new build price tables. There is no longer a multiplier for fire sprinklers, as a lump sum capital cost addition has been factored into the calculations. Refer to pages 39 and 40 of the report for more details.
The changes that may cause initial concern for some is high physical support (HPS) apartment prices. While HPS 1-bedroom apartment prices remain largely unchanged (with the exception of the increase to account for GST inequities), HPS 2 and 3-bedroom apartment prices have been reduced.
The NDIA’s concern about the high level of supply of HPS 1-bedroom apartments has been strongly and publicly signalled for quite some time. Therefore it was widely anticipated that prices for these may not increase. Further, there are numerous other changes announced in the report that will help to offset the HPS apartments results to some extent. This includes increased prices for lower design category apartments that should enable vacancies in HPS apartments to be more easily and viably filled by participants with lower design category eligibility. Furthermore, change to the 20-year new build price start date enables the higher new build payment to be received for more of that 20-years. Additionally, there is a clear requirement for the NDIA to now apply any new higher and indexed pricing immediately to participants plans (instead of having to wait for a new plan before this higher rate is implemented).
Significant price reductions in real terms do need to be carefully messaged to the wider market. To provide comfort that this type of price response may be well signalled in future, or ideally, not eventuate due to a greater level of demand and supply visibility and more effective market stewardship from herein.
It is also important to note that the new pricing arrangements will take effect on 1 July 2023. However, to enable operational implementation to be completed they will not be implemented until 1 October 2023. Based on past performance we expect July to October to be a little confusing in terms of service bookings, participant plan funding and the like. So stay tuned for more operational guidance and information from the NDIA and SDA Alliance in coming weeks and months.
Other Interesting Stuff
There is also a bunch of other interesting changes and positive movements signalled by the review report, including:
New location factors for new build stock, with some odd variation.
Fire sprinkler costs are better covered, and a recommendation to consider a mandate
Increased pricing for 4–5-bedroom group homes, coupled with a recommendation that should serve as a clear warning.
A recommendation that may suggest the government is warming to the idea of SDA self-provision
A recommendation that should enable additional funding for necessarily bespoke SDA projects that can’t fit the price matrix or design standard.
DSC and SDA Alliance will unpack all this, and more, over the coming weeks.
In the article titled “Is 2023 the year SDA rewrites its fate” in February 2023, it was stated that the future sustainability of the SDA market was heavily dependent upon the outcome of the 2022-23 SDA Pricing Review. It is very pleasing to see that the Review outcome has met the expectations of many market players and has set the foundations of a more sustainable and attractive SDA market moving forward, for the ultimate benefit of NDIS participants.
Brent Woolgar, Principal Consultant
Melanie Southwell, CEO SDA Alliance