Once SDA is in a participant’s plan it is highly unlikely it will not be required in subsequent plans. A participant is only likely to cease having SDA included in their plan where it is a participant’s goal to pursue alternative housing options other than SDA.
Will the NDIA change the SDA price limits?
As acknowledged in the Introduction the Agency acknowledges the feedback from stakeholders on:
- The need for clarity on price regulation, particularly the detail of the upcoming Pricing & Payments Framework Review and how this effects the Benchmark Pricing Review
- The need for further information on SDA and the NDIS including funding levels and the eligibility of funding
- Further clarity on operational processes, particularly the dwelling enrolment process and how participants and providers connect
- The desire for quality market demand data and ongoing communication between the NDIA and the market.
A transparent and stable funding regime is critical to stimulate new supply of high quality, fit for purpose and innovative SDA, and for the funding approach to be commercially viable and attractive for investors.
As described above, funding for each participant is included in their Plan, which will describe an amount of SDA funding along with a specific Design Category, Building Type/s and location/s.
The funding methodology is described in the SDA Pricing and Payment Framework. The draft baseline assumptions underpinning SDA funding were also made public on 1 April 2016 in the SDA Position Paper on Draft Pricing and Payments.
SDA has two key review points:
- A review of the SDA Pricing and Payment framework will be undertaken in its third year of operation (2018-19) by the Disability Reform Council;
- Price limits developed by the NDIA will be reviewed every five years, with pricing from the first review to apply from 2021.
The SDA review cycle is intended to strike the right balance between providing investment certainty and ensuring SDA price regulation arrangements are sufficiently flexible to accommodate participant choice and new data.
SDA Pricing and Payment Framework Review
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 review will be led by an Independent Expert Panel which will examine the current Framework to assess whether it:
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- Supports participant choice and control, innovation, market development, financial sustainability
- Reflects an efficient cost structure for providers
- Facilitates providers obtaining investment
- Has appropriate timeframes for price reviews
- Needs to be updated to meet changes in quality and safeguard requirements
Benchmark Price Review
The benchmark price review’s scope is predicated on the above framework review However, during the 2021 review of the SDA price limits, the NDIA does not anticipate making wholesale changes to the methodology, rather the NDIA will use statistics from the Australian Bureau of Statistics, the Reserve Bank of Australia, Commonwealth Treasury and other bodies as appropriate to ensure returns and SDA payments remain aligned to the cost of capital in prevailing economic conditions. These reviews will ensure the inputs to the Pricing model remain current, reflecting among other things:
- The cost of debt
- The cost of equity, driven by the CAPM, based on comparison with aged care and other health care investments
- Typical debt to equity ratios.
For example, this process may be used to increase the location weightings provided to SDA in line with changes to property values since 2015/16.
Any change in the pricing model will then change the funding participants are entitled to in both existing plans and new plans.
Understanding the need for certainty for both participants and providers, reviews will work closely with SDA participants and providers to ensure an attractive and effective SDA system is in place. This will include appreciation of the fact that, from a provider point of view, returns on SDA investment are derived over a 20-year period, and that any change to the pricing would need to consider this impact. Further, any SDA price adjustments stemming from the first five-yearly review are expected to be implemented from July 2021.
3. Provision of high quality SDA
What innovation is possible through SDA funding?
Under the NDIS, purchasing power will shift from the government to participants, who will be able to exercise choice and control in the supports that best meet their needs and preferences. This is expected to create incentives for providers to meet participant demands in new and innovative ways. Several types of innovation are now possible and available to participants.
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Apart from determining SDA eligibility and funding levels for participants and enrolling compliant dwellings once constructed, the NDIA does not play a role in selecting or endorsing particular property designs or developments.
The NDIA expects that the flexibility of the approach, with the inclusion of multiple dwelling types along with participant choice and control, will lead to significant innovation in the SDA market. Whereas ‘group home’ configurations have been the most common form of supported accommodation in the past, the NDIA expects participants will choose smaller forms of SDA under the NDIS in configurations that still enable to efficient sharing of person- to-person supports. Further details on the sharing of supports is provided in Box 3.
Box 3
Value for money
Providers are reminded that in most cases SDA participants will receive an SDA budget that is sufficient for a shared arrangement (for example with 2-3 others). Additionally, SDA funding is in almost all cases intended to facilitate access to shared supports whether they are provided on-site or close by.
A single resident dwelling with no proximity to shared supports is highly unlikely to be affordable to most SDA participants, whereas smaller shared forms of accommodation in a configuration that makes shared supports possible are more likely to be affordable.
