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March 8, 2024 by ash

Housing scheme backed by NDIS has too many apartments and not enough houses

Small investors’ interest in NDIS-funded specialist disability accommodation threatens to further distort a housing pipeline that is already producing too many apartments and not enough detached houses.

A $700 million program that started in 2017 and aims to provide housing of different designs for 28,000 Australians with disabilities is still in its early stages, with only $271 million paid out to participants last year.

Land prices, however, have already distorted the housing market, and private sector-led developments emphasize apartment homes over single-family homes due to land constraints.

The emerging asset class is being embraced by institutions like Australian Unity, Hesta, Suncorp, the Paul Ramsay Foundation and Conscious Investment Management, but SDA advocates warn that the growing number of retail investors could increase the imbalance.

Alecia Rathbone, chief social enterprise officer for Housing Hub, an SDA listings and information portal, said, “The risk is that we aren’t determining what to build or where to build based on what people need.”

The federal government will overhaul the NDIS, which started in 2013, as costs are rising faster than expected, Disability Minister Bill Shorten announced this month.

The Australian Financial Review has previously reported that property spruikers are luring in mum-and-dad investors with unrealistic expectations with the help of specialist disability accommodation payments.

SDA homes receive subsidies – currently under review and whose new rates will be announced next month – that increase according to the needs of residents.

Subsidies types

In the improved liveability category, the subsidy is the lowest, followed by the fully accessible category, robust – for tenants with complex behavioral needs – and the highest for high physical support.

Besides subsidy payments, robust housing, built in single-family dwellings, requires the most land because it needs good soundproofing and a safe environment for other tenants.

It has higher costs and risks than other types of SDA housing, such as high physical support units in apartment buildings.

A Housing Hub-Summer Foundation report in October found that of the 2304 places under development last year for people with disabilities in 1522 homes, almost two-thirds (64.2%) were for high physical support, followed by robust (12.8%), improved liveability (12.2%) and fully accessible (10.5%).

According to separate data from January, most jurisdictions experienced demand-supply mismatches, with undersupply concentrated in regional areas. WA had the largest undersupply, followed by Queensland and the Northern Territory. NSW, Victoria, SA, and the ACT had surpluses.

Housing Hub’s parent company, Summer Foundation, conducted an analysis of offers to retail investors regarding investment in an SDA dwelling, and found that the promotion of homes for three to five residents in Queensland indicated an imminent shortage of high physical support homes.

She said there will be an oversupply of HPS in Queensland in the next few years.

Retail investors were not exacerbating the imbalance, but many were developing a home without full knowledge of whether it was the right one, Ms Rathbone said.

According to her, this is not a property investment rental like you would find in the mainstream market.

Retaining a property after a resident moves out can be challenging, particularly when a home was built for sharing. Finding a new tenant depends not only on their needs matching those of the property, but also on their compatibility with the current tenants.

“I am concerned that people are investing in it without understanding what the tenants’ needs are,” she said.

Returns that are overstated

“Most of them build properties in the hope that they’ll find tenants.”

It is also possible that investor returns are overstated.

“In some cases, yes. What’s being touted isn’t the reality once people move in.

“Often, they claim that it’s government-backed. However, it’s not. You need a person who wants to live in the property, it needs to be an NDIS [certified] property, and it needs the right level of funding. That kind of detail never gets explained.”

Investing in bricks-and-mortar assets requires the right properties to be built in the right places at the right time to meet tenants’ demands, she emphasized.

“We’re building social infrastructure that won’t meet people’s long-term needs.”