Two months have passed since the NDIA released its final housing policy paper. Now that we all know the detail, what are players across Australia doing about creating housing?
DSC has held forums and met with private developers, group home providers, community housing providers, governments, banks and the NDIA. This is what we are seeing emerge as the next generation of housing in the NDIS.
There are four changes in the next generation of housing that is being developed through the NDIS:
It does not look specialist;
The design is for independence and the location close to transport and amenities;
Apartment are growing, large group homes are in decline;
Housing is provided separately from support;
Why these four characteristics? They are what banks are telling us they will require as a pre-requisite to funding. They are what housing developers are including in their plans and contracts for SDA housing. And they are what people with disability are saying is what they want in the NDIS.
1. Housing does not look specialist
Housing owners want assets that can be resold into the private residential market if NDIS housing turns sour. The next generation of disability housing will look and feel like the housing that every Australian would want to live in.
This is because NDIS housing is a risky proposition. The risk is twofold. First, providers are only being paid if an NDIS participant with the SDA payment in their plan is residing in their dwelling. Second, providers are worried that the NDIS will change the rules of the game and prices over time and make their investments unviable.
Building a 5 bedroom fortress on a giant suburban block has very little market value outside NDIS. An asset that has a value outside the NDIS is a beautifully fitted out, platinum level accessible townhouse that could be re-sold to an older couple who want to age in place.
Investors want an exit strategy and housing that looks specialist is a bad exit strategy. From a financial risk perspective, banks are extremely wary of lending for assets that have no value to those outside the NDIS, and Boards are not approving these.
What we are seeing is that almost everyone with plans in the pipeline to build NDIS housing are looking to build housing that is as mainstream as possible. Accessibility features are seamlessly integrated into these houses, and the exterior of housing looks like part of the neighbourhood.
2. The design is for independence and the location close to transport and amenities
The days of housing being located at the fringes are over. The housing being planned for NDIS participants is located in the heart of the community.
Housing providers see the need to build housing that enables – rather than disables – people. Build without technology and good design, or far from amenities, and expect that your house will be sitting empty in 5 years.
The sophisticated players with plans to build housing know that the NDIS is all about insurance thinking. They get that this means the NDIS will look at how housing reduces a person’s lifetime NDIS package cost. Relying on a taxi or ‘group home bus’ from the house to shops, work, recreation and social events will increase the NDIS package costs every year of a person’s life. Locating housing within a short walk of a supermarket, regular and accessible public transport and community hub cuts tens of thousands, potentially hundreds of thousands, of dollars of transport funding out of the NDIS’ lifetime liability.
The same is true of technology and design that increases independence. The Summer Foundation’s excellent guide on accessible housing design shows how smart design and technology reduce the need for paid support staff. People can live with greater dignity and the NDIS can reduce the amount paid to personal support workers.
The SDA payments and policy does not currently include penalties or incentives for this kind of smart design. But those looking at taking a risk on building housing on a big scale are expecting that the future SDA policy will penalise those who have shifted costs to the NDIS by building in poor housing locations.
Not only is there the NDIS payment risk encouraging better location and design, but participants are telling housing providers that they want to live closer to the things that matter to them. Boards are not ticking off NDIS housing projects that are could be uncompetitive in 5-10 years because they think participant might see them as second-rate locations and designs.
3. Apartment are growing, large group homes are in decline
A fascinating division is emerging. New players to the sector are building smaller dwellings, while traditional disability service providers are building the biggest housing allowable in the NDIS.
The new players in the sector — private developers and larger community housing providers — are all focused on 1-3 bedroom apartments, townhouses and villas. The only 4-5 bedroom free standing homes they are building is where a service provider partner is insisting on big homes.
The older players — existing disability service group home providers — are often the only ones planning to replicate the 4-5 bedroom group home model. They see the NDIS as the funding stream that will replicate what governments have always told providers to build: large shared accommodation.
What’s driving this difference? It’s price and culture. Anyone who looks at the NDIS prices sees that the financial returns are for smaller dwellings. Traditional providers often go straight to how much the NDIS will pay for the larger homes the sector has always been told to deliver. Those fresh to the sector ask themselves what stacks up from a financial viability perspective. The NDIS pricing appears to have been deliberately designed to provide better returns for smaller dwellings.
