Specialist Disability Accommodation White Paper

April, 2020 – Specialist Disability Accommodation is growing as an attractive investment option due to its high return potential and government backing.

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  • Health & Aged Care

Key Highlights















What is Specialist Disability Accommodation?

  • Specialist Disability Accommodation (SDA) is one of the supports that may be funded under the NDIS for some participants.
  • From the COAG Disability Reform Council Quarterly Report: “SDA refers to accommodation for people who require specialist housing solutions, including to assist with the delivery of supports that cater for their extreme functional impairment or very high support needs. SDA does not refer to the support services, but the homes in which these are delivered. SDA may include specialist designs for people with very high needs or may have a location or features that make it feasible to provide complex or costly supports for independent living. SDA funding is provided to participants who require a specialist dwelling that reduces their need for person-to-person supports, or improves the efficiency of the delivery of person-to-person supports. SDA funding is only provided for participants who meet the eligibility criteria.”
  • In October 2019, the National Disability Insurance Agency (NDIA) released three major initiatives to support growth, innovation and sustainability in the SDA market, being the SDA Design Standard, the SDA Innovation Plan and the SDA Limited Cost Assumptions Review.


Casey Robinson

National Research Specialist

View Profile > QLD
Laila Burnet

National Director - Health, Aged Care & Seniors Living

View Profile > VIC

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As an emerging asset class, the SDA sector is experiencing significant development growth as participant demand remains unabated over the short term. We therefore expect industry stakeholders to find their footing over the next few years, reflecting an increasingly transparent investment and operational landscape over the long-term.


Laila Burnet
National Director - m3property



The Building Code of Australia classifications are used to define the physical characteristics of SDA building types. These codes are as shown below.

Minimum Requirements for SDA Design Categories


SDA Current Snapshot – Supply, Providers and Participants

  • During the December 2019 quarter there were 13,683 participants nationally with SDA in their NDIS plan.
  • There were 215 active SDA providers nationally as at 31 December 2019.
  • As at 31 December 2019, there were 3,938 enrolled SDA dwellings nationally. 24% of enrolled dwellings have a maximum of one resident. A further 24% have a maximum of two residents.
  • Approximately 45% of SDA dwellings nationally are located in New South Wales.
Source: NDIS, m3property
Source: NDIS, m3property

SDA Enrolled Dwellings by Statistical Area 4s (SA4)

  • Enrolled SDA dwellings for the four States with the highest number of dwellings  (New South Wales, South Australia, Victoria and Queensland) are broken down below and overleaf into SA4s within the State. The definition of a SA4 can be found here.
Source: NDIS, m3property
Source: NDIS, m3property
Source: NDIS, m3property
Source: NDIS, m3property

Despite SDA supply growing, the market remains under-supplied

  • According to the Specialist Disability Accommodation Supply in Australia Report (March 2020), there was an estimated 1,766 SDA places in development as at 30 September 2019. New South Wales and Queensland had the strongest development pipelines with 607 and 443 places respectively reported to be under development.
  • The majority of new SDA places in development are apartments (852 places).
  • By design category, most of the SDA places in development are High Physical Support places.
  • Nationally, the providers / developers most active in the SDA development pipeline as at September 2019 were private housing providers and community housing providers.
  • The level of supply is expected to decrease as a result of supply chain issues relating to COVID-19 shutdowns. Pent-up demand may result in increased supply when markets re-open depending on the length of disruption and ability of projects to gain pre-commitments.
  • The Specialist Disability Accommodation Supply in Australia Report identifies potential areas of SDA under-supply using known new supply, existing supply and distribution of SDA places per capita. According to the Report, Victoria, New South Wales, Queensland and Western Australia remain significantly under-supplied.
Source: Specialist Disability Accommodation Supply Report, m3property

The NDIS SDA scheme providing residential accommodation for disabled persons is a great scheme – high quality, subsidised accommodation taking into account the physical needs of those who require more than standard residential housing. We will look back on this as a ground breaking initiative.


David Blanck
Managing Director - Property Solutions

Areas of high SDA under-supply

Source: GapMaps, Specialist Disability Accommodation Supply Report, m3property

Calculating the funding for an SDA dwelling

  • To incentivise investment in, and development of, funding is granted to providers of SDA accommodation.
  • SDA payments vary depending on the type of accommodation, its location and a number of other factors. Whilst funding is attached to an individual participant’s plan, it is paid to the housing provider.
  • To determine annual SDA prices per participant, a base price is determined and then additional factors are considered.
  • Base Price Calculation:
    • Is the dwelling a new build, existing stock or legacy stock?
    • What is the building type and class?
    • What is the design category? (i.e. basic, improved liveability, fully accessible, robust or high physical support).
  • Base Price Calculation (Continued):
    • Is there a room for On-Site Overnight Assistance (OOA)?
  • Once the Base Price is determined, the following factors are then considered:
    • Is there an additional breakout room? (additional breakout rooms are only possible for dwellings in the ‘robust’ design category).
    • Where is the property located? (a location factor is applied to pricing and is based on SA4s).
    • Does the dwelling have fire sprinklers? (fire sprinkler allowances are 1.2% for apartments and 1.9% for other building types).

   Annual Base Prices per Participant for New Builds (2019/20)

   Base price calculations are shown in the following table.