In addition to innovations in design and development of SDA, SDA providers are implementing flexible arrangements for non-NDIS or non-SDA participant tenants in SDA dwellings. While SDA funding is only able to be spent on an enrolled SDA dwelling from a registered SDA provider, an SDA compliant dwelling could be used in a “mixed tenant” arrangement, together with non-NDIS participants and/or participants with a different profile and level of need. Further details on mixed-tenants is provided in Box 4.
Given that SDA funding is provided to individuals and not dwellings, providers are able to create commercially viable “mixed tenant” properties an example of how this might work is outlined in Box 5.
Box 4
Can I charge a non-SDA participant rent?
Absolutely. A Provider is free to engage with a non-SDA participant in a typical lessor/lessee relationship. It is likely that the lessee agreement will reflect general market rental prices rather than SDA price limits, however this negotiation is between the tenant and landlord and not the NDIA.
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Box 5
Examples of flexible arrangements under SDA
An SDA provider with several dwellings in Sydney has recently completed construction and enrolled a new SDA dwelling with the NDIS. The SDA provider is looking for tenants for this new enrolled dwelling.
Barry is an NDIS participant who has SDA in his plan. He would like to stay in the SDA provider’s new SDA dwelling. It is a 2 bedroom property that meets Barry’s needs, and Barry is keen to move in straight away.
Barry would like to live with his friend Steve, who is not an NDIS participant. The NDIS does not fund supports for non-participants. Steve is happy to pay general market rent for his accommodation.
The SDA provider is happy to have Barry and Steve move into their new enrolled dwelling, because it means they will be able to fill the property immediately. The provider is satisfied with the return they are making through a mixed tenancy arrangement, with Barry supported by NDIS SDA funding, and Steve agreeing to pay general market rent.
What standards must all SDA dwellings meet?
While innovation in the provision of SDA dwellings is possible and encouraged, all SDA dwellings are required to meet a basic set of certification standards in order to be enrolled with the NDIA and used as SDA.
Currently, providers must possess a written certification against the SDA design standards, and attest to this fact. The requirement does not specify a profession type or require it to be a third party to carry out this written certification.
The NDIA has contracted a well-regarded third party — Livable Housing Australia (LHA) — to further develop and publish SDA certification standards, in line with current industry standards.
LHA will develop training packages for assessors, who will lead dwelling assessment (rather than a suitably qualified professional as is now the case). The NDIA expects a larger number of assessors and clearly published standards will streamline and accelerate the dwelling certification and enrolment processes and provide extra surety for providers. Work on the certification standards is expected to be completed by the end of June 2018.
While properties can only be enrolled in the Scheme once construction is fully complete, LHA assessment will be possible at both the design and development stage. The opportunity for provisional certification by an accredited assessor might be useful for providers, even when enrolment with the NDIA is only currently possible once the dwelling is complete.
Provision of SDA in different states or territories require registration as a provider of SDA with the relevant State Quality and Safeguards authority. Providers must also meet the quality and safeguard requirements, including all applicable building codes and laws, for each state or territory as outlined in the Guide to Suitability.
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4. Connecting participants and providers
While individualised funding under a market-based approach enables greater participant choice and control and encourages provider innovation, it also creates the imperative for a shift in provider and participant behaviours.
One key shift required will be in the way participants and providers find each other.
The NDIA will not centrally administer ‘placements’ for participants with SDA funding in their NDIS plans. Instead participants (often with support such as support coordination) will be expected to find and apply for appropriate advertised vacancies, and providers will be expected to advertise their vacancies and undertake selection processes.
I’m a participant. How do I find a suitable SDA option?
Participants may consider a variety of advertising platforms when seeking an SDA vacancy. This is aligned to other mainstream housing markets and the NDIS’ objective to support choice and an ordinary life for participants. The NDIA will assist participants in two ways:
- Funded supports such as a Support Coordinator: participants who require assistance to navigate the finding a home process may receive additional funding in their plan. Where this is the case, a Support Coordinator can assist a participant with all aspects of searching for and considering vacancies, making applications, negotiating a tenancy and transitioning into an SDA option.
- A Provider Finder: the NDIA will shortly pilot an enhanced provider finder with a selected user base and, in time, will be available to all users on both the NDIS website and through the Myplace Portal. The enhanced provider finder will enable NDIS participants to exercise greater choice and control by improving the experience of finding and connecting with providers.
In most cases participants with SDA in their NDIS plan will use their SDA budget to approach the market. In practice this will mean a participant will approach an SDA provider who has an advertised SDA vacancy and decide to submit an application for consideration.
After reviewing advertised SDA vacancies, participants with SDA in their plan will choose which vacancies to apply for.
