Back in 2022, the Australian government came up with a 20-year projection model - wherein it has been estimated that by 2042, 36,700 people with a disability under the National Disability Insurance scheme (NDIS) will require SDA (where currently the government is supporting 25,000 participants). Still - many Australians with disability are residing in Aged Care Facilities, Hospitals and other Institutional Settings or in inappropriate homes, which misalign with their needs and goals in life for independent living. Up until 2032, the NDIA (the government-led national disability insurance agency) is providing $700 million per year to develop SDA housing for eligible participants, ensuring that these individuals have access to safe, secure and suitable accommodation. Rents’ are paid by the Government to the property owner via the Participant’s NDIS funding plan. The strong demand data and approved government funding has led private housing developers and builders to enter the market and provide construction opportunities to investors looking to diversify their portfolio, make an ethical investment and leverage high rental yields.
Without a doubt, embarking on SDA construction projects can be quite financially and personally rewarding. Builder Brokers Australia’s select builder partners are dedicated to understanding the unique needs of those with disability and providing participant-led designs for enhanced liveability. Investing in the construction of new SDA properties can lead to significant improvements in tenant independence, reducing reliance on paid supports and alleviating long-term liabilities for the National Disability Insurance Scheme (NDIS). Investors looking to maximise their returns will enjoy exceptionally high rental yields. Whether you are looking for an SDA investment in Brisbane, Sydney or Melbourne, we’ve got you covered.
In this blog we will answer some of the most common queries that we get regarding SDA investments - so let’s get started!
SDA Design Standards
SDA design standards detail the requirements for compliance with the National Disability Insurance Scheme (NDIS). All dwellings are assessed by an SDA assessor and then certified as a particular design category once at the design stage and also a second time, at build completion. This process also ensures that each home is built to the compliance standards of that design category. Each category of design will feature a particular set of home modifications to ensure that the property can accommodate for different types of participants with varying levels of required disability support. This may include the use of more resilient materials for a durable structure (like reinforced walls) or greater passage access through the entire dwelling to accommodate for wheelchairs.
Typically the floorplans are designed to accommodate 2 or in some cases 3 NDIS participants maximum, with one room serving each person. An extra room is provided for support staff or Onsite Overnight Assistance (OOA) to ensure a high level of care from their health providers. On-site Overnight Assistance (OOA) (support staff/carers) are employed by SIL (Supported Independent Living) providers to look after tenants in the home and are paid from the tenants’ NDIS plan. Media rooms are usually provided for enhanced personal liveability and kitchens are designed to ensure both participants and their carers may move independently without disruption to the other.
The four design categories featured under the Specialist Disability Accommodation (SDA) Design Standards:
- Improved Livability: Dwellings under this design category must have a reasonable level of physical access and provision for people with sensory, intellectual, or cognitive impairment. It must also include one or more improved livability design features, such as light-based doorbells, hearing augmentation or luminance contrasts. Improved Livability is the largest category funded by the government, being 70% of all the people with SDA funding (typically built to accommodate up to 3 participants). An improved livability home is the least expensive design type to construct so the initial investment will generally be less than other SDA design types but the net returns, once tenanted with participants funded for Improved Liveability, will still be competitive when compared to other design categories.
- Fully Accessible: Under this, a high level of physical access is needed for people with significant functional impairment e.g. complete loss of mobility, ability to eat, go to the bathroom or manage behaviour. These dwellings must have external doors and the outdoor private areas should be accessible by wheelchair. The kitchen sink, cooktop, meal preparation bench area all need to be accessible in a seated or standing position (similarly with the bathroom vanity) and the doors/windows should have a power supply to retrofit automation if needed. Some NDIS participants funded for Improved Livability may experience further physical deterioration in the future and may qualify to ‘upgrade’ to Fully Accessible funding. Three tenants are the maximum number you can accommodate for this property category, plus an on-site care provider (however the optimum number is 2 given mobility limitations that require the use of wheelchairs).
- Robust: Robust houses are for those with a cognitive or psychosocial disability who may require a house to live in on their own, with or without OOA. Under the Robust design category, the property must have a high level of physical access provisions. Such housing options should be very resilient and use products, materials and safety features that reduce the risk of injury. They should have secure doors and windows, high-impact wall lining, soundproofing, and laminated glass. They should feature adequate space needed to support the needs of residents with complex behaviours. Most Robust-funded participants will require a single tenancy home due to their psychosocial behaviours, but most homes are built for two participants maximum.
