Is Support Independent Living (SIL) the path you are following to increase your revenue?

anna4284
Apr 1, 2024
4 min read

Updated: Apr 2, 2024

Financial Analysis (SIL)

To understand the financial aspects of renting or buying a Specialised Disability Accommodation (SDA) dwelling and operating it, you need to consider various factors such as government fundings, current market, Sydney Fees, SIL risks.

Houses in Sydney have increased by 0.2% in January 2024 followed by an increase of 0.5% in February 2024.

Here is the latest data on the median property prices for Sydney. Over the past year, there has been an 11.4% increase in property prices in Sydney.

Property	Median price	MOM	QOQ	Annual
Capital city dwellings	$1,122,430	0.2%	0.1%	11.4%
Capital city houses	$1,395,218	0.30%	0.9%	12.8%
Capital city units	$828,525	0.0%	0.6%	7.7%
Regional dwellings	$708,181	0.4%	0.8%	2.9%

Source: CoreLogic, 1st February 2024 (https://metropole.com.au/sydney-housing-market-update/)

Current SIL Economic Data and Vacancy

The roundtable data report is compromised of 30 participating organiations and collectively found the following data:

$5 billion annually in turnover. The SIL Roundtable includes a national spread of some of Australia’s most respected disability service providers, with a mix of larger, as well as small- and medium-sized organisations.
More than one third of all NDIS participants (9,881) residing in SIL accommodation (see Figure 1.1), across nearly 2,800 dwellings nationally.
More than 33,400 employees – or more than 12% of the NDIS workforce.
For these organisations, NDIS participants represent 94% of shared accommodation revenue.

The data is comprised of the following SIL resident characteristics:

The majority of residents have an Intellectual disability, followed by people with physical disability.
56% of all residents are aged over 50 years.
Nearly 60% of all residents have High or Very High support needs, with 47% requiring positive behaviour support. While there are variations between participating organisation, generally consistent insights have been observed.

The average vacancy rate (SIL)

In the past 2 years, vaccines have increased from a median of 7.3% to 10% in 2021-22. This trend therefore highlights a growing problem of lost accommodation options for SIL participants as well as lost revenue generation opportunities for service providers annually.

Assuming an average SIL package value of $248,000 (the group average in 2021-22), and with 10,672 bedrooms across the group, this represents around $265 million of foregone revenue for this group of providers, or nearly $9 million per Roundtable member.

The SIL vacancy initiatives introduced by the NDIA in April 2022, while welcomed, are only available in limited circumstances and for a limited period. Furthermore, under the Agency’s policy, the participant that exits a dwelling will ultimately bear the additional cost from their plan. The NDIA’s current approach to vacancy management is not addressing the deeper and more systemic issue, with most vacancies out of scope and therefore unfunded for increasing periods of time.

While SIL providers have a responsibility to manage vacancy risk, these systemic factors highlight that it is not the sector’s burden to carry alone, and a more realistic response is required from the NDIA, including through its pricing framework and improvement to its home and living decision making performance to stimulate investment in appropriate stock.

Vacancy length also increased over this period, rising from median of 246 days in 2019-20 to 365 days in 2021-22. When considering vacancy rates and vacancy length together the data suggests that 10% of revenue earning capacity was lost in the 2021-22 financial year due to vacancy risk.

Vacancy Rates and Lengths

Risks

Several factors appear to be driving this growth in vacancy rates. The effects of the COVID-19 pandemic may have reduced movements across 2019-20 and 2020-21, but conversely appear to have contributed to increasing vacancies in 2021-22.

Another factor is the restricted pipeline of new SDA stock combined with a significant volume of SIL tied to older stock inherited from the historical management of shared accommodation by State governments in a highly rationed funding environment.

The other factor playing out in higher vacancies is the need for SIL residents to be comfortable with the people they are living with - finding the right place and the right fit is often complex and time consuming. These issues are discussed later in this report.

Vacancy Management by Building and Dwelling Type

Analysis by building type shows that median vacancy rates were highest for High Physical Support (11.7%), Improved Liveability (12.2%) and Robust (12.5%) building types. When examined by dwelling type, Apartments had the highest vacancy rate at 14%.

Interestingly, when combining Apartments with High Physical Support, the vacancy rate increased to 22.6%. This is most likely associated with two factors – a higher saturation of apartments being built (and therefore vacant), but may also correlate with younger residents, who are more likely to change residence in line with societal trends. This is something providers should anticipate and plan for when operating their SIL supports. The data also shows that Robust buildings have both a high vacancy rate and vacancy length.

Robust is associated with more challenging behaviours and providers typically find it difficult to match residents, commonly resulting in vacancies for extended periods and provides a disincentive to build Robust stock or support participants with challenging behaviours. The NDIA is encouraged to recognise this in its pricing, through incentive or outcomes-based models.

Vacancy rates and lengths, by dwelling and building types, 2021-2022.

Analysis by dwelling size shows that dwellings with 5 to 6 bedrooms had the lowest median vacancy rate. Conversely, dwellings with 2-3-bedrooms present with a higher than median vacancy rate, but also a lower median vacancy length at 265 days and 331 days, respectively