FOI 24/25-1795 DOCUMENT 2
redacted: s47F - Personal Megan
From: Sahil redacted: s47F - Personal
Sent: Friday, 2 March 2018 2:02 PM
To: redacted: s47F - Personal Antonia
Cc: redacted: s47F - Personal Samuel; redacted: s47F - Personal Toni; Meaghan redacted: s47F - Personal Julian redacted: s47F - Personal
Subject: For SDA handover discussion
Attachments: 180219 SDA handover document (23 Feb).pptx; Consultation summary - price (21 Feb) v2.xlsx; 180220 DRAFT SDA market communications w clean v4.docx; 20180206 Draft Management Response update (23 Feb - sent).docx
Hi Antonia
For our handover call, I’m re-attaching deliverables from our end of week email.
During the call, I suggest we could spend our time on:
- Overview of the four deliverables (5 mins)
- Deep dive on next steps, as set out SDA handover document (ppt) – slides 12-16 (40 mins)
- Overview of the Management Response to SDA system controls audit (15 mins)
Speak soon!
Cheers Sahil
McKinsey & Company
Ph: redacted: s47F - Personal
+========================================================================+ This email is confidential and may be privileged. If you have received it in error, please notify us immediately and then delete it. Please do not copy it, disclose its contents or use it for any purpose. +========================================================================+
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ATTACHMENT 1
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NDIS Specialist Disability Accommodation: Market Communications project
Handover document
February 23, 2018
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ndis
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Executive Summary (1/2)
- There is some evidence to suggest that Specialist Disability Accommodation (SDA) funding under the NDIS has started to stimulate new investment in a historically under-supplied sector, although data limitations create uncertainty in estimating supply and demand of SDA under the NDIS
- According to Productivity Commission 2011 estimates, 12,000 out of the 28,000 people requiring SDA are not living in fit-for-purpose accommodation. Productivity Commission 2011 estimates suggest that about half of these are young people (under the age of 65) living in Aged Care accommodation
- The sector requires a significant amount of additional capital (estimated at ~$4.3-5.1b, based on high-level assumptions) to meet historically unmet demand, and to ensure existing SDA meets acceptable standards
- To attract capital investment, the NDIA estimates Scheme expenditure on SDA will total ~$700 million annually by 2031, reaching ~$420 million by 2021
- For investors and developers, average rental yields and investment returns on SDA can be generous, though this may vary by location and dwelling type
- Although the NDIS has stimulated some new investment in SDA till date, investors and providers have raised concerns that uncertainty (particularly on price settings and demand) may inhibit future investment
- To date, SDA roll out has been dominated by “existing SDA” dwellings and participants (those previously in State schemes) – with 1,593 “existing dwellings” enrolled – rather than “new SDA” dwellings and participants (those not previously in State schemes) – with 140 “new dwellings” enrolled.
- The relatively slow ramp up of “new SDA” may reflect the long lead time in new SDA dwelling construction, and the relatively complex and time-consuming nature of SDA planning for “new SDA” participants
- Providers and investors have raised concerns (both through consultations and separately to Agency and Government stakeholders) focused on four key risks that may inhibit future investment in “new SDA”:
- Price regulation: Scheduled price reviews have been raised as a source of uncertainty. Interviewees note that, given the long lead time in construction of SDA, any downward adjustment in prices in 2021 would affect investment decisions made today 1-2 years into their 20+ year investment horizon. Interviewees suggest several options – including price guarantees and grandfathering – as potential solutions
- Pace of demand growth: the pace of demand for “new SDA” through the NDIS (i.e., not rolled over from states) is limited by the speed of planning process. A slower pace increases the risk of initial vacancies in “new SDA” dwellings that come online
- To date, SDA roll out has been dominated by “existing SDA” dwellings and participants (those previously in State schemes) – with 1,593 “existing dwellings” enrolled – rather than “new SDA” dwellings and participants (those not previously in State schemes) – with 140 “new dwellings” enrolled.
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Executive Summary (2/2)
- Dwelling enrolment: providers raised concerns that delays in the enrolment of SDA dwellings could lead to delays in matching with and securing tenants, creating higher vacancy risk. Providers suggested pre-enrolment of dwellings (prior to construction being completed) as a potential solution
- Lack of granular demand data: the lack of NDIA-provided granular supply and demand data make it more difficult to anticipate potential SDA demand at the time of investment decisions. Interviewees note that third parties have now commissioned demand studies that will be made available to the market
- To address provider and investor concerns, the NDIA should: (a) provide an initial market update, in line with commitments to DRC (b) work with DSS to inform the upcoming review of the DRC Pricing and Payments Framework; (c) improve key SDA operational processes; and (d) and increase communications to the market
a) Initial communications: In line with its commitments to DRC, the NDIA should release a Market Communications document to provide greater clarity to the market on key SDA topics. While an important first step, this is not expected to address the full range of concerns raised by providers and investors
b) Price: Given the expected imminent commissioning of the upcoming DRC Pricing & Payment Framework, and the lack of compelling evidence of market failure, the right path forward is to work with DSS to inform the scope and timing of the upcoming DRC Pricing & Payments Framework Review
- The DRC Pricing & Payments Framework review is expected to include a focus on price risk and price review cycles, and could lead to significant recommendations related to top-of-mind issues for providers and investors. The NDIA should engage DSS to inform the review and present a coordinated approach to market
- In the meantime, there is insufficient evidence to suggest potential under-supply, which would necessitate an intervention. Existing investments suggest the risk-return profile is attractive for at least some investors
- The pace at which “new SDA” participants are transitioning to NDIS is gradual, allowing the NDIA time to watch how supply evolves before acting c) Operational processes: the NDIA should improve key SDA operational processes, flagged by providers, including transparent and efficient SDA planning and timely processing of applications for dwelling enrolment d) Ongoing communications: The NDIA should committ to regular communications with the SDA market in the future, including the provision of more granular data on SDA demand and supply as it becomes reliably available, and simple “how to” guides on key provider topics (e.g., payments, dwelling enrolment)
