Investing in Specialist Disability Accommodations (SDA): Understanding the interest and the risks.

What is Specialist Disability Accommodation (SDA)?

Specialist Disability Accommodation (SDA) refers to housing designed for individuals with extreme functional impairments or very high support needs. SDA is part of the National Disability Insurance Scheme (NDIS) in Australia, which aims to provide suitable living arrangements for people with disabilities, ensuring they can live independently and with dignity. SDA is constructed to be accessible and tailored to the specific needs of their residents, incorporating various modifications and assistive technologies.

Why the Surge in Interest?

The interest in SDA investments has surged in recent years and this has been driven by several key factors:

1. Government Support and Funding: The Australian government’s commitment to the NDIS provides a robust framework and financial backing for SDA properties. In June 2023, the National Disability Insurance Authority (NDIA) released the findings of its SDA pricing methodology review. The new pricing arrangements became effective from 1-Jul-23 with CPI annual adjustments for the following four years. The new pricing arrangements saw SDA payments for dwellings other than apartments increase in most instances by more than 10.0% p.a. The price increases are intended to stimulate investment in the sector to reduce unmet demand. This support reduces investment risk and ensures a steady demand for well-designed accommodation.
   
   
2. High Demand for Quality Housing: There is a significant shortage of suitable housing for people with disabilities. Approximately 8,590 dwellings were enrolled for SDA as of 31 December 2023. The current national unmet need for SDA is estimated to be approximately 15,000 dwellings. The NDIA forecasts that the market will reach equilibrium in FY2033. This gap between supply and demand creates a lucrative market for investors who can provide high-quality SDA properties.

Sources: NDIS website (May 2023), Australian Government Institute of Health and Welfare (May 2023), NDIS Quarterly report to disability ministers (31 March 2023)

3. Attractive Returns:

• SDA properties often offer higher rental yields compared to traditional residential investments.
• The long-term income streams
• Benefit from Residential property market growth (Perth in particular has experienced and is expected to continue to experience strong growth due to demand and supply)
• Government-backed funding
• Strong continuing demand
• Rise in interest from institutional investors which is boosting the market.

The Attraction and Growth of SDA Investments

SDA investments are not only attractive due to their financial returns but also because they offer the opportunity to contribute positively to the community. Investors are drawn to the dual benefit of making a meaningful social impact while achieving significant financial gains.

The SDA market is growing rapidly due to the following reasons:

- Social Responsibility: Investing in SDA properties allows investors to play a crucial role in improving the quality of life for individuals with disabilities.

- Diverse Investment Options: There are various types of SDA properties, including apartments, villas, group homes, and more, providing flexibility for investors to choose based on their preferences and budget.

- Strong Legislative Framework: The NDIS provides a clear regulatory and funding framework, ensuring transparency and stability in the SDA sector.

Common Misconceptions and Risks

While SDA investments offer numerous benefits, there are common misconceptions and risks that potential investors should be aware of:

1. Variability Among NDIS Providers: Not all NDIS providers are the same. Some providers are more experienced and reliable, offering better support and services to both investors and participants. It is crucial to research and choose NDIS providers with a strong track record and positive reputation.
2. Participant Availability: Some NDIS providers already have participants ready for housing, while others do not. This can impact the speed at which properties are occupied and generate rental income. Investors should seek out NDIS providers who can demonstrate a pipeline of participants needing accommodation.
3. Impact of ‘Dodgy’ Operators: The sector has seen instances of unscrupulous operators who cut corners, resulting in substandard properties. These ‘dodgy’ operators can tarnish the reputation of the SDA market and lead to financial losses for investors.

What to Look Out For

To navigate the SDA investment landscape successfully, investors should consider the following:

1. Reputable Developers and Providers: Partner with experienced and reputable SDA developers and providers. Conduct thorough due diligence to ensure they have a track record of delivering high-quality, compliant properties.
2. Compliance with SDA Standards: Ensure the property meets all the required SDA design standards and NDIS regulations. Non-compliance can result in lower occupancy rates and reduced rental income.
3. Location and Demand: Invest in areas with high demand for SDA properties. Proximity to healthcare facilities, public transport, and community amenities can significantly impact the desirability and occupancy rates of SDA housing.
4. Quality of Construction and Design: Focus on properties that are built to a high standard with durable materials and thoughtful design. Quality construction reduces maintenance costs and ensures long-term tenant satisfaction.SDA represents one of the strongest investment opportunities in Australia today. With the right approach, investors can achieve attractive financial returns while making a positive social impact. However, it is crucial to navigate the market carefully, partnering with reputable developers who have experience and work with credible NDIS providers to ensure compliance with all standards and regulations. By meeting these key criteria, SDA investments can offer a stable, rewarding, and socially responsible addition to any investment portfolio.

About Jarra Property

Jarra Property is a specialist developer and fund manager with a robust track record in delivering SDA and commercial property developments. For more information on Jarra Property and current investment opportunities, visit www.jarraproperty.com

This article does not constitute investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person.  You should read and understand the IM document for any investment opportunities and you should seek professional advice from someone who understands your financial and personal situation and is authorised to provide investment advice.