A participant will have many considerations when deciding whether or not to apply for an advertised vacancy. It is important that a participant considers their SDA plan budget and whether their budget aligns to an advertised vacancy. If a participant is considering applying for a higher cost SDA type or location, the participant must make the SDA provider aware of their SDA plan budget. Depending on the SDA model, participants will need to carefully consider their likely compatibility with existing residents. Depending on the household and provider’s process, this may occur either before deciding to apply, or before accepting an offer.
While this is the likely to be the typical path for participants, under the NDIS it is also possible for participants with SDA in their plan to consider pooling their SDA budgets and approaching a developer to explore having an SDA option purpose-built for them (please note participants should not assume the outcome of a particular plan decision as it relates to their SDA funding or their supports funding).
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Under the NDIS a participant can also choose to use their SDA budget to provide SDA to themselves. Due to the requirements for SDA, participants will need to become a registered provider, and enrol their compliant dwelling in order for this to occur. More detail on participant choice of property is outlined in Box 6.
Box 6
I’m a participant. Can I spend my SDA funding on any property?
SDA funds can only be paid to a Registered Provider who has a compliant and enrolled dwelling with the NDIA - this includes where participants are providing their own SDA.
I’m a provider. How do I find a suitable SDA tenant?
The NDIA expects SDA providers will develop and utilise a variety of methods to advertise their SDA vacancies. Many will be market-specific. Some common methods of advertising a vacancy will include:
- through local networks
- in the newspaper
- on web-based/e-market platform/s
- through local known support coordinators and their networks
- outsourcing to a third party contracted to manage tenancies (such as a real estate agent).
Some very large providers of SDA may pool a portion of their SDA payments to fund a vacancy management team for their SDA portfolio. These teams may operate in a way similar to the centralised approaches delivered by state and territory governments under previous systems. Some SDA providers will choose to engage a third party to manage their vacancies and tenancies, as is most often the case in the mainstream housing market.
The SDA price limits paid by the NDIS have been calculated for providers to cover the costs associated with delivering these functions. Payments for vacancies are available in limited circumstances as described in the SDA Rules.
SDA providers can also take steps to protect against the risk of vacant properties. First and foremost, providers should wait for NDIS participants’ SDA eligibility and plan decisions before making offers or investment decisions. Providers should not assume the outcome of a plan decision, and even where participants do end up having SDA funding included in their plan, payments cannot be made for any period that SDA was not in the participant’s NDIS plan (SDA Rules 2016).
Second, providers can look to “future proof” their investment decisions by designing and developing SDA that could serve multiple uses. This could allow flexibility for providers to offer dwellings alternate markets (e.g., aged care or the general housing market) in response to changing market dynamics in the long term.
Finally, providers should build in response to market signals and market needs (based on participant plans). It is important for developers of new SDA dwellings to do their own research of the supply and demand for the SDA design category within the areas they plan to build a new SDA dwelling. The NDIA will support this research by providing timely market information wherever possible (discussed in the next section).
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5. Future communications about SDA
The NDIA understands that more market information can be helpful to participants, providers and potential investors in the SDA sector. While there are limitations in the current available data, the NDIA is committed to the ongoing release of demand data and other market information as it becomes reliably available.
This document is the first in a suite of communications designed to provide information to the market. To assist in understanding demand for SDA, the NDIA will publish a regular SDA Market Insight paper – the first of which has been published in conjunction with this market communication. Market Insight papers will provide data, as it becomes available, on the expected demand for SDA by type of participant and by region to inform provider investment planning.
In addition to Market Insight papers, the NDIA intends to communicate with the market on a range of topics throughout 2018. These topics and indicative timing of communication are shared below.
| Topic | Timing |
|---|---|
| SDA Market Insight papers | March 2018, updated bi-annually [TBC – pending discussion with Scheme Actuary] |
| Market information: overview of the existing supply of SDA, broken down by State & Territory | [TBC – pending discussion with Scheme Actuary] |
| – How to guides on key topics, including: |
- How SDA payments work
- How SDA dwelling enrollment works
- How the planning process works
- Provider responsibilities for modification
- Other topics, based on provider and investor feedback | April 2018, with new topics added quarterly as required | | Market information: overview of the forecast total supply of SDA required at Full Scheme, broken down by region | [TBC – pending discussion with Scheme Actuary] | | Actual data of NDIS participants with SDA in their plans, broken down by region | | | Terms of Reference for the 2018/19 SDA Pricing and Payment framework review | [TBC – pending discussion with DSS] |
In addition to market information provided by the NDIA, providers and investors should also conduct their own market research to inform their investment decisions. This could be through independent research, or partnering with disability support organisations and other experts.
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