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Productivity Commission estimates suggest ~40% of SDA demand has gone “unmet” historically
Supply and demand of SDA
Estimated number of people and SDA places, Productivity Commission estimates as at 2011
- Estimated SDA demand: 28,000
- SDA supply under state schemes: 16,000
- Historically unmet demand: 12,000 (43%)
Key underserved populations
Percentage of total unmet demand, Initial NDIA estimates as at 2014²
- Other: 40%
- Institutions: 20%
- People <50 yrs in aged care: 4%
- People 50-65 yrs in aged care: 36%
2 “National Disability Insurance Scheme: A catalyst for scalable, affordable and accessible housing for people with disability”, 26 August 2014
SOURCE: Scheme Actuary NDIA Pricing model 30 May 2017; Productivity Commission Report 2011
High level estimates suggest the sector requires ~$4.3 to $5.1b in capital to serve historically unmet demand
Key assumptions
Participant numbers
- 28,000 participants (Productivity Commission: 15,700 existing, 12,300 new)
- 2.5% of residents in legacy SDA move to new SDA each year¹
Costs
- $300-350,000 weighted average cost of new place (using Agency forecast for dwelling type and design category)²
- Median capital city assumed for costs
- Legacy conversion costs 50% of newbuild
Dwellings
- ~5,400 dwellings built by 2025³
- 140 new dwellings enrolled⁴
Capital investment in SDA, 2016-2025
Estimates only; A$ million
- Enrolled: 125-145
- Additional required: 4,200-5,000
- Full Scheme: 4,300-5,100
- Aged Care⁵: 35,000
¹ Based on a 40 year life of asset; ² Group home improved liveability 10%; Group home fully accessible 30%; Group home high support 5%; Duplex/townhouse improved liveability 5%; Duplex/townhouse robust 20%; Duplex/townhouse fully accessible 20%; Apartment fully accessible 10%; ³ Required for supply to reach 28,000; ⁴ Dwelling enrolment dashboard; ⁵ Aged Care Financing Authority Annual Report on the Funding and Financing of the Aged Care Sector, July 2017
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To attract capital investment, the NDIA estimates Scheme expenditure on SDA will total ~$700 million by 2031
Forecast annual NDIS expenditure on SDA¹
NDIA estimates; A$ millions
- 2016: 44
- 2017: 94
- 2018: 177
- 2019: 302
- 2020: 359
- 2021: 418
- 2022: 459
- 2023: 492
- 2024: 519
- 2025: 539
- 2026: 556
- 2027: 573
- 2028: 590
- 2029: 606
- 2030: 623
- 2031: 640
Externally, the NDIA has communicated a funding level of ~$700 million for SDA at Full Scheme to the market.
¹ Assumes 2.5% transfer from legacy to new and 1.4% growth in population; Based on demand of 29,000 at 2016 includes contingency of 5%
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Source: Scheme Actuary NDIA Pricing model 30 May 2017
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Although returns on SDA can be generous, market feedback suggests returns vary by location and dwelling type
INDICATIVE ONLY
Potential overestimate of returns, due to low assumptions of capital requirement in NDIA model
SDA vs market rental yields
% rental yield¹ (estimated)
| Housing type | South Penrith (Outer West Sydney) | Paddington (Eastern suburbs Sydney) | South Yarra (Inner Melbourne) |
|---|---|---|---|
| SDA housing | Market rental | SDA housing | |
| 4 bedroom house (Robust) | 8.8% | 3.5% ($0.9m, $1.4m) | 5.7% |
| 2 bed apartment (High Physical Supports) | 8.1% | 3.8% ($0.4m, $1.2m) | 7.7% |
Provider feedback
- Provider feedback suggested that returns are generous on average, but vary by location and building type, and could skew investment flows
- In addition to rental yields (shown on this slide), overall investment returns will also depend on:
- Capital returns (which may be lower for SDA, which requires modifications)
- Terms of financing (where SDA may not be able to attract the same level and terms of debt funding)
¹ Excludes capital gains; assumes 8.5% vacancy rate for SDA
Source: Realestate.com.au suburb reports, median house prices and median rental yields; Scheme Actuary NDIA Pricing model 30 May 2017; Assumes 8.5% vacancy rate for SDA
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To date, SDA roll out has been dominated by “existing SDA” dwellings and participants, with some new supply stimulated
SDA supply under the NDIS¹
- According to PC estimates, ~16,000 existing SDA places
- 1,733 dwellings enrolled, which could house a maximum potential 6,906 SDA residents
- 1,593 “existing” or “legacy” stock, transitioning from previous State schemes of which 553 is government in kind
- 140 “new builds”, including 8 refurbishments
- An additional estimated 860 dwellings in the “enrollment backlog”, which has a total of 116 applications
- 541 registered providers, 117 of which have enrolled dwellings
- According to third party estimates (not verified by NDIA), an additional 380 dwellings “committed”³
- 400 places (~140 dwellings) refurbishments
- 200 places (~70 dwellings) funded directly by SA government
SDA demand under the NDIS²
- According to PC estimates, 28,000 people estimated to need SDA
- 6,936 participants with active plans with SDA committed
- Participants need to demonstrate they have investigated non-SDA options (e.g., in-home supports)
- $63.1 million committed to SDA in active plans
- Participants are individuals with complex needs
Factors contributing to a slow scale up of “new SDA” could include:
- Time consuming and complex SDA planning process
- Planners often receive incomplete initial applications from participants
- Long lead time for construction of SDA dwellings
- Finding suitable land can be challenging
- Lengthy dwelling enrollment process, with significant backlog
¹ NDIA data as at end January 2018; ² NDIA data as at end December 2017 ³ Based on estimated from a third party report commissioned by the Summer foundation report – methodology has not been tested or verified
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Source: SDA Dwelling Enrolment Team, Scheme Actuary
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To understand potential market concerns in making new investments, we have completed 1-on-1 consultations with 20+ providers, investors and other stakeholders
Stakeholders consulted
Financiers
- NAB
- CBA
- Macquarie
- Community Sector Banking
- Social Enterprise Finance Australia
- Cheyne Capital
- Allen Partners
Providers
- Social Ventures Australia
- Multicap
- Summer Foundation & Summer Housing
- Ability Homes
- Ability First Australia
- Independent Living Villages
- Lifetime Homes
- Montrose
- Housing Choices Australia
- St John of God Healthcare
- Scope Australia
Others
- Assistant Minister’s Office
- Department of Social Services
Questions asked in interviews included:
- What has been your experience in the SDA market to date?
- What’s working well, and what are your concerns?
- What information would better help you make decisions about investing in this market?
