Doors Open for Disability Housing with the new NDIS Housing Funding Principles

What you need to know

• The NSW and Commonwealth Governments have signed a landmark Bilateral Agreement to roll out the NDIS in NSW. Schedule J of the agreement contains the NDIA's updated policy regarding how it plans to fund accommodation for people with disabilities under the NDIS.
• The updated principles provide welcome insight into the future of specialist disability housing, which is a critical element of wellbeing for people with disability.
• The principles confirm that while the NDIS will provide some housing support, it is not responsible for building or providing housing for people with disability.
• This gap between community need and NDIS functions provides an opportunity for organisations in the disability, social finance and housing sectors to develop models to fund, build, maintain and operate specialist disability accommodation. 

Introduction

On 18 September 2015, the NSW and Commonwealth Governments entered into the Bilateral Agreement Between The Commonwealth and New South Wales For The Transition To A National Disability Insurance Scheme (Bilateral Agreement). Schedule J of the Bilateral Agreement sets out the funding principles that will guide the NDIS's $700 million housing capital budget. In particular, the Bilateral Agreement contemplates that the NDIS will fund reasonable and necessary supports for individuals with disability who require assistance in regard to housing. Funding will be directed to the following categories of supports:

• supports to assist people with disability to live independently in the community, including building capacity to maintain tenancies;
• home modifications for accessibility for people living in private dwellings, legacy public and community housing dwellings; and
• user costs of capital in some situations where a person requires an integrated housing and support model.

The NDIS will not be responsible for the creation, ownership or management of housing stock for NDIS participants, despite the anticipated increase in demand for more suitable accommodation as the Scheme's roll out continues. Instead, NDIS participants will largely access housing through public or community housing or private rental markets, all of which have to date been in short supply or inadequate condition.

This gap between community need and NDIS functions provides an opportunity for key stakeholders in the disability, social finance and housing sectors to innovate and develop scalable models to fund, build, maintain and operate specialist disability accommodation.

Funding Principles

Schedule J of the Bilateral Agreement confirms earlier commentary by the NDIA that the NDIS will not be responsible for the provision of affordable accommodation for people with disability. Schedule J does, however, clarify the NDIS's commitment to fund some specialist disability accommodation, in order to meet the needs of (according to the Productivity Commission, approximately) 16,000 individuals with profound disability who require financial assistance with accommodation.

Schedule J of the Bilateral Agreement lists six principles underpinning the NDIS's willingness to fund specialist disability housing. These principles build on the issues previously canvassed by the Chairman of the NDIA as part of a stakeholder feedback process in early 2014. They are:

• A mix of potential funding streams may be utilised to address existing and new specialist disability housing;
• NDIS funding will be based on the efficient lifecycle cost of delivery of specialist disability housing representative of typical providers;
• Residents will be expected to provide a reasonable contribution towards their accommodation;
• Funding is provided for both existing and new supply of specialist disability housing, as well as for both private and publicly owned specialist disability housing;
• Providers of specialist disability housing will be expected to finance the purchase or build of accommodation and their operations; and
• Funding will allow for the continuity of supply from providers and also ensure there is scope for change and innovation over time.

User cost of capital funding stream

In costing the NDIS, the Productivity Commission included an average amount to support housing arrangements for participants with high support needs (which the Productivity Commission found was around 6% of participants). This is referred to as the user cost of capital funding stream. It is currently estimated by the NDIA (in a 2014 discussion paper on Optimising the User Cost of Capital) that between 3 and 4% of overall package costs have been earmarked within the Scheme to assist with the user cost of capital of housing. By adopting a user cost of capital funding stream, the NDIA intends to increase housing supply options, not by directly owning or developing housing stock, but by encouraging growth in affordable housing which is driven by the housing sector, disability service providers, governments, families, social finance and philanthropy.

How funding principles will shape the investment landscape

The principles set out in Schedule J of the Bilateral Agreement indicate the NDIA's strong preference to collaborate with stakeholders in the sector to address disability housing needs and specifically, develop additional housing stock suitable for NDIS participants.

At a high level, the NDIA has identified a few avenues which could be explored jointly by interested stakeholders (such as government, families, disability service providers, philanthropists and others in the housing sector) to increase housing stock:

• working with State Governments which have primary responsibility for affordable and public housing. We note that in this regard, the housing needs of people with disability often vary considerably from the needs of individuals requiring affordable social housing;
• promoting stock ownership transfers from governments and disability service providers to community housing associations;
• forging partnerships with developers, community housing associations, banks, philanthropists and social finance providers; and
• promoting the benefits of both mixed equity and singleton models of ownership.

Suitable and stable housing is critical to the wellbeing and independence of people with disability. For organisations and individuals involved or interested in developing innovative solutions to address the shortage of disability housing, the policy direction of the NDIA as captured by the Bilateral Agreement, is encouraging.