AFFORDABLE SOCIAL DISABILITY HOUSING | Not-for-Profit Tier-One Community Housing Provider

Key Site Challenges in SDA Development

BLUECHP SDA BLOG

Written by Charles Northcote, BlueCHP Chief Executive Officer

Participants face numerous challenges in securing the type of Specialist Disability Accommodation (SDA) housing they need, in their desired location. Understanding the NDIS SDA Funding Guide for housing can help.

The guide is only updated structurally every five years, and is indexed for inflation in the intervening period. This is problematic, as we have witnessed recently, with the significant increase in property prices. This increase is particularly evident in Sydney, Brisbane, and Perth, where properties have risen by up to 25 per cent, thus making the challenge of delivering a home within the price-points set by the NDIS almost impossible.

As a result, we are seeing developers squeeze shoeboxes on sites to achieve the high yields promised. This type of offering is not tenable in the long run, particularly with the category of High Physical Support and the increased size of modern electric wheelchairs, making living conditions intolerable.

Housing development requires access to land. Generally, sites are greenfield (vacant land) or brownfield (existing residential). BlueCHP is always looking to access sites near services/utilities, and we also consider the availability of care services, which results in most sites we purchase being brownfield.

There are also several other site-specific issues to consider when sourcing land, including:

  • Is the site reasonably flat?
  • What planning scheme does it fall under?
  • Is there car access to the site?
  • What shape is the site?
  • What is the size of the site?

These points are just a portion of the many issues attached to sourcing the right type of property for an SDA home.

Two components in the NDIS financial model impact investment returns with respect to land; these are the price per square metre and the land size.

This article covers a lot of technical material to help understand land pricing; however, it does not seek to explain all aspects. We aim to provide the reader with some key points to address when considering a site for SDA.


Whilst this is technical in aspect, we are always focused on the Participant. However, it is important that financial investment metrics are sufficient to ensure the long-term viability of the home. The Participant’s security of tenure is a key factor. BlueCHP as an SDA Provider can provide tenure up to 60 years.


Land Price per Square Metre

Under the NDIS Funding Arrangements for SDA, the value of land per square metre is calculated based on Statistical Area 4 (SA4) boundaries, using the median price in 2023 for those areas.

Looking at the area of Ryde as an example, the below snapshot shows that the NDIA has determined the current median price of Ryde properties to be $2,217.13 per square metre.

The SA4 area for Ryde includes all suburbs in the relevant Local Government Area, including: (Ryde), Denistone, Denistone East, Denistone West, East Ryde, Eastwood, Macquarie Park, Marsfield, Meadowbank, North Ryde, Putney, and Tennyson Point.

NDIS SDA land price per square metre for Ryde, NSW. Source: NDIS SDA Price Guide 2024-25.

This calculation was first determined in 2023, and this land value has not been indexed in the 2024-25 Funding Guide. However, when reviewing the 2024 data from Realestate.com.au, the median price is currently $2,966 per square metre, versus $2,457 per square metre in 2023.

2024 Land Value for Ryde, NSW. Source: realestate.com.au

This is a real increase of over 10 per cent! As shown in the table below, this calculation methodology has resulted in a current variance of over 20 per cent in the NDIA payment calculation for the development of sites for SDA.

Variance in Land Value (per sqm) for Ryde, NSW (NDIS Price versus current Market Price).
Table by BlueCHP Limited. Sources: NDIS and realestate.com.au

This impact forces us to build in suburbs further west with a lower average median price per square metre. An example of this can be seen in the diagram below, which shows West Ryde. Without an interim adjustment within the 5 years, acquiring land at the prescribed values that the NDIS bases funding upon becomes very difficult or nearly impossible. This issue impacts all cases of SDA, regardless of the category or dwelling type.

2024 Land Value for West Ryde, NSW. Source: realestate.com.au

We note that the land prices for West Ryde are close to the 2023 NDIS Price Guide data, however the West Ryde land costs have increased by 14% over the past year. Despite this increase, it is still more favourable to access land in West Ryde, rather than in Ryde, based on the median price points.

Variance in Land Value (per sqm) for West Ryde, NSW (NDIS Price versus current Market Price).
Table by BlueCHP Limited. Sources: NDIS and realestate.com.au

The land cost is also reflected in the NDIS Location Factor Table, which is used to calculate the annual payment. We will discuss the location factor calculation in more detail in upcoming articles.

Land Size Considerations

The NDIS SDA Funding Guide provides a table of the estimated land size required for the construction of a number of building types. BlueCHP is highly critical of the NDIS guide on land sizes, particularly for Robust Housing. We are of the view that larger land areas are needed for the robust category, as the needs of this client group are significantly diverse. There is also the key consideration of the impact on neighbours and risk of neighbourhood fatigue.