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Stakeholders raised 7 key issues or “top concerns” that may inhibit future investment (1/2)
| “Top” provider and investor concerns | What we’ve heard | Evidence | Implications |
|---|---|---|---|
| 1) Supply | New investment in the SDA sector has started, but is small in scale in comparison to overall requirement | - 140 “new” SDA dwellings enrolled - “Pipeline” of ~380 “new” dwellings estimated by 3rd party (though not verified by NDIA) - Big banks are interested in SDA, but have not started lending to SDA only projects; view SDA as small market with disparate investment profiles and small scale borrowers, which makes a scalable lending approach difficult - Equity investors (private and institutional) with higher risk appetite have invested, and are waiting to see how initial investments perform |
- NAB reported no lending; CBA has not funded any “SDA only” developments (but has funded SDA as part of broader developments) - Macquarie has invested in ~10 dwellings with Summer Housing - Other providers targeting private equity investors |
| 2) Demand | Currently few participants have “new SDA” (not rolled over from states) in their plans, with pace of demand growth limited by speed of the Planning process Slow demand growth could lead to potential “over-supply” in short term, affecting early investors and providers |
- SDA participant numbers in line with NDIS rollout, but most participants are existing beneficiaries of State schemes, rather than “new SDA” participants - Preliminary data suggest SDA scale up lagging initial NDIA forecasts in terms of Scheme expenditure (tbc) - Granular demand data (e.g., by region, over time) is needed to inform investment decisions - Third parties have commissioned SDA demand studies |
- If third party demand data is inaccurate, could misdirect investors and have implications for the broader market |
| Price level | Providers and investors view current price levels as adequate and even generous (including provision for some vacancy risk) Several investors see returns as unevenly distributed, with certain locations and certain building types being more/less commercially attractive for investors and providers to supply (e.g., away from Sydney, larger 4 person homes) |
- Based on NDIA assumptions, modelled rental yield is favourable compared to private rental market on average - Initial analysis suggests that NDIA pricing assumptions imply uneven returns across locations and building types |
- On average, price levels are sufficient to provide adequate returns to investors - Investment may be skewed towards certain locations and building types |
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Stakeholders raised 7 key issues or “top concerns” that may inhibit future investment (2/2)
| “Top” provider and investor concerns | What we’ve heard | Evidence | Implications |
|---|---|---|---|
| 3) Regulatory risk | Price reviews leading to uncertainty. Given the long lead time in construction of SDA, any downward adjustment in prices in 2021 would affect investment decisions made today 1-2 years into their 20+ year investment horizon Several suggestions offered, ranging from communicating scope and mandate of reviews, to price guarantees Some providers took the pragmatic view that it would be politically difficult for the NDIA to make drastic changes that adversely affect existing investments and risk foreclosures SDA price risk heightened by perceived risk of political support and funding for NDIS as a whole |
- 140 “new SDA” dwellings enrolled, and unverified 3rd party estimate suggests a further 380 dwellings “committed”; implies risk-return profile is attractive for some parties - Price reviews common in government schemes, though can include provisions for existing providers - Anecdotally, providers are accepting difficult terms to secure finance (including “adverse price review” clauses and short debt repayment schedules), and are having difficulty securing a 60:40 debt to equity ratio |
- Top-of-mind issue for investors, which will require clear and coordinated NDIA response - Insufficient evidence to suggest imminent under-supply in SDA market - Given long construction lead times, could stall or slow down investment in the near term |
| Vacancy risk | Ongoing vacancy risk due to factors including tenant compatibility in multi-tenant dwellings and small tenant pool Some providers having difficulty finding and connecting with NDIS participants who have SDA in their plan Uncertainty on whether plan reviews can lead to SDA being withdrawn from/reduced in participant plans |
- Current policy allows for this possibility | - Collect data on provider vacancy - Opportunity to clarify position to market |
| Operational risks | Delays and back log in enrollment of dwellings could lead to vacancy risk; request to pre-enroll dwellings (before construction is complete) | - Large and growing backlog of applications for dwelling enrolment: 116 applications at Jan-18 | - Delays could lead to initial vacancy |
| Reputational risk | High perceived reputational risk from adversely affecting lives of participants (especially on the part of institutional investors); reluctance to foreclose increase importance of cash flow certainty | - - | - - |
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To address market concerns, four main streams of action are required
Detail to follow
| Recommended path forward | |
|---|---|
| Initial Market Update | - In line with its commitments to DRC, publish a Market Update to provide greater clarity to the market on key SDA topics - While an important first step, this is not expected to address the full range of concerns raised by providers and investors |
| Price Reviews | - Given the imminent timing of the DRC Pricing & Payment Framework, and the lack of compelling evidence of market failure, the right path forward is to work with DSS to inform the scope and timing of the upcoming DRC Framework Review - Before undertaking any commitments on timing or nature of NDIA price review, wait for outcomes of DRC Pricing & Payment Framework review and additional data as SDA scales up |
| Operational processes | SDA planning - Improve planner training on SDA assessment and planning - Build SDA into CRM, and provide interim support to planners (e.g., assessment tools) - Investigate options to quicken pace of SDA planning and plan reviews, given long lead time of support provision and potential risk of service failure SDA dwelling enrolment - Invest in temporary resources to clear dwelling enrolment backlog as an interim solution in the transition to the Quality & Safeguards Commission - Streamline or automate enrolment process, including potential use of database management software - Investigate potential for “pre-enrolment” of dwellings, prior to construction completion, to provide collect data on “pipeline” of projects, and give additional assurance to providers and investors early in process Other - Address specific cases of concerns raised by providers on SDA payment process |
| Market data & communications | Supply/Demand data - Improve and standardise data capture during planning, particularly given the lack of CRM support - Provide granular (by region, by type) demand and supply estimates to the SDA market - As more reliable data becomes available, publish actual SDA data (number and location of participants) Other - Publish easy-to-read “how to” guides on key SDA processes (e.g., payments, enrollment, planning) - Simplify and update SDA content on NDIS website |
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Work across these four streams could be sequenced over the course of 2018 (1/2)
Timing & responsibility are indicative – TBC by Head of Provider & Market Development
| Stream | Sub-stream | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Responsible (TBC)¹ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Initial Market update | ▲ Publish | Sam redacted: s47F - personal p |
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| Price Reviews | ▲ ToR finalise (TBC) | ▲ Review started (TBC) | ▲ Review complete (TBC) | Greg redacted: s47F - personal p |
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| Operational processes | System | Finalise and submit SDA CRM Business Case | Work with TAT to inform TAT CRM requirements | ▲ Agree target date for SDA CRM build | Greg redacted: s47F - personal p |
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Greg redacted: s47F - personal p |
