SPECIALIST DISABILITY ACCOMMODATION Position Paper on Draft Pricing and Payments 1 April 2016 ndis.gov.au Contents Foreword ................................................................................................................... 4 1. Background and purpose .............................................................................. 5 What is Specialist Disability Accommodation (SDA).................................... 5 The process to-date ..................................................................................... 5 Purpose of this position paper ..................................................................... 6 Next steps ................................................................................................... 6 High level methodology for inputs to SDA prices ......................................... 6 2. Pricing and approach ..................................................................................... 8 Pricing objectives......................................................................................... 8 Approach to pricing...................................................................................... 9 Pricing model and Price matrix .................................................................. 10 Benchmark pricing formula ........................................................................ 10 Accommodation design categories ............................................................ 13 Building types ............................................................................................ 13 Adjusting for Geography ............................................................................ 14 Additional factors impacting building costs ................................................ 15 Additional pricing considerations ............................................................... 15 Price differential for existing and new housing .......................................... 17 Reasonable rent contributions ................................................................... 19 Key pricing assumptions ............................................................................ 20 3. Demand and assessment ............................................................................ 25 Assessment criteria and considerations .................................................... 25 4. Administration arrangements ..................................................................... 28 Purchase of SDA supports ........................................................................ 28 Registration of providers ............................................................................ 28 Registration of dwellings ............................................................................ 29 Quality and safeguarding ........................................................................... 30 Implementation considerations .................................................................. 31 5. Appendices ................................................................................................... 32 Appendix A: SDA Pricing and Payments Framework ................................ 32 5.2 Appendix B: Building Specifications for SDA design categories ................ 46 5.3 Appendix C: Location Factors ................................................................... 64 2 Disclaimer This document is provided for information and to seek feedback. The Commonwealth and the National Disability Insurance Agency have no liability to any person for any loss, damage, cost or expense suffered as a result of any use of or reliance on any of the information. The information in this document may change, is not advice, and should not be relied upon for any action or failure to act. The Commonwealth and the National Disability Insurance Agency accept no responsibility for the accuracy or completeness of the material contained in this document. 3 Foreword Specialist Disability Accommodation (SDA) refers to specialist designed housing for those participants requiring integrated housing and supports, due to their significant functional impairment and/or complex needs. SDA refers only to specialist accommodation and is not intended to reflect the accommodation needs of people with disability for whom mainstream housing would be appropriate. The National Disability Insurance Agency (NDIA; Agency) will continue to work with other agencies and departments with housing responsibilities to stimulate accessible and affordable housing options. Historically, SDA has been delivered primarily by State and Territory governments (hereafter ‘States’). The responsibility for funding SDA is now transitioning to the National Disability Insurance Scheme (NDIS; Scheme). Like all parts of the Scheme, the SDA payments approach seeks to bring greater choice and control for people with disabilities in relation to their need for reasonable and necessary housing supports. For eligible participants, SDA will be funded on a per-person basis and reflect the range of different types of housing, the specific disability needs and other factors such as the age of the property and where it is located. The approach is also designed to enable a smooth transition of existing SDA stock, to improve the long term supply of SDA and to incorporate provision for innovative housing solutions. This will contribute to greater choice and control within a commercial and sustainable framework. The Council of Australian Governments’ Disability Reform Council endorsed the Specialist Disability Accommodation Pricing and Payments Framework (the SDA Framework) to guide the implementation of SDA supports as they transition from State government jurisdiction into the NDIS (see Appendix A). This position paper should be read in conjunction with that framework. This paper sets out the NDIS benchmark pricing and payments approach, operational processes and administrative arrangements for SDA, designed in accordance with the SDA Framework, for the funding of the land and built elements of SDA under the NDIS. As required by the council, and as part of developing this pricing and approach, the Agency has held public consultations in all States and Territories, and with all governments. These consultations have provided valuable input which has been incorporated into the design. The pricing and administrative arrangements outlined in this paper represent the Agency’s intended approach for the implementation of SDA supports to commence from 1 July, 2016. As part of finalising this approach, the Agency is keen to continue engaging with a range of stakeholders, seeking final feedback and comment on its consideration issues of substance. We invite you to send your feedback to [email protected] by 15 April, 2016. The Agency will then publish the final SDA benchmark pricing and payments approach, for commencement on 1 July, 2016. 