22 October 2021
A decade ago, the Australian Government commissioned its independent advisory body, the Productivity Commission, to review the provision of long-term care and support for people with a severe or profound disability.
The Commission found that the existing support system gave people with disability little choice and no certainty of access to appropriate supports. It highlighted how a systematic lack of independent, supported accommodation was not best serving the needs of individuals with significant care and support needs.
It found that as a result, an unacceptably high proportion of people had little to no choice outside of living in accommodation unsuitable for their significant care and support needs, including in residential aged care or nursing homes despite their young age, living at home with elderly parents, or in unsuitable public housing.
At the same time, the system was found to be 'underfunded, unfair, fragmented and inefficient', placing increasing cost pressure on public funds.1
To address these shortcomings, the establishment of a national, government-funded scheme for people with disability was recommended. The benefits of such an arrangement were noted as outweighing the costs and had the potential to add almost one per cent to Australia’s gross domestic product by 2050.2
The National Disability Insurance Scheme (NDIS) was established in 2013, centralising funding of long-term high-quality care and support for people with significant disabilities.3 For individuals with extreme functional impairment or very high support needs4 - approximately six per cent of NDIS-eligible individuals – this included the provision of high-quality, bespoke and community-integrated homes.
Importantly, the NDIS was structured to provide government payments directly to participants to empower them to make their own choices about their care and accommodation needs. This was a transition away from the traditional block-funding model and allowed the individual to directly fund specific services and providers.
To facilitate this new approach and establish a private sector-led market to fund, build and manage the new accommodation, Specialist Disability Accommodation (SDA) was introduced by the National Disability Insurance Agency (NDIA) - administrators of the NDIS - in 2016.
Once fully operational, it is forecast that annual government funding for SDA will reach $A700 million per annum5 to support eligible participants. Still, as an estimated $A10 - 12 billion market,6 private capital is required to build out the scheme.
The government provides an above-market rental stream to incentivise private market participation in the SDA sector7 and encourage investors to incur the upfront capital costs to develop accommodation to meet the needs of NDIS participants.
A range of private sector investors brings competition, and this incentivises providers to invest in their accommodation, offer housing in desirable geographic areas with access to services, and properly market residences to attract tenants. Private sector participation also ensures a competitive market that provides the highest standard of accommodation to meet the requirements and expectations of participants. Continued innovation and investment will be needed to remain competitive.
“The individual is driving the outcomes. The centrality of individual choice and control that is fundamental to the NDIS means that, in a competitive market, accommodation providers need to continually raise the bar with the best possible homes in the right location to attract tenants. The regulation and allotted pricing sets the parameters within which providers must operate,” says Ben Barry, Executive Director at Macquarie Asset Management.
Given the scale of the ongoing need for quality accommodation, an underlying government framework and regulatory regime, and some early participation from infrastructure investors, SDA is evolving from a nascent to an emerging institutional investment class. Creating a market that is driven by private investment has allowed SDA to attract capital from competitive debt markets and global equity investors. The regulatory framework creates a clear understanding of the revenue stream and what the NDIA perceives to be appropriate risk-adjusted returns.
“Investing in infrastructure brings with it an element of risk, and social infrastructure, such as this is no different. But in a world awash with investment opportunities, it’s important for attracting private capital that there’s clarity over the parameters in which operators are working and how that will impact customer demand for the product now and into the future,” says Barry.
Moving away from a block funding model to one that covers the full cost of ownership and operation of buildings means a larger universe of potential investors, including financiers, institutional investors and family offices, are able to be mobilised.
Macquarie has been engaged in the SDA sector since 2017, contributing to its growth towards becoming a stable asset class. Our involvement - with our housing partners, government and other market players - has helped raise awareness and understanding of SDA as an asset class.
“Both the deployment of our own balance sheet and our reputation as an infrastructure investor helped drive early momentum and have played an important role in developing this new sector,” says Barry.
Working directly with high-quality SDA providers – those who best understand the needs of SDA participants – Macquarie has directly enabled the creation of more than 230 SDA dwellings across Australia.
Not-for-profit organisations such as Summer Housing and Youngcare are working with Macquarie by assisting in dwelling design and procurement, marketing accommodation to prospective tenants, and helping to facilitate the provision of the services needed by the individual.
"We believe that by investing in, and coalescing partners around, the development of real assets that underpin society and communities we add real and lasting value for those who use and depend on them. This work closely aligns with our purpose: investing to deliver positive impact for everyone,” adds Barry.
With an initial focus on new build properties across Australia’s mainland cities, and which are located close to key infrastructure amenities, Macquarie expects to continue to grow its capability in the sector with the support of its clients.
Measuring the impact of SDA on the lives of individuals through numbers does not do it justice, but official data does show that it is having a positive effect.
Collectively, the number of specialist dwellings now stands at over 6,224 – including new build dwellings and dwellings that existed before SDA was implemented – which are supporting over 16,000 individuals across Australia. Providing people with who have the most significant care and support needs with access to this accommodation has seen the number of those under the age of 65 entering residential aged care fall by two thirds (68 per cent) since SDA launched.8
Source: National Disability Insurance Agency
The sector remains in its early stages, though, and has plenty of opportunity for growth and maturity ahead of it.