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| Process | Map current SDA planning process | ▲ Investigate improvements (e.g., reduce number of planning decisions that go to TAT) | Design ideal SDA planning process | Toni redacted: s47F - personal p (working with TAT & Planning) |
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| ▲ Update SDA task cards | Toni redacted: s47F - personal p |
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| People | Finalise and rollout planner training & materials | Rollout SDA training to regions | Consider release of further planner communications | Toni redacted: s47F - personal p |
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| Review and improve design of regional support model (e.g., SDA champions) | Toni redacted: s47F - personal p |
¹ Responsible persons identified are all from the Markets & Provider Branch. In some cases, Responsible persons will primarily be working with other teams in the NDIA (e.g., TAT, Participant Pathway Design) to ensure SDA related work is progressing as expected
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Work across these four streams could be sequenced over the course of 2018 (2/2)
Timing & responsibility are indicative – TBC by Head of Provider & Market Development
| Stream | Sub-stream | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Responsible (TBC)¹ |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operational processes | System | Update CRM requirements and business case to reflect transition to National Q&S Commission | Greg redacted: s47F - personal p |
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| Review interim solution for transition | Develop and implement additional quality checks | Amy redacted: s47F - personal p |
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| SDA dwelling enrolment | With LHA develop Dwelling Standards | ▲ Communicate Dwelling Standards to Providers | Toni redacted: s47F - personal p |
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| Finalise Working Instructions for current process and information sharing | Align with National Q&S Commission on dwelling enrolment process and information sharing | Transition to National Q&S Commission begins | Philip redacted: s47F - personal p |
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| People | Engage resources to clear backlog of enrolments | Stephen redacted: s47F - personal pTamara redacted: s47F - personal p |
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| Market data and communications | Supply/Demand data | Agree on interim SDA reporting and data Provision | Collect and forecast data on SDA demand | Report data on participants with SDA in plan, including “new SDA” participants | Tamara redacted: s47F - personal p |
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| Future communication | Publish Market Insight paper | Develop broader SDA Market Communications Strategy | Publish “How to” guides for SDA (E.g., payments, self-provision) | Explore options to highlight/share “what good looks like” | Tamara redacted: s47F - personal p |
¹ Responsible persons identified are all from the Markets & Provider Branch. In some cases, Responsible persons will primarily be working with other teams in the NDIA (e.g., TAT, Participant Pathway Design) to ensure SDA related work is progressing as expected
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In line with DRC commitments, the NDIA will release an initial Market Communications to provide greater clarity to the market
| Key topics covered | Market concerns addressed | DRC deliverable addressed |
|---|---|---|
| Specialist Disability Accommodation Market Update March 2018 |
Definition of SDA and government commitments to funding - Concern that SDA will not continue to be funded in the long term |
- The long-term commitment to SDA |
| Criteria and process for SDA eligibility and funding - Concern about caps on the number of eligible participants - Lack of clarity about SDA approval process - Lack of visibility of pricing review process |
- Principles of SDA funding and the future direction of price regulation - Confirmation that there are no caps on SDA places; - Confirmation that participants will have full choice and control with no preference for legacy stock |
|
| Dwelling standards and innovative models - Lack of clarity on ability of providers to have mixed-use properties |
- The capacity of SDA providers to charge rents to non-SDA residents; | |
| Dwelling enrollment process | - The development of standards other measures to streamline the property enrolment process | |
| Future communication plan, including topics and timing of upcoming communication to market - Concerns relating to lack of information on other topics (e.g. price review, data availability) |
- First step in addressing DRC deliverable ‘other mechanisms that may provide signals of longer term market surety for early release to the market’ |
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Path to closure on Market Update document
| Description | Proposed next step | Who |
|---|---|---|
| Open decisions | - Should we commit to publishing supply/demand data in the Future Roadmap? - What remaining communications can we include? - Are the proposed communications feasible, given team capacity? - Are there others we should flag? - Are there some we can accelerate (as per Open CEO comment)? - Should we include key feedback themes – “what we head” – from consultation in the document introduction (as in the current draft)? - Can we share scope, timing and approach of upcoming Price Reviews - Should we include reference to future price deregulation? |
- Consult with Scheme Actuary to determine timing / Sam - Include intention to communicate: - Market Insights Paper - 3 “how to” guides - DRC Review ToR - Market Engagement team to draft broader comms roadmap, together with Housing team - Antonia to review and provide feedback - Pending meeting with DSS on 26/02 - Antonia to review and provide feedback |
| Pending reviews | - Feedback from IAC - Feedback from Chairman - Full Board? - External Comms Team? |
- Incorporate once received - Incorporate once received - Guidance from Helen/Robyn on whether to engage Full Board / Sam - Share draft with Comms team |
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Financiers, especially those who had not entered the SDA market yet, were more likely to raise price regulation as their “top concern”
Indicative categorisation, based on interviews
| Raised price regulation as their “top concern” | Raised other issues as their “top concern” (primarily demand risk) | |
|---|---|---|
| Have participated in the SDA market | - Macquarie - Summer Foundation & Summer Housing |
- Multicap - Independent Living Villages - Ability Homes - Lifetime Homes - Housing Choices Australia - St John of God Healthcare - Montrose - Community Sector Banking¹ - Social Enterprise Finance Australia¹ |
| Have not participated in the SDA market | - Cheyne Capital - Allen Partners - NAB - CBA² - Social Ventures Australia - Scope Australia |
¹ Did not confirm participation during interview, but suggested they either had or were very likely to ² Has financed SDA dwellings as part of broader developments that include other types of accommodation
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A range of potential responses to regulatory risk surrounding price levels were suggested by providers and investors
| Potential NDIA actions | Description | Pros | Cons |
|---|---|---|---|
| Communication Review terms of reference | - Provide providers and investors with more information on scope and mandate of review, together with details on review approach and process (including a commitment to industry consultations) | - Better understanding of review process and mandate assures investors and leads to a gradual increase in capital commitments | - Cannot announce Benchmark Price Review ToR prior to SDA Pricing and Payments Framework review |
| Partial grandfathering of existing investments | - For existing investments, only review “variable cost” assumptions, grandfathering “fixed cost” assumptions (e.g., cost of construction, land) for property built before 2021 | - Certainty of cash flows triggers supply rush before 2021 as investors/providers seek to invest in time to take advantage of grandfathering - Cost impact is limited to variable costs assumptions of pre-2021 investments |
- Difficult to implement: potentially requires 3rd pricing table |