4 1. Background and purpose What is Specialist Disability Accommodation (SDA) SDA refers to specialist designed housing—including land and built form (user cost of capital)—for NDIS participants requiring integrated housing and supports, due to their significant functional impairment and/or complex needs. In designing this pricing and payments approach the Agency is cognisant that the definition of SDA includes both the existing specialist accommodation where people are currently living, as well as new and innovative models that are not yet widely available. This definition also explicitly separates out the support arrangements delivered to participants within specialist disability accommodation, such as home modifications where a person does not require specialist accommodation. These supports, where reasonable and necessary, are funded through a participant’s NDIS plan. The process to-date In November 2015, the Disability Reform Council endorsed the SDA Framework. The SDA Framework outlines how benchmark prices for SDA will be developed by the Agency and provides guidance on for whom, and under what circumstances, SDA will be provided. A copy of the SDA Framework has been included in Appendix B. In the development of the benchmark pricing, the SDA Framework required the Agency to follow a process where it: 1. Sought the views of the Commonwealth and State governments on the pricing and payments arrangements for SDA; 2. Issued discussion papers on the arrangements it might adopt and consulted with current and future residents of SDA and government and non-government providers of SDA; 3. Sought feedback from other stakeholders including: families, carers, disability interest groups, provider peak bodies and financiers; 4. Developed draft benchmark prices on which it sought views of residents, providers and other stakeholders as necessary; and 5. Made any adjustments it deemed necessary before publishing its final benchmark prices (and any associated weights and factors). Over the period January 2016 through to March 2016, in accordance with item one through to three above, the Agency sought the views of each State government on the SDA pricing and payment arrangements, issued discussion papers, and consulted widely with stakeholders through open consultations scheduled in every State and Territory. Public forums held as part of the open consultation process attracted more than 500 individuals representing a broad 5 range of stakeholders including: families, carers, disability interest groups, disability service providers, provider peak bodies and financiers. Purpose of this position paper This paper sets out the draft benchmark pricing and payments approach, that the Agency will use to fund SDA for eligible participants commencing from 1 July, 2016. This paper is being released for two purposes. Firstly, to provide guidance to the market on benchmark pricing, pricing structures and the rules and administration arrangements that sit alongside these prices; and secondly, for the Agency to seek final feedback from the market in relation to the same prior to publishing final pricing which will apply to SDA under the NDIS from 2016 to 2021. Next steps The Agency seeks the views of all interested stakeholders on the content of this position paper by 15 April 2016. Responses can be provided to the Agency via email to [email protected]. The Agency will consider any feedback prior to finalising the prices to apply from 1 July, 2016. The Agency does not intent to publish or share comments received in response to this position paper. All submissions will be treated as confidential unless otherwise indicated by the author. In parallel, the Agency will continue to work with governments on a number of interrelated projects, some of which are external to the Agency which support or facilitate the pricing and payment approach outlined in this position paper. Related projects which do not form the scope of this paper, include, but are not limited to: development of the rule(s) under the National Disability Insurance Scheme Act (2013) (NDIS Act); settling mechanisms for reasonable rent contribution and land-payment pass through; and finalisation of policies and working arrangements with States relating to grandfathering arrangements. The rule(s) authorising the Agency to apply SDA criteria to reasonable and necessary decisions and payments for SDA is a precondition to finalising prices. High level methodology for inputs to SDA prices In order to determine a sustainable benchmark price, the agency has applied data from a range of sources in its modelling, the basic elements of which are outlined in Figure 1 The cost of SDA to the Scheme is a product of pricing (1) and demand (2). Demand is in turn driven by assessment criteria (3) and estimates of the number of NDIS participants that may require SDA, given their needs and circumstances. Pricing inputs include supply data, such as the nature and location of existing stock, provider registration and building requirements (4), tenancy rights and obligations (5) and capital and ongoing costs including vacancy rates (6) 6 and offset by the proportion of costs to be met by reasonable rent contribution. The various potential scenarios that these factors drive (7) are then assessed by the Agency for their impact on participant choice and control, Scheme and administrative costs (both internal and external) and the ability for that solution to be implemented during transition and to support the desired market objectives. Necessary amendments to legislation, systems and operational guidelines support implementation. FIGURE 1 - CALCULATION OF BENCHMARK SDA PRICING AND COSTS 7 2. Pricing and approach Pricing objectives The Agency’s draft benchmark pricing and payments approach recognises that two important goals of the Scheme are to enable people requiring SDA to obtain appropriate accommodation suitable for their needs and for these people to have greater choice and control over where and how they live. The Agency has applied the following objectives in developing this approach: 1. The NDIS will support the availability of SDA for participants who are assessed as requiring such specialist accommodation. 2. The NDIS will support a sustainable SDA market that fosters choice and control, encourages innovation and provides options for participants, continuity of supply and financial sustainability for governments, participants and providers. 3. The approach is designed to give effect to the objectives of the NDIS Act, in particular, to promote the provision of high quality and innovative supports that enable people with disability to maximise independent lifestyles and full inclusion in the community. 