- High Physical Support: This is designed for people with significant physical impairment who have lost the ability to perform one or more self-care activities on their own or for those who need very high levels of support. Such dwellings should have a fully accessible design (for wheelchairs); structural provisions for ceiling hoists, 950mm clear-opening-width doors and more. They should also include heating, cooling, and household communications technology, as well as modern emergency power solutions that can handle a minimum two-hour power outage. Three HPS tenants is the maximum number of tenants you can have per property, however given mobility limitations of HPS participants as well as the requirement for storage of equipment, the optimum number is 1 or 2 HPS Participants per HPS dwelling.
SDA Providers
Leasing an NDIS/SDA property follows a slightly different approach. Instead of involving a local real estate agent, a registered SDA provider will hold a Head Lease for the property. The Head Lease grants them the authority to sublet the property to eligible SDA-approved participants, who will become the tenants.
By engaging a registered SDA provider, you ensure that the property remains in compliance with the relevant regulations and guidelines. These providers have a deep understanding of the SDA framework and can effectively manage the tenancy process, ensuring that the property is allocated to suitable participants and that all necessary paperwork is completed accurately. Lead time is important and SDA providers should be engaged early to start advertising your property as soon as possible. They will also demand a contribution fee to assist with the placement and management of participants.
Can an existing house be converted to an SDA property?
While converting an existing home to an SDA property might seem like a good idea, experts discourage doing so. The costs of renovations/ changes needed are substantial, and thus, building a new SDA home from scratch seems like a more economical option. Moreover, new builds offer better living experiences and there is typically more consideration given to the leveling of the block of land (ensuring step-free access ways), width of the lot (to accommodate wheelchair accessibility and adequate onsite parking for carers, family and friends) and location proximity to medical facilities, shops and public transport.
Our SDA-compliant builder partners ensure that all requirements are met for the specific SDA design category as well as adherence to all local, state and national construction codes. This means the integrity of the build is not just built to last, but reduces the frequency and impact of challenging behaviours that may be present in participants. Through insight and demand-driven data, our select builder partners are able to offer SDA construction in particular areas with an increased need for these properties and take into consideration ideal land or block requirements to suit.
Funding requirements
As a private investor looking to make an SDA investment in Brisbane, Sydney or Melbourne, construction costs will be higher compared to that of a standard traditional property due to the capital required for additional features to meet the SDA design standards. However, this also means that the tax deductions of claimable structural items (such as ramps, door widths, reinforced structural components) and plant/equipment (such as home automation, fire services etc) for these costs over time will be notably higher. Tax depreciation is applied against the properties income in the same way that other property expenses are e.g. borrowing costs, property management fees, repairs and maintenance etc.
Builder Brokers Australia have got you covered with our accredited financial partners who understand the structuring of an NDIS loan for private investors. There is a 20 year payment guarantee from the government for SDA projects and banks are willing to lend to these investors typically with a starting deposit of 20%.
Investment returns and financial incentives
As mentioned earlier, investing in Specialist Disability Accommodation housing can lead to attractive financial returns. This is mainly because they can offer higher rental yields than traditional residential properties - the government offers high-than-average market rents and long tenancy periods for SDA properties to address the severe shortage of suitable accommodation for people with disabilities.
The SDA regular payments are made to property owners by the government based on the type of SDA property and the level of support it offers. There is also a reasonable rent contribution paid by the participant capped at 25% of their Disability Support Pension and any and all financial assistance that they may receive in the form of Commonwealth Rent Assistance.
The yields usually range between 7 - 12 percent, and in some cases, even higher, based on the location and the type of the property. This is significantly more than what you might receive from traditional/ standard rental properties. Building SDA properties does include several costs and can be a little expensive, but it is offset by the higher rental yields. High-demand areas usually lead to better results because of higher occupancy rates and premium rent/ pricing.
SDA investment across Australia: The current state of opportunity
At Builder Brokers Australia, we believe that the market for SDA homes is all set to grow exponentially over the next decade - something that has already been reiterated by property investment experts around the country. In fact, a lot of it would be due to the growing demand fuelled by participants moving out of regular homes, group homes, or other forms of non-Specialist Disability Accommodation.
Each year, the number of people with disabilities funded and eligible under SDA is on the rise, and with the government’s ongoing support, the encouragement for SDA investment in Brisbane, Melbourne or Sydney in particular will continue to grow even further.
Key takeaway
The Australian government supports SDA construction and investment through different financial incentives and tax depreciation benefits so that there can be quality and accessible housing for NDIS participants.
Builder Brokers Australia have notable experience in the modern residential property market and specialise in ‘off the plan’ projects of different types - including co-living, dual living, and SDA properties. We have partnered up with top-tier builders and property developers to bring you the best traditional and non-traditional property investment opportunities that will help you build your lifestyle.
If you’re looking to step into the world of property investing and wish to benefit from emerging trends in the real estate market, please connect with us for more information.