| Grandfathering of existing investments | - Grandfather existing investments entirely with current funding arrangement for property built before 2021 | - Certainty of cash flows triggers supply rush before 2021 as investors/providers seek to invest in time to take advantage of grandfathering - Cost impact is limited to pre-2021 investments |
- As above |
| Review early and leave until 2026 | - Review price levels today, and then leave prices stable for ~ 7 years - Equivalent to “preponing” the 2021 price review to today |
- Certainty of cash flows triggers supply rush in first 2 years - Better debt to equity ratios offered by financiers encourages new providers |
- Inability to revise prices for 7 years - Signals to the market the NDIA can be effectively lobbied - Increase perceived risk of 2026 price review meaning remaining supply gaps after 2021 are less likely to be filled |
| Provide a 7-10 year price guarantee | - Leave price levels unchanged for 7-10 years - Equivalent to “skipping” the 2021 price review |
- As above | - If existing prices are too generous in some areas, impact is locked in for 7-10 years - Signals to the market the NDIA can be effectively lobbied - Increase perceived risk of 2026 price review meaning remaining supply gaps after 2021 less likely to be filled |
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In upcoming Reviews, the NDIA should consider key indicators to assess the level of market intervention that may be required
- ✓ Strong / some evidence to suggest this is true
- ✗ Strong / some evidence to suggest this is not true
- ? Insufficient data to draw a conclusion
| Option A: “Light Intervention” (e.g., clarity on rules and review cycles) | Option B: “Heavy intervention” (e.g., increased price guarantees) | |
|---|---|---|
| What you would need to believe to choose this option | - ✓ Existing and committed investments are underway, suggesting the current risk-return profile is attractive for investors - ✓ The pace at which “new SDA” participants are transitioning to NDIS is gradual, allowing the NDIA some time to watch how supply evolves before acting - ✓ Given the nascence of SDA rollout, there is insufficient evidence to suggest potential under-supply, which would necessitate an intervention - ✓ DRC Review outcomes will comprehensively address provider concerns mid-2018, and action in the meantime could create confusion or contradiction |
- ? Under current settings, the time taken to stimulate supply to cover the estimated 28,000 people who need SDA is beyond “acceptable” level - ? Scale of investment so far has been small relative to expectations - ✓ Providers are unable to secure financing, or have to accept difficult terms (e.g., “adverse price review” clauses, short debt repayment schedules) - ✗ NDIS participants with SDA in their plans have long wait times before they are able to find suitable SDA dwellings enrolled in the NDIS - ? Announcement of the DRC Review will alarm market in the short term, who will seek additional reassurance from the NDIA in the meantime |
| Risks | - No NDIA action on price reviews today could lead to future under-supply of SDA dwellings - Long lead time of SDA construction implies the scheduled 2021 price review could “cast a shadow” back till 2019 - Course correction may be possible, but expensive (e.g., SDA refurbishment) |
- Early action, without further data on supply and demand, could “lock in” inappropriate prices for the long term (e.g., too generous in some cases, inadequate in others) |
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Key considerations for upcoming Framework and Price Reviews
- SDA Pricing & Payment Framework Review (Framework Review):
- Will consider the methodology by which the NDIA sets Benchmark Prices (e.g., formula for dwelling costs, additional factors to consider including location, price inflation, etc.) and the future timeline and cycle of Reviews
- Currently scheduled for 2018-19
- NDIA Benchmark Price Review (Price Review):
- Will review Benchmark Prices, in line with methodology set out in the Framework
- Currently scheduled for 2021
Key considerations
Timing
- Consider acceleration of the Framework Review (e.g., completed by June 30 2018)
- Consider potential to bring forward the Price Review and complete together with (or directly after) Framework Review. Completing Reviews together would help to:
- Consider issues holistically, managing interdependencies between the two Reviews. For example, Framework Review analysis on the best way to address geography specific costs and prices will need to consider (a) how the NDIA may subsequently set location factors, and (b) how the NDIA expects supply and demand to evolve by region
- Reduce the period of uncertainty for the market. Accelerating the Framework Review but leaving the Price Review at 2021 may not address market concerns regarding regulatory uncertainty. Completing the Reviews simultaneously would minimise the disruption the market to one event
- Save time and resources. There is likely to be significant overlap in the participant, provider and investor consultations, as well as the quantitative analysis, required to effectively complete the Framework Review and the Price Review
Scope & Approach
- Comprehensive scope: how much new supply is required (by region and over time), what’s the right pricing construct, what are the right price levels (including inter- and intra-city dynamics), how should they be reviewed over time?
- Combined governance: joint DSS and NDIA Steering Committee and Working Team, working with commissioned third party
- Consultation with participants, providers, investors, other stakeholders
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Currently, dwelling enrolment is time-consuming, leading to delays in processing and a significant backlog
Time taken to complete dwelling enrolment
Days
- Ideal: 30
- Average: 103
- Worst case: 384
Month-by-month processing of dwelling enrolment applications¹
Number of applications
- Applications received
- Backlog²
(Chart spans Jul-16 to Jan-18, showing a growing backlog peaking around 116-120 applications near Jan-18)
¹ Each dwelling enrolment application can have up to 50 dwellings for one provider. ² It is estimated that there 860 potential dwellings in the backlog currently.
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SOURCE: NDIA Dwelling Enrollment Team data
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Price reviews are common practice across similar Schemes, though they often include protections for existing providers
| NDIS Specialist Disability Accommodation | National Rental Affordability Scheme | Defence Housing Australia | Aged Care Accommodation Supplement | Residential Aged Care Basic Subsidy | |
|---|---|---|---|---|---|
| Funding Principles | - Funds participants to lease disability supported homes from providers | - Funds providers to lease houses to participants from low/middle-income households | - Funds guaranteed rent to lessors of DHA houses on behalf of residents. | - Paid on behalf of eligible ‘supported’ participants to providers - Eligibility is based on means test |
- Funds providers for the care needs of individual participants |
| Funding Amount | - Amount differs on individual basis, depending on participant’s reasonable and necessary needs | - Annual payment of approx. $11,000¹ - 75% in form of tax offset from federal government - 25% in form of cash payment from state government |
- Commencing guaranteed rent is determined based on market rent for the properties factoring in location. | - Amount depends on: - If the facility has >40% supported participants - Whether the facility is newly built or refurbished |
- Determined by applying the Aged Care Funding Instrument (ACFI) which has three funding domains: 1) Activities of Daily Living 2) Behaviour 3) Complex Health Care |
| Price/funding reviews | - Every five years - To be confirmed |
- Indexed annually - Previous review in 2014 - Review resulted in no further funding rounds |
- Indexed annually - Previous review in 2014 |
- Previous review in 2014 | - Funding changed in 2016-17 budget - Implemented Jan 2017⁵ |
| Review outcomes | - Existing providers were grandfathered for up to 10 years² | - Property is valued annually and rent is indexed according to current market-value. - Rental floor applies to some DHA properties.³ |
- Changed eligibility criteria to include income, in addition to assets, of participants - Grandfathering of previous rates for participants in care before 1 July 2014⁴ |