It’s also culture. People new to the sector are asking why 5 people with disability would want to live in the same home, when the only other people in society who live in such large accommodation are poor university students. More people per house means more chance of empty rooms because of inter-tenant dynamics and inability to find the right tenant mix.
Why bother with the hassle of a 5-person house, when it is easier to find the right mix of 2-3 people per dwelling and tenants are likely to be prefer to live with fewer people? These common sense questions and answers are proving easier for new players to ask than those whose minds automatically go to larger group home models.
Finally, it’s also about financial risk. Some wishful thinking in the sector sees the NDIS housing policy as an endorsement of the 5-person group home. Wiser Boards and CFOs see the size restrictions are a ceiling that is only getting lower and lower as time goes by.
The phasing out of large accommodation and prohibition on funding housing for more than 5 people per home and 10 people per site are more likely to be the beginning from the NDIA, not the end.
What happens when the NDIA’s next housing policy says that the new maximum size per site is only 8 people? Why would you take the risk of building the biggest possible allowable housing? Boards and Senior Managers are saying that it’s better to avoid being on the extreme end of housing sizes because that’s where NDIS policy change is most likely to pose financial risks.
Big developers are planning to build with a buffer on the number of people per house and site. That’s why we are seeing a growth of smaller dwellings that are not congregated on the same site.
4. Housing is provided separately from support
The last trend we are seeing is that people have seen the writing on the wall about combining tenancy and support. NDIS readiness is incredibly challenging and most disability service providers are focusing on growing their support business – not their property business.
The NDIS SDA framework allows the same organisation to own the property and provide the support for now, but it must be ‘separable’. Yet the NDIS could not have been clearer that as soon as they can get state governments to agree, they will prevent support providers from getting SDA payments.
Getting out of the property business is very challenging for some providers whose identity is closely tied to their physical housing stock. But those that have started to transition out of owning their own housing are doing it to focus on growing their support service – because that’s what they do best.
CEOs we work with are telling their Boards that they have to make a choice. Their CEO and management team can devote one day a week focusing on building new accommodation or one day a week on growing their NDIS support services.
Most Boards are saying that NDIS support service growth is more important than housing. And it is not hard to see why when you compare SDA payments ($328 per person per week for a 3-person house) and shared living support packages ($3,000 per week in support costs for a person in a 3-person house).
While there are certainly some ‘integrated’ housing and support providers that will be building SDA-funded housing, the vast majority of what is being planned and built will be owned by organisations that are not providing services.
Even those service providers who are choosing to build new housing and be the support provider are setting up housing trust so that if (when!) they are forced to choose between housing and support, they can easily sell or transfer their assets.
Frankly, we think that organisations are bonkers to put service redevelopment on the backburner to build housing (that they will almost certainly be transferring to a community housing provider in 3-5 years time)!
With more than 2,500 participants coming into the NDIS every week, service providers investing time and energy in a model that the NDIA has said it intends to split up is a very poor allocation of financial resources and scarce management and Board time.
Where are we going next
There is no structured approach to share lessons learnt in the NDIS SDA market, or share a development pipeline to know who is intending to build what. At DSC we think this is a big market gap.
The NDIS housing market will undoubtedly develop faster if we all shared what our development pipeline looks like. And the speed of growth is important. People with disability have consistently said that housing is the biggest barrier to living the life they want.
We would like to see a way for all organisations planning to develop housing share their intentions in a central platform so we can find opportunities to collaborate. This isn’t a time to reinvent the wheel.
Some organisations are worried about sharing their growth plans. We think this is misplaced.
No one provider is monopolising the NDIS housing market. The Productivity Commission estimating that the NDIS will provide 12,000 people with funding for new accommodation (and 16,000 people with the funding to redevelop their existing group home).
The unfortunate reality is that the the current development pipeline looks unlikely to even meet 30% of this need over the next 5 years. Our ‘best guess’ market assessment is that in 5 year’s time, 70% of people will have SDA payments in their plan but no housing to spend it on because housing providers are sitting back to see what others do.
Those organisations planning to be part of solution for the 30% of the market have nothing to fear by sharing their intention to build. The reverse is true – engaging in a network of all the serious NDIS SDA builders will increase organisation’s capacity to build more housing, more quickly.
We hope that more organisations are willing to share their NDIS housing plans.
If you are interested in talking about how we better document the NDIS housing pipeline, we would love to hear from you!