FAQs (2)

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There’s a bipartisan agreement that’s been signed off by all the parties in Canberra - the scheme has a 20 year timeframe of NDIS Certification. All the States and Territories also are unified in this program to ensure federal funding goes where its supposed to go.

The lease management agreement between the provider and landlord can be issued as 2 x 10 years or 4 x 5 years. SILs prefer long term leases, as this suits the client’s needs best, so there is no expectation for them to leave after the first lease term and remember that the house design has been built around their specific needs, so there is little benefit to leaving accommodation which suits the tenants.

The investor can sell the property as per standard Real Estate legislation requirements, and the investor has the option to roll over their agreement and continue the NDIS as Existing NDIS stock once the 20 year period is up, as well.

Leases between the SDA provider and the  participant are normally for 2 years. These new homes are very sought after as many disabled people are currently living in less desirable accommodation like nursing homes, hospitals or low standard living accommodation so are likely to stay for an extended period. The lease is extended based on all participants living happily together. It is up to the SIL to ensure all tenants are happy and if not, move participants in or out to provide the best outcome for the participant and the household.

The figures below estimates are gross, and may vary slightly due to the region :

• 2 x High Physical Support $80,991 + RRC $18,825 (Total p/a approx. $99,000)
• 3 x High Physical Support $111,991 + RRC $28,236 (Total p/a approx. $140,000)

 Source: SDA QLD - 2019/20

Some lenders have become lenient when it comes to lending money for SDA projects and property. Besides providing home loans for participants, lenders are encouraging investment loans for family, friends or any interested investor. Since there is a 20 year rental backing  from the government for SDA property, lenders should be willing to lend to investors with a deposit of 20%, but we still recommend investors have a large amount of cash available to consider this opportunity. Here are some ways you can get a loan approved for SDA funding:

• Find an SDA compliant builder who knows the requirements of the participants.
• Get a deposit of at least 20% so you do not have to pay LMI. 
• A good credit history.
• Exceptional credit score
• Stable employment with good income.
• Build a house that has an adaptable design to accommodate people with different disabilities

Borrowing to build a Specialist Disability Housing is generally limited between 60% to 80% as this is a niche segment that is still growing. Furthermore, you might be able to borrow more if you plan to invest in a property that requires more improvements according to the SDA Design Category. In theory, you can borrow up to 80% of the total cost of land and construction. We reiterate, in the word 'theory' because lenders are few and far between and its going to take time for most lenders to open up to this NDIS sector for residential lending. WATCH THIS SPACE!

Since this is a niche area of finance for lenders to be in, investors are bound to face some challenges as an borrower:

• The biggest challenge is that the banks do not lend for NDIS. Is it usually a non bank lender, and even then its very rare to locate a funder. Even if they do lend, it is rare for them to do construction lending for NDIS aswell. BUILD NEW HOMES can refer clients to specialists for finance upon request if unable to secure finance from traditional lenders. 
• It is recommended that investors have between $250,000 - $350,000 cash and or equity that can be redrawn from existing property, to obtain a new home loan with a lender. We have spoken to few brokers who have said they cannot find a bank to lend to clients for NDIS residential property. Crazy!!!
• As the requirements for Specialist Disability Housing are quite specific, the cost of construction might exceed the final value. The property may become overcapitalised. This happens quite a lot if its a custom build due to provider requests of the builder, prior to building for the participants.
• The property is only made for a specific niche of people, so it might be harder to sell later on.
• Lenders generally do not prefer to lend to long terms leases to tenants. They would rather see you sell the property.
• Since the property is extremely specialised (i.e. a normal abled tenant would not live there), some lenders would not accept it as security.
• There could be problems with valuations as the property might be valued as a normal housing and will not account for the special modifications made to it.
• The construction has to be compliant; signed off by a SDA design certifier.
• There could be vacancy rates if the tenant moves out, while waiting for a new tenant to come in.
• While you can build anywhere in Australia, there are concentration limits on land, so land approval might be an issue. There are restrictions on the number of dwellings that can be in a particular area.

Please note that to get the benefit of the SDA payments, the tenant must fulfil the requirements needed for either Improved Liveability, Fully Accessible, Robust or High Physical Support. Some of the improvements required according to the Design Category are:

• Improved livability: Luminance contrasts, improved way finding and/or line of sight.
• Fully accessible: External doors and external outdoor areas accessible by wheelchairs, bathroom or hand basin and the kitchen sink, cook top, oven, laundry, etc. that is accessible in seated or standing position, power supply to doors and windows (retrofit of automation).
• Robust: Must be very resilient and use inconspicuous materials that can withstand heavy use and minimises the risk of injury like; high impact wall lining, fittings and fixtures, secure windows, doors and external areas, appropriate soundproofing (if needed), laminated glass.
• High physical support: External doors and external outdoor private areas accessible by wheelchair, bathroom vanity/hand basin, kitchen sink, cook top, meal preparation area and key appliances accessible in seating or standing position, structural provision for ceiling hoists, assistive technology, heating/cooling, household communication technology (video intercom system), emergency power solutions that can withstand at least 2 hours of outage where the welfare of the participant is at risk, doors with 950mm minimum clear opening width to all habitable rooms. 

Payments for an NDIS SDA property are paid differently to that of a non NDIS property. Your rental payments will be paid to you from the provider at the end of each calendar month. Each Tenant’s payment is made up of 3 parts;

• Fair rent contribution (25% of base disability supplement): paid fortnightly by the participant (tenant)
• 100% Commonwealth Rent Assistance: paid fortnightly by the participant (tenant)
• NDIS SDA Payment: paid quarterly in arrears.

• Fully Accessible
• Robust
• High Physical Support
• Improved Liveability

The provider (property manager) would then receive payments from the NDIS and Department of Social Services (DSS) which is then paid to the investor. You only get paid once the participant starts living in the property.

Around 650-700 new SDA places were created or commissioned in the past 12 months (2019/20). 

Only 250-300 of these are for unmet demand. The remaining 400 are to rebuild existing &  outdated government disability housing stock.

For 2019 just gone, there was only $70M spent on SDA funding for accommodation. The target was $700M every year.

The 2020 numbers are estimated to be between 600 - 900 brand homes due for completion around Australia. In March 2020 it was forecast to be 200 for 2020, but now this is revised up due to the demand from investors. 

Over the next five years (2020 - 2025)  there is 16,000 new or refurbished SDA places are needed around Australia. 

Before NDIS was implemented, the funding for housing people with disabilities mostly came from governments or non-profit providers using upfront capital grants. Now, there is a growing appetite among investors for impact investing and Australian banks have become lenient and started to lend to finance SDA projects. 

• Out of the 400,000 participants in the NDIS, an estimated 28,000 of them qualify for SDA. 
• Currently there are around 16,000 people in accommodation that is inappropriate for them, because it doesn’t meet their needs, they are isolated from the community, and they really have no choice.
• 50% of the 16,000 are living in aged care facilities, while the other 50% are living in unsuitable situations (inappropriate design, living with aging parents, etc).
• The Summer Foundation, estimate that there will be an additional 33,000 people who will come out of the woodwork and join the NDIS program.
• That’s potentially 49,000 people needing accommodation.

The SDA scheme is designed to address the massive under supply. 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 $700M per annum in the SDA scheme funding from the overall NDIS budget of $22B planned over 20 years. Your investment home not only provides rental income for yourself, but it provides the perfect home for Australians with disability out of inappropriate aged care and place them in suitable housing.