- Funding changes to particular items in Complex Health Care matrix - Applied only to new appraisals or re-appraisals - Pause of annual indexing |
¹ National Rental Affordability Scheme – NRAS Incentive (Indexation)
² Australian Government Budget 2015-2016 – Budget Paper No. 2, Part 2: Expense Measures
³ Defence Housing Australia Lease Edition 6C
⁴ Aged Care Act 1997 – Subsidy Principles 2014
⁵ DoH Factsheet: Changes to residential aged care funding arrangements – Budget 2016-17
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FOI 24/25-17953a Grandfathering in aged-care effectively maintains previous funding level for the life of existing participants
| Context | Funding review | Implications for existing participants |
|---|---|---|
| Aged Care Accommodation Supplement | ▪ Participant eligibility is means tested based on income and assets of participants. ▪ 40% of beds in each residential aged care facility must be for ‘low means residents’. |
▪ Review of the Accommodation Supplement in 2014 changed eligibility criteria to include participant income and assets (previously only assets).¹ ▪ This reduced the amount of participants that can qualify as ‘low means residents’ but maintained the 40% requirement. |
| Residential Aged Care Basic Subsidy | ▪ ACFI has three funding domains: 1) Activities of Daily Living 2) Behaviour 3) Complex Health Care (CHC). ▪ Residents care needs are assessed using scoring criteria for each domain. ▪ Each domain is then allocated a funding level (low, medium or high) based on scores |
▪ Review of ACFI in 2016 reduced scores for several common items (e.g. measuring blood pressure) in the CHC domain. ² ▪ This resulted in lower total CHC scores residents with these care needs. ▪ Lower scores then reduced the CHC funding level for these participants and lowered total basic subsidy amount. |
1 Aged Care Act 1997 – Subsidy Principles 2014
2 DoH Factsheet: Changes to residential aged care funding arrangements – Budget 2016-17
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FOI 24/25-17953b Example SDA price calculation
SDA price = (Base Price) x (Location Factor) x (1+Fire Sprinkler Allowance)
Example SDA price calculation
| Existing stock or new build | Select one | New Build | Base Price is calculated using: Building Type: apartment, villa or house; the no. of bedrooms in the building; the no. of residents in the building. Design category: Basic, Improved Liveability, Fully Accessible, Robust, High Physical Support. Whether there is on-Site Overnight Assistance |
|---|---|---|---|
| Building Type | Select one | House, 3 residents | |
| Number of residents at full occupancy | Calculated value | 3 | |
| Design Category | Select one | Robust | |
| With or without On-site Overnight Assistance (OOA) | Select one | With OOA | |
| Base Price | Calculated value | $28,648 | per participant per year |
| Breakout room (robust, 2+ residents only) | Select one | With breakout room | |
| Breakout room price (if applicable) | Calculated value | $1,205 | |
| Base Price + breakout room (if applicable) | Calculated value | $29,853 | per participant per year |
| Location | Select one | NSW - Sydney - Eastern Suburbs | |
| Location Factor | Calculated value | 1.96 | |
| With or without Fire Sprinklers | Select one | With Fire Sprinklers | |
| Fire Sprinkler Allowance | Calculated value | 1.9% | |
| SDA Price ($ 2107/18) | Calculated value | $59,623.61 | per participant per year |
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FOI 24/25-17953b There are 6 key inputs in determining price levels
| Option 1 | Option 2 | Option 3 | Option 4 | Option 5 | Option 6 | Option 7 | Option 8 | Option 9 | Option 10 | Option 11 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Build | New build | Existing stock | NA | NA | NA | NA | NA | NA | NA | NA | Existing Stock or New Build |
| Building Type | Apartment, 1 bedroom, 1 resident | Apartment, 2 bedrooms, 1 resident | Apartment, 2 bedrooms, 2 residents | Apartment, 3 bedrooms, 2 residents | Villa/Duplex/Townhouse, 1 resident | Villa/Duplex/Townhouse, 2 residents | Villa/Duplex/Townhouse, 3 residents | House, 2 residents | House, 3 residents | Group home, 4 residents | Group home, 5 residents |
| Design Category | Basic | Improved Liveability | Fully Accessible | Robust | High Physical Support | NA | NA | NA | NA | NA | NA |
| With or without On-site Overnight Assistance (OOA) | With OOA | Without OOA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| Breakout room (robust, 2+ residents only) | With breakout room | Without breakout room | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| Location | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple | Multiple |
| With or without Fire Sprinklers | With Fire Sprinklers | Without Fire Sprinklers | NA | NA | NA | NA | NA | NA | NA | NA | NA |
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SOURCE: SDA position paper on Draft Pricing and Payments April 2016 p21 26
FOI 24/25-17953b Key assumptions for calculating investment required
| Description | Range | Source or rationale | |
|---|---|---|---|
| Rental contributions from participant | Investment horizon | 20 years | Consultation with investors and financiers |
| Annual rental contribution/participant | $8,554 | 25 per cent Disability Support Pension + Commonwealth Rent Assistance (lower without CRA). Defined by framework. | |
| Growth in rental contribution | CPI | Assumption | |
| Vacancy rates – group homes | 3%-10% | Historic data indicates 3-7 per cent. Assume higher in group homes when choice available. | |
| General market information | Vacancy rates – smaller forms | 3-7% | Public housing vacancy rates around 3 per cent. Assume slightly higher when the dwelling is not a single occupancy. |
| Median land values | Varies by area | State land agencies, aggregated to ABS statistical division. Base $552/sqm Base = median price combined capital cities. | |
| Long term land appreciation | 5% p.a. | Literature and State data indicates long term averages from 5-10 per cent or more. Assume low end due to high current property values. | |
| Increase in building costs | CPI | ABS housing cost index similar to CPI over long term. | |
| Gross market yield for existing stock | 5.5% - 6.5% | Proportion of total property value. Based on RBA estimate of standard yield (4.2 per cent) plus 1-1.5 per cent additional cost for SDA based on review of State data. +1 per cent for apartments. | |
| Cost of ownership | Maintenance and outgoings | 15,000-$34,000 | Depends on property type. Based on review of State data. Significantly higher than general (non-SDA) industry benchmarks. |
| Property management | 0.4% | Proportion of total property value. From RBA analysis. Equivalent to industry benchmarks of 8-10 per cent of rental value. | |
| Vacancy management | $4,000 | Per vacancy. Equivalent to one FTE plus overheads for one month. | |
| Property costs | Build costs | 0.4 - $1.6m | Varies by build type and design category. Advice from quantity surveyors with architectural design advice. |
| Additional breakout or staff rooms | 30,000-$40,000 | As above. | |
| Major refurbishments | 20-25 years | Consultation advice. | |
| Major refurbishments costs | 40,000-$80,000 | Consultation advice. | |
| Asset life of building | 60 years | Consultation advice. Assumes property is well maintained and regularly refurbished. | |
| Loss on building costs when sold | 20% - 40% | Assumption. Loss of building value on sale because building is designed as SDA. Higher end represents loss on group homes. Homes with higher specifications than platinum are treated in accordance with platinum homes. | |
| Fees on sale of property | 7.3% | Transaction fees, stamp duty, etc. Industry average estimated by RBA. | |
| Financing | Debt rate | 5.2% | Ten year Commonwealth Bond rate plus 2.5 per cent debt margin. |
| Equity rate (nominal after tax) | 8.1% | CAPM, based on comparison with aged care and other health care investments. | |
| Level of debt | 60% | Comparison with financing assumptions applied in the aged care sector and other regulated industries. |
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SOURCE: SDA position paper on Draft Pricing and Payments April 2016 p21 27
FOI 24/25-1795 ATTACHMENT 3
Specialist Disability Accommodation Market Update
DRAFT
March 2018
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Introduction
The National Disability Insurance Agency (NDIA) seeks to continually engage participants, providers and investors on matters relating to the Specialist Disability Accommodation (SDA) market.
