Governments have today released the six principles that will guide the NDIS’s $700 million housing capital budget.
This announcement has been a long time coming. Governments have never publicly released an official housing strategy. The announcement has very important information in it that sets the foundations for how NDIS accommodation will work. The flesh will be put on the bones of these principles in a more detailed strategy that will come out by December 2015.
The six principles announced by the Prime Minister and State Premiers build on the NDIA’s previously presentations on housing.
The principles are:
- a mix of potential funding streams may be utilised to address existing and new specialist disability housing;
- NDIS funding would be based on the efficient lifecycle cost of delivery of specialist disability housing representative of typical providers;
- residents (people with disability) will be expected to provide a reasonable contribution towards their accommodation;
- funding is provided for both existing and new supply of specialist disability housing, as well as for both private and publicly owned specialist disability housing;
- providers of specialist disability housing will be expected to finance (‘cash-flow’) the purchase or build of accommodation and their operations; and
- funding will allow for the continuity of supply from providers and also ensure there is scope for change and innovation over time.
These principles provide the foundation for a more detailed framework that governments will release by December 2015. In this more detailed strategy, governments will look at issues including how land and buildings currently used for disability accommodation will be treated.
How much will the NDIA pay for accommodation?
The housing announcement provided much more detail than we have seen before in how the NDIS will think about payment for disability accommodation stock.
The NDIA will be using this broad formula:
NDIS funding support = (asset base x cost of capital) + accommodation related operating costs + depreciation – land appreciation – resident contribution
The formula takes into account the key cost drivers of housing by recognizing that housing providers will need funding for:
- the cost of both land and buildings (purchase, lease or construction);
- the cost of capital (finance);
- depreciation to replace buildings at the end of their life; and
- operational costs (facilities management, rates, insurance, utilities, repairs and maintenance).
The announcement suggests that there is an efficient cost for many of these items – that the NDIA may be a price setter for accommodation construction and management. This is similar to the way the NDIS approaches other items it funds – setting a standard (efficient) price for the cost of personal care and then requiring the market to adjust to this price.
The NDIA’s approach to setting prices in other areas reflects that the same type of service can cost different amounts in different circumstances. For example, that personal care is charged at a much higher rate on Sundays than on a weekday. The NDIA is expected to take a similar approach to housing by recognising that operational and building costs are very different for different client groups and in different geographies.
Who will be living in NDIS funded accommodation?
Governments have said that there will be a place funded by the NDIA for all participants who currently live in disability housing and want to stay as well as funding those who wish to swap to a different housing option.
The NDIS will also be funding accommodation for those who “specialist disability housing would be reasonable and necessary”. Although on this important question of what defines ‘reasonable and necessary’ there was no further detail announced. This will be a critical issue to be addressed in the paper due out at the end of the year. The announcement also said that those already on State supported accommodation waiting lists will be given priority.
Previously the NDIS has said that it only has sufficient funding for around 28,000 participants, despite an unmet need for housing amongst people with disability of up to 120,000 places.