The minimum size required is similar to that of High Physical Support measurements.

1. Land Size

The size of the block required for the construction of the proposed dwelling is determined by the planning rules of each Local Government Authority (LGA). 

Further in this article, we have provided the estimated table the NDIS has published, versus the sizes BlueCHP believes to be appropriate. 

The House to Green Area ratio and landscaping requirements are essential factors that determine this.

An example would be a 1-Bedroom Villa with On-site Overnight Assistance (Staff Room, as referred to as OOA), at 100 square metres requires a further 100 square metres of green space, and on top of this, an additional 30 per cent of landscaping. Therefore, a total of 260 square metres would be required.

Other factors include the site aspect in relation to topography, such as sloped blocks resulting in significant landscaping costs, or flood zone requirements that may require the site height to be raised.

1.1  BlueCHP Dwelling Size Table

The table below shows BlueCHP estimated dwelling sizes by building type and design category. We note the inclusion of a certain level of additional spatial requirements, as we note the SDA Design Guidelines and measurements do not include storage and personal bathrooms.

The below considerations are included in these sizes:

  1. Alfresco area;
  2. Single Garage;
  3. Private bathroom for each Participant;
  4. OOA (staff room) with toilet;

It should be noted that these sizes do not take into account a secondary living area.

BlueCHP Dwelling Size Table – Estimated dwelling sizes by building type and design category.

1.2  BlueCHP Land Size Table

The table below shows BlueCHP estimated land sizes by building type and design category.

BlueCHP Land Size Table – Estimated land sizes by building type and design category.

1.3 Impact of Land and Price

The impact of land size required, together with the price per square metre, gives rise to a range of prices that can be paid for a block of land. This can be seen in the table below.

Variance in Land Values (per sqm) for Ryde, NSW (NDIS Price versus current Market Price), with examination of required sizes for SDA dwelling categories.
Table by BlueCHP Limited. Sources: NDIS and realestate.com.au

The 33.8% price impact seen in the above table will not be recovered in a reduction in construction costs.

Finding sites that meet the spatial requirements is challenging in inner-city suburbs. Not only are land sizes smaller, but we are competing with other land developers who often increase the density of buildings (increasing the yield) on the site.

This means they can bid up the price of the land and price out someone looking to purchase the land for SDA. 

This is the first part of the challenge of building an SDA home. There are many other challenges, including the cost of construction. We will publish further articles that examine construction costs.

The NDIS SDA Financial Model (Land)

“The NDIS SDA Price Review for 2022-23 has changed the price drivers in the financial model calculations. The decrease in the cost estimate is that the assumptions about the land area required for each SDA development have been decreased (see Exhibit 21).

Note that the NDIA does not mandate the size of blocks on which SDA dwellings are built. Within the SDA pricing model, land is assumed to appreciate in value over time. The inclusion of more land in the initial assumption, therefore, lowers the overall price because it discounts the price for the capital gain made on the land at the end of the investment period. The NDIA, therefore, considers that the fairest approach is to include only the minimum land requirement in the costing assumptions.”

SDA Price Review 2022-23

It is important to note that this is not the amount of land that is actually required to build a dwelling. The factors used in the NDIS SDA model, versus the land size you need to purchase are materially different for a good reason. It is, however, essential to understand the financial model used for the basis of investment, as opposed to the actual land you are required to purchase for an SDA home.

With respect to the NDIS SDA Financial model, we are only discussing the land element. The methodology reduces the land size as to reduce the impact of the land component on the SDA payment. The indexing of the land is approximately at a rate of CPI, which is noted in the worked example on the NDIS website. 

The NDIS SDA Pricing Model Worked Example can be viewed at this link

The land appreciation rate used is a real rate (i.e. Including inflation).

Further information can be found in the NDIS 2022-23 Final Report, listed on the NDIS SDA Pricing Review Page.

Exhibit 21 – NDIS Comparison of 2016-17 and 2023-24 Land Requirement Assumptions.
Source: NDIS SDA Funding Review 2022-23.

Conclusion

The factors to consider for the purchase of land are:

  • Site size, dependent on the type of house to be built
  • Site aspect in relation to topography, neighbours, service availability, etc.
  • Estimated long-term SDA demand in the area
  • Planning rules of the Local Government Authority
  • Price per square metre and impact on the financial returns
  • Price per square metre and the NDIS Statistical Area 4 price per square metre comparative

We have sought to provide information to assist with the purchase of land and to help you better understand how the annual SDA payment is calculated. 

In coming articles, we will examine the issues around how construction costs are calculated, together with planning issues and classes of construction under the National Building Code.