In its role as market steward, the NDIA is committed to providing regulatory clarity that would support development of the SDA sector. Through various forums, including 1-on-1 consultations, we’ve received feedback from stakeholders on key topics where greater clarity on SDA regulation would benefit both participants and providers. Key themes that have emerged from our consultations include a need for greater clarity on:
- Principles guiding SDA eligbility and SDA funding levels
- Price regulation, including on the upcoming DRC Pricing & Payments Framework Review and the Benchmark Pricing Review
- Operational processes, particularly the dwelling enrolment process and SDA planning process
- How provide and participants connect and find each other, including vacancy management, the availability of market supply and demand data
Having heard these and other concerns, the NDIA is committed to addressing them. In particular, we are undertaking three streams of action:
- The NDIA will work with the Department of Social Services (DSS) to inform the Pricing & Payments Framework Review, to commence in May 2018 and to be completed by the end of 2018. We expect this review to be a key opportunity to work closely with participants and providers to ensure appropriate price settings are in place for SDA
- The NDIA will work to improve the efficiency of key SDA operational processes, including transparent and efficient SDA planning, and timely processing of applications for dwelling enrolment.
- The NDIA will provide more regular communications to the SDA market in the future, including the provision of more granular data on SDA demand and supply as it becomes reliably available
This document is the first in a suite of communications designed to provide clarity to the market. As a first step, this document seeks to provide clarity to SDA participants, providers and investors on salient points around the SDA market and regulations, including:
- Eligibility and funding levels;
- Future funding principles including price reviews;
- Innovation in SDA;
- Dwelling standards and enrolment;
- Future communications about SDA.
The NDIA understands and agrees that more information will greatly support investment decisions. While there are limitations in the current available data that are only likely to be
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resolved at full scheme, the NDIA is developing a Market Insight paper to provide supply and demand information to the SDA sector.
In addition, topics planned for future communications are outlined in Section 5, and include:
- Pricing & Payments Framework Review Terms of Reference;
- Payment process
- Participant planning process including assessment templates Intended to assist external assessors e.g. occupational therapists; and
- Dwelling enrolment process.
Providers and others should note that the information and other assistance the NDIA provides in this guide is only to be relied on in relation to the National Disability Insurance Scheme (NDIS) and not in relation to the requirements and obligations beyond the NDIS.
The NDIA accepts no liability to any person for any loss, damage, cost or expense suffered as a result of reliance on the information given to providers and others about SDA beyond that which relates specifically to requirements and obligations under the NDIS.
The information about the requirements and obligations under the NDIS may change over time and should also not be relied on for any action or failure to act. Providers and others seeking to obtain SDA payments should seek assistance if they are unclear about the requirements they must meet or their obligations.
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Contents
Introduction ……………………………………………………………………………………………………………. 2
- Introduction to Specialist Disability Accommodation (SDA) …………………………………………….. 5
What is SDA funding? ………………………………………………………………………………………………. 5
Why include SDA funding under the NDIS? …………………………………………………………………… 5
What’s new about SDA funding? ………………………………………………………………………………… 5
Is SDA funding here to stay? ………………………………………………………………………………………. 6 - SDA eligibility and funding levels …………………………………………………………………………….. 7
How are SDA eligibility and funding levels assessed? …………………………………………………….. 7
When are SDA eligibility and funding assessments made? ……………………………………………….. 8
Will the NDIA change the SDA price limits? …………………………………………………………………. 9 - Provision of high quality SDA …………………………………………………………………………………. 10
What innovation is possible through SDA funding? ……………………………………………………….. 10
What standards must all SDA dwellings meet? ……………………………………………………………… 12 - Connecting participants and provides ………………………………………………………………………… 13
I’m a participant. How do I find a suitable SDA option? ………………………………………………… 13
I’m a provider. How do I find a suitable SDA tenant? ……………………………………………………. 14 - Future communications about SDA …………………………………………………………………………… 15
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1. Introduction to Specialist Disability Accommodation (SDA)
What is SDA funding?
SDA refers to accommodation for participants who require specialist housing solutions including to assist with the delivery of supports that cater for their extreme functional impairment and/or very high support needs.
SDA is a disability support funded through the NDIS. Under the NDIS, eligible participants receive funding to support them in finding and living in SDA that meets their needs. SDA funding under the NDIS refers specifically to funding available to eligible participants for capital/housing supports, and does not refer to funding for person-to-person support services that may additionally be delivered to support independent living.
SDA is delivered under the National Disability Insurance Scheme (Specialist Disability Accommodation) Rules 2016. Other key governing documents for SDA include the SDA Pricing and Payments Framework, the SDA Price Guide, SDA Operational Guideline and Terms of Business for Registered Providers.
Why include SDA funding under the NDIS?
SDA funding provided to participants who meet the eligibility requirements under the NDIS will create a market-place for SDA. In the medium term the NDIA expects this to begin addressing the long standing under supply of SDA. Historically a lack of funding has meant insufficient supply of suitable SDA options.
In 2011, the Productivity Commission estimated that around 28,000 people (or 6 percent of Scheme participants) will require SDA support. Prior to the launch of NDIS, it was estimated that 15,700 SDA places existed, implying a gap of 12,000 places in the market.¹
The SDA funding available to participants under the NDIS is designed to attract further investment into the development of new SDA. NDIS funding for SDA will represent a new and substantial injection of funds for the sector. At full scheme, aggregate funding for SDA is expected to total approximately $700 million per year.
What’s new about SDA funding?
