Financial Models for NDIS Housing – NFP Report

Using the NDIS to address the large housing shortage for people with disability will depend on the ability of housing providers to access significant amounts of capital from the private financial market, according to a new analysis.

Research based philanthropic organisation The Summer Foundation collaborated with private financial institutions, National Australia Bank, Commonwealth Bank and JBWere, to determine how different NDIS housing payment structures would impact on a housing provider’s ability to access finance to build more units of housing.

The Summer Foundation said it initiated the consultation to help formulate decisions on financing its next housing demonstration projects, and to inform and shape government policy and funding related to housing for people with disability.

The key messages from these consultations were:

The design of NDIS housing payments should enable financial institutions to lend against the future stream of income from these payments.

The report said that if lenders cannot secure loans against NDIS payments, it will require loans to be secured against property which effectively lowers the amount of finance housing providers can access.

NDIS housing payments should be attached to the dwelling and paid regardless of whether a participant is residing in the dwelling.

“If this is not possible for all housing payments, the report said, a payment guarantee should at least exist for highly modified dwellings funded in the early years of the Scheme.”

According to the report housing providers have very few tools to manage occupancy risk given that the NDIA determines whether someone is a participant and whether they get a housing payment in their plan.

“If housing providers bear the full occupancy risk we expect to see either very expensive financing rates or very limited construction of dwellings for young people exiting aged care,” it said.

“If governments want to introduce some element of risk sharing we would recommend that housing providers bear risk for a defined number of weeks after which the NDIA bears the occupancy risk. For example, the housing provider bears the occupancy risk for the first 4 weeks after which the NDIA bears the risk.”

The length of the NDIS’ assignment agreement should be between 20 and 25 years.

The report said that assuming a useful life of a building of approximately 25-30 years it is therefore appropriate for the NDIA to make a funding commitment for the majority of the dwelling’s life.

“Shorter contract terms will limit a housing provider’s access to finance and require refinancing, which will raise the cost of delivering NDIS housing.”

Adaptable design for a range of abilities (alternate use of assets).

The report said housing that is highly adaptable and suitable for people with disabilities and for the general population is more attractive to potential investors.

“Highly adaptable apartments or townhouses that are peppered throughout larger developments are much more attractive to potential investors than traditional group homes. We should prioritise creating adaptable housing that is equally attractive to the private market, while recognising that the private market may not fully value the additional cost of creating accessible housing.

“This gap between market value and cost of construction requires an ongoing funding commitment from the NDIS.

“Taken together the Summer Foundation’s position on financing NDIS housing would create a stable, predictable and low risk investment. This will enable housing providers to access a larger sum of finance to address the enormous unmet capital needs of young people in residential aged care,” the report said.

Download the report here.