What Is the NDIS?
The National Disability Insurance Scheme (NDIS) was started in 2016 as a government initiative to fund the housing needs of Australians living with disabilities. The aim of the scheme was to assist 28,000 Australians every year to move into Specialist Disability Accommodation (SDA) that was affordable, accessible and in line with the requirements of people with disabilities and improve the well-being of the disabled person as well as their family and carers.
Specialist Disability Accommodation (SDA) is funded under the NDIS through individual participant plans, but the funding for housing are only catered to a small niche of people who require a high level of support.
As part of the scheme, the NDIS also funds the development of Special Disability Accommodation (SDA) to encourage investment from the private sector.
The government has pledged to fund of $700 million for 20 years, with investor returns anticipated at 10% to 12% per annum.
SDA providers will work towards developing and building suitable properties via partnerships with investors, developers and builders to participants who are eligible for SDA payments as part of their NDIS plans.
How Does NDIS Assist its SDA Participants?
The NDIA will assist the participants in two areas:
- Funding the support of participants who need support coordinators who will help them navigate the process of finding a home.
- Connecting directly with SDA providers.
Why Invest in an SDA Property?
Out of the 400,000 participants in the NDIS, an estimated 28,000 of them qualify for SDA. 12,000 of them are most in need of suitable accommodation. Out of the 12,000, half are living in aged care facilities, while the other half are living in unsuitable situations (inappropriate design, living with aging parents, etc).
The SDA scheme is designed to address the massive undersupply. Demand is not the problem here, and if you can build the right home for the participants, then your property will not face the problem of vacancy.
Furthermore, the government wants to motivate private investment of $5 billion to encourage the build of brand-new residential properties built for inclusion in the scheme.
The government has committed $700 million per annum in the SDA scheme funding from the overall NDIS budget of $20 billion per annum.
Your investment home not only provides rental income with a 20 year payment guarantee from the government, it provides the perfect home for Australians with disability out of inappropriate aged care and place them in suitable housing.
How Do I get a Loan For An SDA Property?
You can usually borrow between 60-90% LVR for up to a 30 year loan term with some specialist lenders depending on the loan amount you wish to borrow. You can borrow for an existing SDA compliant investment property or to build an SDA complaint property.
Borrowers must provide 2 years of full income documentation and have a clean credit score above 650 to be Serviceable. As part of the Serviceability calculation the lenders will accept up to 80% rental income, where evidenced by a NDIS Lease Agreement for an existing property or if the property is to be built, an NDIS Rental Appraisal from a government approved NDIS Support Agency.
This type of lending is only for investor borrowers, not property developers. Property developers must apply for property development finance if they require funding to build NDIS SDA complaint properties.
What Types of SDA Dwellings Can I Build?
You can build apartments, villas, duplexes or townhouses, stand-alone houses and even group homes that meet the following criteria:
- Is a permanent dwelling and not a mobile home.
- Must provide long-term accommodation for at least one participant.
- Cannot already be funded as an accommodation by the Commonwealth, state or territory under a scheme unrelated to a disability.
- Is not excluded from SDA as it previously received home modifications, funding from National Disability Insurance Agency (NDIA).
- Is not excluded from being SDA as it is a parental home.
- Meets the requirements of new build, existing stock or legacy stock set out in SDA rules and NDIS and price guide.
There are also specific design requirements required for the dwellings. At the most basic and minimum level, any dwelling or building type must have at least one Kitchen, Bathroom, Living/Dining area and Bedroom. It is acceptable for the dwelling to have more than one of each element. If the dwelling does not have either one of these elements, then it cannot be enrolled as SDA.
The requirements for the participant will change depending on the level of accessibility and support needed such as:
- Basic – There are no specific design requirements, but the location and feature must cater to the needs of people with disability.
- Improved Liveability – The house has been significantly modified to improve physical access and enhanced provision for people with sensory, intellectual or cognitive impairment.
- Fully Accessible – The designs must incorporate a high level of physical access for people with significant physical impairment.
- Robust – The housing design must incorporate a high level of physical access and must be very resilient, meaning there should be minimal maintenance later on.
- High Physical Support – The housing design must incorporate a high level of physical access with significant physical impairment requiring high levels of support.
How Can I Find SDA Tenants?
Since the NDIS has adopted a market-based approach to encourage greater participation, it is not responsible for finding SDA tenants for your property.
Once the NDIS participants are eligible for SDA and it is added to their NDIS plans, they can go to the market and apply for any advertised properties/vacancies.
Depending on what suits their personal needs, they have the options to choose from single-occupancy apartments to shared facilities like villas and group houses.
The property must be registered with NDIS as an SDA compliant property in one of the three categories:
- Fully Accessible
- High Physical Support
The investor only gets paid once the participant starts living in the property. The provider (property manager) would then receive payments from the NDIS and Department of Social Services (DSS) which is then paid to the investor.
SDA price caps vary substantially according to the design category and type of building, ranging from $13,244 per year for Group Accommodation with five residents in an Improved Liveability building with no On-site Overnight Accommodation (OOA) to $105,738 per year for a participant living alone in a two-bedroom apartment with OOA.
You can find SDA tenants by advertising vacancies through:
- The NDIA’s provider finder
- Through local networks
- Organisation’s websites
- Through participants’ local support coordinators and their networks
- Accessing web-based platforms that offer matching provider to tenants
- Outsource to a third party (real estate agent)
NDIS Investment is not as simple as investing in any other investment property, so it is important to do your research and ensure that you have met all the criteria and the NDIS property is compliant before you commit.
Keep in mind that NDIS Investment lending is a niche area and there are a limited amount of lenders and brokers that specialise in this niche. It is important to find the right lender who specialises in NDIS lending, the lender should use a NDIS Valuation firm to assess and value your NDIS property or else you run the risk of your NDIS property being undervalued and not being able to borrow what you need to complete your purchase.