In the five years since the inception of SDA, just 3,883 new build places have been built, with the remainder of NDIS participants residing in existing disability housing stock - much of which no longer meets today’s standards.
On the optimistic assumption that construction levels increase to 2,000 rooms built a year, it will take another six years to close the current gap of around 12,000 places and meet the government target of 28,000 rooms.
Current SDA dwellings supply gap
Summer Housing was established in 2017 with an ambitious mission to expand the range and scale of housing options available to people with disability and currently living in or at risk of admission to residential aged care – particularly younger people.
Working with stakeholders, supporters and partners such as Macquarie, it has acted as a pioneer for the rollout of SDA and commissioned over 300 residences since inception.
Acting CEO Queenie Tran – who has over a decade’s experience in architecture and access consulting, specialising in residential design and tailored solutions for accessibility – says Summer Housing’s premise is about providing the right housing and support in the best locations to increase a person’s quality of life and independence, while reducing lifetime care costs.
“There has long been a lack of understanding as to the role that housing plays in allowing people with disability to live both independently and as part of the community. SDA finally allows for high-quality accommodation that has been designed to increase an individual’s self-sufficiency and is integrated into a broader residential development, giving residents independence and a much higher quality of life.”
Tran says that the scheme’s market-driven nature and the coming together of the not-for-profit and commercial sectors to really understand what the shared outcomes are have been a core component of its success. And that has delivered the best possible accommodation in a way that provides commercial value for both providers, partners and governments.
“The NDIS has given people the ability to consider what their own needs and preferences are, and to be able to go to the market and push for suitable accommodation that meets those needs. What has been especially interesting to see is the exchange between participants and the market in driving those outcomes.
“The SDA scheme specifically has been revolutionary for people with disability and complex care needs, because it’s not about building something and retrospectively making it work for them, rather it’s about creating properties that you and I would live in, but with the additional needs of those with severe disability taken into account at the development stage.
“Our developments are getting so much interest from individuals wanting a better lifestyle – because we’re building the right properties in locations people want to live in, and in the communities they are personally associated with, in some cases have spent their lives in.”
Working with Macquarie and other partners has allowed the coming together of partners with individual strengths to achieve a common goal, says Tran. And, accordingly, the SDA model has been proven.
“We have successfully scaled and demonstrated the ongoing viability and future potential of SDA. Its success has made it a lot more acute for people to recognise that disability housing isn’t a typical asset, and the potential for it to be an infrastructure asset as opposed to standard residential stock is absolutely there.”
More importantly, Tran says the impact it’s had on people’s lives has been even more substantial.
“It has already generated life-changing outcomes for thousands of people who were living in hospitals and aged care facilities, providing them with a level of independence that many of the previous and historical housing models never did.
“Prior to the NDIS – and SDA specifically – people would never have thought it possible for some of those individuals living in residential age care to come back into the community and live among their family and friends; there was nothing available for them. Together, we have made something people thought was impossible happen over the short space of about four-and-a-half years.”
‘Specialist Disability Accommodation Pricing and Payments Framework’, Australian Government, Department of Social Services, June 2020, https://www.dss.gov.au/
Andrew Beer, Kathleen Flanagan, Julia Verdouw et al., ‘Understanding Specialist Disability Accommodation funding’, Australian Housing and Urban Research Institute Limited, 21 March 2019, https://www.ahuri.edu.au/
‘National Disability Insurance Scheme (Specialist Disability Accommodation) Rules 2016’ (Cth), Australian Government, 27 March 2019, https://www.legislation.gov.au/
‘NDIS Specialist Disability Accommodation: Pathway to a mature market’, PWC and Summer Foundation, August 2017, https://www.summerfoundation.org.au/
‘Specialist Disability Accommodation: Market insights’, SGS Economics and Planning and Summer Foundation, 2018, https://www.summerfoundation.org.au/
1. ‘Disability Care and Support’, Productivity Commission, Report no. 54, 31 July 2011, https://www.pc.gov.au/
2. ‘Disability Care and Support’, Productivity Commission, Report no. 54, 31 July 2011, https://www.pc.gov.au/
3. ‘Disability Care and Support’, Productivity Commission, Report no. 54, 31 July 2011, https://www.pc.gov.au/
4. ‘Disability Care and Support’, Productivity Commission, Report no. 54, 31 July 2011, https://www.pc.gov.au/
5. ‘Governments take action to increase Specialist Disability Accommodation’, NDIS, 8 February 2019, https://www.ndis.gov.au/
6. ‘NDIS Specialist Disability Accommodation: Pathway to a mature market’, PWC and Summer Foundation, August 2017, https://www.summerfoundation.org.au/
7. ‘Specialist Disability Accommodation: Position Paper on Draft Pricing and Payment (April 2016)’, NDIA, 1 April 2016, https://apo.org.au/
8. ‘NDIS Quarterly Report to disability ministers’ (2020-21 Q4), NDIS, 30 June 2021, https://www.ndis.gov.au/
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