In addition to introducing new funds, the NDIS also changes the way SDA funding is provided. Instead of funding SDA through centrally managed capital grants programs that provide block funding to providers, the NDIS provides SDA funding directly to participants after determining their appropriate budget by applying the reasonable and necessary test within the NDIS Act (s.34), and the eligibility criteria under the SDA Rules (s.3). With their SDA funding, eligible participants can make their own decisions to find and enter into
¹ Productivity Commission Disability Care and Support Report Vol 2 No. 54, 31 July 2011
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agreements with suitable accommodation providers. This is consistent with the emphasis on participant choice and control across the NDIS.
Moving to an individualised, participant led funding model has several benefits:
- SDA funds are allocated based on participants’ choices on where they would like to live, rather than government agency decisions on the merits of provider grants applications
- Through participant choices, funding can flow to a wide range of providers of varying scales offering new and innovative solutions, rather than being limited to incumbent players who are familiar with grants processes or established models of accommodation and support
- Funding levels are consistent and smooth across years, as they are linked to participant needs, rather than being tied to “lumpy” grants rounds and decisions.
These benefits increase participant choice and control, improve outcomes, and encourage innovation among providers.
This purchasing power of participants will drive greater competition, stimulate innovation and create incentives for providers to be more responsive to the needs and preferences of users.
Currently the NDIA sets price limits for SDA depending on the SDA type and location. Price limits provide a ceiling up to which providers can negotiate with participants for the provision of SDA.
Price limits are a form of regulation that the NDIA uses to ensure participants are receiving value for money for their supports while the market matures. Over time as the market develops, the NDIA will begin to remove price limits for NDIS supports including SDA.
Is SDA funding here to stay?
Yes. SDA funding under the NDIS is a legislated commitment of Australia’s Commonwealth, State and Territory governments, set out in the NDIS SDA Rules (2016) under the NDIS Act (2013). This legislation provides the foundation for government’s firm, long-term commitment to SDA funding under the NDIS.
Beyond the legislative commitment, ensuring that eligible participants have access to appropriate SDA that meets their needs contributes to better outcomes while representing value for money for the NDIS. This is due to high-quality SDA making it easier (and less expensive) to provide the range of in-person supports that SDA eligible participants require. SDA residents can easily share supports, and often their person-to-person support needs are reduced by improved design in SDA dwellings compared to general market housing.
The value for money that SDA provides for participants with very high support needs or extreme functional impairment benefits the sustainability of the NDIS overall.
Broad benefits to all parties including participants, providers and the NDIS itself underpin the NDIA’s long-term commitment to SDA funding.
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2. SDA eligibility and funding levels
How are SDA eligibility and funding levels assessed?
The SDA Rules set out the criteria for determining participant eligibility for SDA funding, and were agreed by all governments. Full eligibility guidelines can be found in Part 3 of the SDA Rules.
SDA is intended to be a specialist solution for participants with a very high need for constant or immediately available supports, and/or those participants with extreme functional impairment in a core area (self-care, mobility or self-management) where key activity limitations remain even following the use of assistive technologies, home modifications or capacity building supports.
SDA will be funded for participants where it represents value-for-money for the NDIS in respect to the costs and benefits of alternatives. Commonly asked questions on the number of participants and dwellings are addressed in Box 1.
Box 1
Is there a cap on the number of SDA participants?
No. There is no arbitrary cap on the number of SDA participants. All participants who meet the eligibility criteria will receive SDA funding. However, due to the specific eligibility requirements there are only likely to ever be a small percentage of Scheme participants who meet the criteria for SDA.
Currently, it is estimated that around 6% or a total of 28,000 participants will require SDA funding once the NDIS has reached full scheme, however this estimate does not represent a ‘cap.’
Is there a cap on the number of SDA dwellings that will be enrolled under the NDIS?
No. There is no cap on the number of SDA dwellings that will be enrolled under the NDIS.
Given the market based approach of the NDIS, market forces will determine the supply of SDA dwellings required to meet participant demand.
This may be informed by supply and demand data the NDIA will release (detailed in Section 3).
The level of SDA funding provided to each eligible participant is based on what is reasonable and necessary, as determined through the NDIS participant planning process. Assessments required by the NDIA to determine SDA need and preference may include: activities of daily living, functional capacity assessments, and/or a behaviour assessment. Based on assessment of need, each eligible participant’s Plan will include SDA funding to match the level of support required to meet their needs. The NDIA uses the SDA pricing approach to assist in determining the funding amount required to meet the person’s assessed level of SDA need.
The planning process does not include expressing a preference for either an available in-kind accommodation option, or a new dwelling. Participants can choose to live in either an existing SDA dwelling (including “in-kind”) or in an SDA ‘new build’ provided a suitable option is available.
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Further information on the level of support, including building types and design categories, can be found in the SDA Price Guide. Box 2 provides details on the relationship between funding and price.
Box 2
Competing on price
Payment rates are not aligned with a building’s type and location, but rather the SDA price limit represents a ceiling above which a provider is unable to negotiate with an individual participant.
As the market develops providers may start to compete on price.
The most common example of this is expected to occur where a provider negotiates a lower payment amount with a participant who has an SDA plan budget that is aligned to a lower cost SDA type than what the provider’s dwelling is compliant with and enrolled as.
For example, this may mean that a dwelling enrolled as ‘high physical support’ has an SDA resident who has an ‘improved liveability’ SDA plan budget where the provider and participant have negotiated a price that is aligned to the ‘improved liveability’ price limit, rather than ‘high physical support.’
When are SDA eligibility and funding assessments made?
SDA eligibility and support level assessments for participants are considered at the time of plan approval and plan review. Given the eligibility and associated assessment requirements a participant’s first plan may include funding for Support Coordination and Therapeutic Supports to allow assessments and exploration of suitable alternatives to be made. If it is demonstrated that SDA is the most appropriate option, SDA funding may then be included in the participant’s next plan.
In cases where participants are residents in existing disability accommodation previously funded by a state or territory government, the funding required to continue their current living arrangements will be included in their First Plan. Most often participants will use this funding to make a combination of SDA and Supported Independent Living (SIL) payments to their provider.
A participant’s plan must include the participant’s statement of goals and aspirations and a statement of participant supports (See what must be included in a participant’s plan?).
The statement of participant supports specifies, amongst other matters, the general supports (if any) that will be provided, and the reasonable and necessary supports (if any) that will be funded under the NDIS (s. 33(2)).
SDA is one type of reasonable and necessary support that may be funded for a participant under the NDIS.
While SDA is new to the NDIS and it will take some time for participants to have the required assessments and SDA funding to be included in participant plans, providers are strongly encouraged to only make an SDA offer once a participant has SDA funding already included in their plan.
Once a participant has SDA funding approved, their plan will specify the design category, building type/s (e.g. 2 bed and 3 bed apartments or houses), and location/s they can look to reside in (see part 4 of the SDA Rules).
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