SDA Is Complex, But Worth the Effort
SDA is rapidly becoming a specialist asset class, best served by dedicated asset managers who have the understanding and skill to navigate the complex requirements and nuances of the space.
The journey from concept to completion requires navigating a labyrinth of regulations, engaging with multiple stakeholders, and enduring countless challenges along the way. Yet, for those managers able to dedicate the time and energy to the space the rewards – both financial and social – are substantial.
Understanding the SDA Opportunity
SDA is a category of housing under the National Disability Insurance Scheme (NDIS) designed to meet the needs of individuals with significant functional impairments. With the Australian Government committing billions of dollars annually to fund the NDIS, the demand for high-quality, purpose-built SDA properties is only growing. Currently the NDIS has budgeted for $700m in total SDA rental supports, with roughly $400m of that being utilized currently.
At Brookline we are attracted by the promise of long-term rental income backed by government funding, as well as the opportunity to make a meaningful impact on the lives of people with disabilities.
However, these rewards don’t come easily. Success in this asset class requires meticulous planning, expert coordination, and unwavering commitment. Below, we explore the critical stages of SDA investment and the challenges—and opportunities—at each step.
1. Acquisition of Land: Setting the Foundation
Finding the right parcel of land is the first step and a critical one. SDA properties must be located in areas with strong demand from potential participants and access to essential services like healthcare, public transport, and community facilities. Managers need to carefully research demographics, consult with SDA providers, and ensure zoning requirements align with SDA development standards.
Land acquisition can be time-consuming and competitive, but securing the right location significantly enhances the long-term viability of the investment.
It is important to always validate assumptions about the location, at the end of the day, asking yourself whether you’d want to live in this spot in this house is a good way to check your work.
2. Design of Property: Tailoring for Needs
SDA properties must be designed to meet specific standards outlined by the NDIS. These standards ensure not only accessibility but also that participants can live safely, comfortably, and independently.
Managers must work closely with architects and access consultants who specialize in SDA to create designs that meet compliance while also being appealing and functional. This involves balancing participant needs with market considerations to ensure the property attracts tenants and retains its value.
At Brookline, we believe that if our properties look like an SDA house, then we haven’t done our job.
3. Planning Approval: Navigating Bureaucracy
Obtaining planning approval is often one of the most challenging aspects of SDA investment. Local councils have varying requirements and levels of understanding regarding SDA needs and nuances, adding time and complexity to development applications.
Managers need to prepare comprehensive applications, engage with town planners, and address any objections from local stakeholders. While this stage can be frustrating, careful preparation and a clear understanding of regulatory requirements can help streamline the process.
4. Builder and Development Management: Delivering the Vision
Once planning approval is secured, the focus shifts to construction. Finding a builder experienced in SDA developments is crucial, as these properties have unique requirements that differ from standard residential builds.
Effective development management involves coordinating timelines, budgets, and quality control to ensure the project is delivered on time and within scope. This stage requires close collaboration with contractors and regular site inspections to address any issues promptly.
5. Partnering with an SDA Provider: Ensuring Compliance and Management
An SDA provider plays a vital role in managing the property once it’s completed. They ensure the property meets ongoing compliance requirements, facilitate tenant onboarding, and oversee day-to-day operations.
Selecting a reputable SDA provider with a strong track record is essential. Managers should conduct due diligence, review service agreements, and establish clear communication channels to ensure a smooth partnership. While the SDA provider serves as the tenant-facing stakeholder, regular conversations between managers and SDA providers are essential for efficiency.
Striking a balance between achieving commercial outcomes for investors and acting in the best interest of the participant is crucial.
6. Engaging a Disability Service Provider: Delivering Support
Disability service providers are responsible for delivering care and support to SDA participants. Their involvement is critical to the success of the investment, as they directly impact the quality of life for tenants. SDA is the bricks and mortar of the house, but the service providers turn it into a home for the participants.
Managers must work closely with these providers to align on participant needs, support plans, and operational protocols. A strong partnership can enhance the property’s appeal and ensure long-term tenant satisfaction, which ultimately translates to investment performance and a sustainable investment platform.
7. Sourcing Participants: Filling the Property
Finding suitable participants is another key challenge – and arguably the most pressing problem to solve for a manager. This involves marketing the property to potential tenants, building relationships with local disability organizations, and demonstrating how the property meets participant needs.
While SDA providers often assist with this process, managers must take an active role in understanding market demand and participant preferences. This often means coordinating between service and SDA providers to ensure marketing efforts are effective.
The NDIS provides detailed data on participant demand nationwide. At Brookline, we find that while this data is helpful, boots-on-the-ground research is irreplaceable.
8. Participant Funding Applications: Unlocking Financial Support
Finally, participants must secure funding through the NDIS to live in an SDA property. This requires navigating a complex application process, which can be daunting for tenants and their families. As a manager, we are not involved in this stage and defer to the judgment and advice of the SDA Provider, Service Provider and Support Coordinator (an individual who works directly with the participant on their needs and preferences).
Successful applications are a win-win, securing rental income for the property and a home for life for the participant.
Why It’s Worth It
While the path to SDA investment is undoubtedly demanding, the rewards are significant. From a financial perspective, SDA properties offer high yields and long-term rental stability, underpinned by government funding. From a social perspective, investors have the opportunity to make a meaningful difference in the lives of people with disabilities, providing them with safe, comfortable, and dignified housing.
Moreover, the barriers to entry—such as compliance and logistical challenges—serve as a moat, deterring less committed investors and enhancing the value of successful developments.
Conclusion
Investing in SDA in Australia is not a passive venture. It requires vision, determination, and a willingness to tackle challenges head-on. But for those who embrace the journey, the rewards can be extraordinary. With the right mindset and a commitment to excellence, managers can turn hard work into both profit-with-a-purpose, creating a legacy that benefits everyone involved and ultimately enhancing the broader community.
Brookline Property Group is a Sydney based asset manager with a focus on Specialist Disability Accommodation in Regional Australia.
Contact: office@brooklinepg.com.au
Website: www.brooklinepg.com.au