Specialist disability accommodation (SDA) is one of the segments worst affected by Australia’s housing supply crisis, given the heightened demands and requirements of construction. SDI demand outnumbers available places by at least three-fold according to data from 2021.
The government has measures in place to address the issue, with the National Disability Insurance Agency (NDIA) establishing a clear framework for SDA dwellings. The unique challenges and demands of SDA housing, however, still make it an especially difficult problem for the property market to address.
Marketplace lenders can play a critical role in helping to overcome this shortage, by providing better financial access to those developers who are best capable of building fit-for-purpose housing for the SDA segment.
What is SDA and how severe is the shortage?
In Australia, SDA refers to a range of housing designed and built specifically to address the needs of members of the community with extreme functional impairments or high support needs.
These dwellings must possess accessible features that enable residents to lead more independent lives, or facilitate the safer and more effective delivery of support services.
The NDIA is responsible for outlining special rules and requirements that govern SDA dwellings in Australia. These requirements are covered in a range of documents, including the 2021 SDA Rules, the SDA Design Standard, the National Disability Insurance Scheme (NDIS) Pricing Arrangements and the SDA Operational Guideline.
In order to incentivise the market to produce more SDA dwellings, housing providers can apply for SDA funding that is paid directly by the NDIS to cover building and maintenance costs.
Despite the availability of government funding, the heightened requirements and conditions for SDA housing make it a challenging area for the property sector when it comes to increasing supply.
This is especially the case with worsening home affordability and rising interest rates creating hardship for the Australian economy as a whole.
James Brooker, CEO of Social Impact Funds Management, said the shortage of SDA housing in Australia has become acute.
“There’s a massive undersupply of fit-for-purpose housing for young, high-physical support participants in the NDIS, and it’s continuing to grow,” Brooker said.
“According to 2021 data there are around 28,000 SDA places needed around Australia, but only 8,000 places available.
“There needs to be much more investment behind the SDA asset class to solve this problem.”
Alan Wang, Property Developer Manager, CrowdProperty, said this shortage isn’t just apparent at the macro-level, but also spread across various sub-segments of demand.
“Once we start to take a deeper dive, we see there are severe shortages across different specialist requirements,” he said.
“This includes accommodation for people who need wheelchair accessibility and accommodation for people with mental disabilities, all of which have different specialist requirements.”
Why is there a shortage of SDA supply?
With Australia facing a severe shortage of housing supply in general, SDA dwellings are subject to the very same challenges and constraints that hamper other segments of the market.
In particular, the difficulty faced by smaller developers in accessing finance, as well as lengthy review and approval times.
The heightened demands of the SDA segment further exacerbate these problems, with the added challenge of requiring certification under the NDIS to qualify for special funding.
“The major cause of undersupply is delivery,” Wang said. “SDA accommodation requires very specialised designs and is built for purpose, so it’s not like regular residential buildings. It involves different upgrades, compliance standards and certification.
“This makes it harder for those developers who don’t have experience in the construction of this type of accommodation.
“If they don’t get the certification, then they don’t get the participants and rent that are needed to achieve the yields that developers are looking for.”
Wang points to access to finance as another major barrier to increasing the supply of SDA housing.
“Banks like the completed product with a tenant in as this produces a high yield,” he said.
“However, they don’t typically like to do construction funding for SDA housing, because they don’t understand the delivery process or potential risks.”
How can marketplace lenders help fill the gap?
Given one of the main challenges to increasing housing supply is a lack of accessible funding, marketplace lenders can play a critical role in helping to fill the gap in SDA dwellings.
This is particularly the case when it comes to specialist marketplace lenders like CrowdProperty whose team of experts can help developers deal with the heightened demands of the SDA segment.
“We see an opportunity in this segment, and it’s a market where we can become a segment specialist,” Wang said. “We want to help close the gap in SDA dwellings, by enabling developers to better tap into construction finance.”
Closing the SDA gap isn’t just about providing developers with convenient access to financing - it’s also about ensuring the right developers have the opportunity to build fit-for-purpose housing that satisfies requirements.
“We need to ensure developers are well-educated and have the experience to deliver these products,” Wang said.
“There are plenty of pretenders out there who are taking advantage of the scheme, and rather than delivering products for the end user, they are actually taking advantage of them.”
“CrowdProperty is helping to fill the gap in SDA dwellings by aligning themselves with operators in the market who can develop fit-for-purpose housing,” Brooker said.
“There’s no point in aligning yourself with operators who build to a minimum standard, and end up developing something that doesn’t work or is in the wrong location.
“By backing SDA as an asset class, CrowdProperty can help to overcome the financial hurdles to increases in supply.”
In addition to helping supply housing to members of society who need it most, financial support for SDA housing can also provide lucrative opportunities to investors, given the higher yields offered by this asset class.
“The asset class is currently worth $5.2 billion, and they are forecasting it will expand to $12 billion,” Brooker said. “There’s plenty of opportunity in this risk adjusted social impact asset class”.
“Institutional investors are becoming more confident about it. One of our partners, OCP Asia, are currently rolling out a $200 million portfolio of SDA builds.”
James Brooker is CEO of Social Impact Funds Management (SIFM), an ethical and impact investing fund focused on making investments intended to have a definable and measurable social impact. SIFM funds specialist disability accommodation (SDA), purpose-built houses, units, townhouses in conjunction with its SDA provider NDISP, for participants in the National Disability Insurance Scheme (NDIS) with extreme functional impairment or very high support needs.
^The views and opinions expressed are those of the contributors and do not necessarily reflect the official policy or position of CrowdProperty Australia.