Source: NDIS, m3property

Investment Characteristics of SDA

  • Whilst there remains a general lack of understanding about the SDA market, it is growing as an attractive investment option due to its high return potential and government backing through the NDIA.
  • Based on a 20-year cash flow, m3property analysis indicates running yields on Net Operating Income of between 8% and 14%.
  • Whilst the specialist nature of SDA housing typically requires moderately higher entry cost, investment returns are generally significantly higher than traditional residential housing. This is particularly evident in areas where there is strong demand for SDA, combined with strong market growth.
  • SDA that is designed and developed to serve multiple uses also allows for flexibility to offer the dwellings to alternate markets such as aged care or general residential.
  • Historical vacancy rate data typically sits between 3% and 7% for smaller homes and 3% and 10% for group homes. SDA is only funded in relation to periods when the dwelling is occupied, however for dwellings that house two to five residents, funding is available for a period of up to 90 days after the participant vacates.
  • In addition to investors receiving annual funding per NDIS participant in SDA dwellings, residents also make a ‘reasonable rent contribution’ to their SDA provider. For singles, the rental contribution is currently set at 25% of the basic rate of the Disability Support Pension (DSP) and 100% of the Commonwealth Rent Assistance (CRA) (as at 20 of March 2020), bringing the total reasonable rent contribution to $373.18 per fortnight ($9,702.68 per annum).

What factors are considered in valuations of SDA?

  • m3property has experience in valuing SDA projects nationally. When valuing this type of asset, we utilise a 20-year Discounted Cash Flow (DCF) Analysis and the Direct Comparison approach. The DCF approach involves formulating a projection of net income over the 20-year horizon during which the investment is underpinned by the secured SDA funding income. Using this method, each year, the property effectively reduces in value by the level of funding exhausted that year. The value of the property after the government funding expires is aligned to standard residential properties or social housing.
  • Valuations of SDA are based on the critical condition that all proposed units meet the requirements of the SDA funding and that the project will be enrolled under the NDIS.
  • Whether Land Tax is payable by the owner of NDIS SDA investments varies between the states, and in addition, it can depend on what services are provided to the occupant.  Valuations of these assets need to be completed in the context of State legislation.
  • By necessity, valuation of SDA properties assume that funding for SDA under the NDIS remains unchanged.

The investment market for SDA is relatively immature

  • The NDIA estimates that more than $5 billion in capital is required to be invested in the sector over the coming five years to create new SDA stock, with the total market  expected to be worth between $10 and $12 billion.
  • The NDIS has an annual recurrent budget of $700 million (indexed over the next 20 years) for SDA providers. As at 31 December 2019, $148.4 million was committed in current participant plans to SDA.
  • Strata-titled apartments typically attract interest from owner occupiers, private investors and institutional investors. SDA complexes are typically attractive to institutional investors. We have seen a number of instances of groups of apartments within larger-scale projects being acquired on the basis of the developer re-purposing the apartments as SDA. We note, however, that there remains a lack of understanding of some of the complexities involved in SDA dwellings within the investor market.
  • Some recent investment activity is as follows:
    • In early 2019, Arena REIT acquired three SDA funded group homes located in metropolitan Adelaide. The sale reflected a reported initial yield of 6.0% on a combined purchase price of $23.95 million. Our analysis shows an equated market yield of 6.02% following relevant adjustments and an IRR of 7.02%. The value parameters reflect the long-term lease over the units.
    • Summer Housing is an active investor in SDA properties, including the in-one-line purchase of multiple strata-titled apartments.
    • The Lighthouse Infrastructure Fund Trust (which invests in a broad range of infrastructure assets) and Summer Housing signed an agreement to invest in SDA in 2018. The venture has invested in 30 SDA apartments in Brisbane, Melbourne and Sydney.
    • In late 2019, NAB announced a $2 billion commitment for loans and the development of financing avenues for affordable and specialist housing, including SDA.
    • More recently, Australian Unity has launched its SDA fund with a capital raising of $39 million. The fund aims to commit circa $60 million into the sector over coming months and double the size of its SDA portfolio over the coming year. The initial investment includes 33 SDA apartments and 5 carers apartments across Melbourne.

COVID-19 and Outlook

  • Australian and global markets are currently experiencing substantial economic disturbances due to the spread of COVID-19. The spread of the virus and associated impacts are expected to restrain growth and adversely impact economies globally.
  • COVID-19’s impact on the economy is already resulting in the decision to delay investment decisions by some investors. Investor sentiment and activity has already declined substantially and we expect this will continue for the near-term. Added to this is that some potential buyers might be  unable to travel due to government travel restrictions.
  • Looking past the acute phase of the virus, the fundamentals for investment in commercial real estate remain solid. The ‘lower for longer’ forecast for the official cash rate is likely to encourage investment into real estate going forward, however, this will only occur when confidence and certainty returns to the market.
  • With regards to SDA, we expect that COVID-19 will be felt through supply chain disturbances and potentially labour shortages  that could ultimately impact construction costs. Furthermore, with business confidence having fallen to record-level lows (as recorded on NAB’s March Business Survey), we expect that potential purchasers of SDA stock are likely to delay investment decisions until the acute phase of the crisis has passed.
  • This report was produced on 24 April 2020. The information in this report is based on current understanding and developments with regards to the COVID-19. The response of governments, business and individuals is fluid and the impacts of future events may significantly change our expectations for this market and sector.