4. The approach seeks to address uncertainty in the market for SDA as it is initially and progressively established and as accommodation support services transition from block grant funding into the market. 5. The Agency is committed to a model which allows a sustainable and commercially viable supply of accommodation to reduce the number of people on waiting lists and living in settings that are inappropriate to their needs. 6. The Agency supports fostering a model which, as far as possible, explicitly separates provision of housing infrastructure from supply of supports and services to residents in order to maximise participant outcomes, choice and control. 7. Based on evidence, and the insurance principles of the Scheme, the Agency may build in strategies to influence greater supply of particular types of accommodation and to maximise participant outcomes over the long term. 8. The approach needs to support the market moving, over time, towards achieving this vision and is also intended to ensure there is scope for growth, replacement, change and innovation in the supply of SDA over time. 9. This benchmark pricing will apply for the period 1 July 2016 to 30 June 2021 but will be reviewed regularly as experience and participant data grows. 10. The approach adopted will be nationally consistent. 11. The Agency will work jointly with the Commonwealth and States governments on any material amendments that impact the SDA pricing and payments approach. 8 Approach to pricing The purpose of publishing benchmark prices is to provide guidance to the market on the Agency’s proposed approach to pricing for SDA. In addition, the benchmarking pricing will guide planners when determining the reasonable and necessary supports for the cohort of participants identified as requiring SDA (as will be set out in the SDA rule(s)). Funding will be allocated as each of these participants are identified at entry to the Scheme and the SDA support stated, but not explicitly quantified in their package. For sake of certainty this also will be confirmed by the SDA rule(s). In determining the benchmark prices, the Agency is seeking to allocate SDA funding at a level which results in overall payments to service providers (inclusive of rent contributions) which are commensurate with the market rate of return on investment. The Agency will provide pricing which considers two levels of return based on whether the property is newly constructed or an existing property. As set out in the SDA Framework and relevant sections of this position paper, prices for individual properties vary based on a number of factors including property type, nature of construction, number of bedrooms, allowances for overnight carer facilities, and geographic weightings. All SDA providers will need to be registered, as will the properties. The registration and monitoring process will capture and maintain sufficient details about the property and the tenants to enable the Agency to apply the appropriate pricing. Consistent with the SDA Framework, the payment by the Agency will be per participant, while the property is occupied. Occupancy and vacancy risk rests with the housing provider. Each participant is free to choose whether or not they wish to reside in a property. The rate of return adopted by the Agency has been designed to reflect this risk. The Agency will examine the feasibility of stimulating the market to supply housing in particular areas as demand for specialist housing becomes clear through transition. Subject to policy and legal authority, this may include directly commissioning property. This may be necessary to achieve the short-term growth in accommodation supply necessary to accelerate clearance of waiting lists and support the forecast numbers of full-scheme NDIS participants. This type of procurement is similar to existing approaches where the Agency may choose to bulk purchase supports. In such circumstances the Agency will consider taking on occupancy/vacancy risk and providing an agreed term of funding. In this case a lower rate of return will be applicable. The following sections detail benchmark pricing formula set out in the SDA Framework, then describe the Agency’s proposed scope for variation in elements of the formula and pricing considerations. The final section sets out the key assumptions underpinning the draft benchmark prices. 9 Pricing model and Price matrix The benchmark pricing model for SDA has been developed based on the formula and expected adjustment factors outlined in the SDA Framework. To the extent possible, the model assumptions have been developed from industry benchmarks, but have referenced State government data to test and calibrate the results. There are separate prices for new housing and for existing housing stock. The price for new builds is set to provide an incentive to a broad range of potential investors to respond quickly in constructing new properties to provide for unmet SDA demand. The price for existing housing stock is lower and provides yields more in line with the established rental market to ensure owners have a financial incentive to retain participants for as long as they choose to live at the property. The benchmark prices have additive and/or multiplicative factors or weights for classes of dwellings (determined by the Agency) that can be applied by the Agency as necessary. Prices are differentiated by building type and design category. The building type and design categories were developed through consultation with stakeholders, with detailed specifications developed by architects, reflecting the range of different types of accommodation that the Agency may need to fund, including existing accommodation. For clarity it is noted that the benchmark pricing formula and the SDA Framework (as set out in Appendix B) have been agreed and endorsed by the States and therefore no changes will be made to these aspects as a result of feedback received in this consultation. Comments should be directed towards the interpretation and proposed approach as outlined in this paper. Benchmark pricing formula In accordance with the SDA Framework, the Agency’s benchmark pricing for SDA is based on an efficient representative provider, with representative configurations of dwelling stock. Prices are calculated based on the formula illustrated below and expressed as a price per participant. The numbers in brackets refer to elements described in Table 1 below. Benchmark pricing formula Dwelling price (1) = Consumption costs (2) + Opportunity costs of capital (3) + Costs of ownership (4) – Land price inflation (5) – Reasonable rent contribution (from all participants in dwelling) (6) Benchmark price (7) = Dwelling price (1) / anticipated number of residents (8) 10