Specialist Disability Accommodation (SDA) is well placed to meet a rising demand for impact investment products in Australia, according to the Summer Foundation’s newly released SDA Explainer for Investors.
In recent years, impact investing – investments made with the intention to generate positive, measurable social and/or environmental impact alongside a financial return – has started to attract the attention of investment banks, super funds and private sector investors.
Summer Foundation CEO, Dr Di Winkler, said there has been a significant progression from impact investment being primarily for philanthropists with an interest in a particular area or sector, to it being seen as a viable option for mainstream investment banks, super funds and private sector investors.
“One of the limiting factors for the growth of impact investment in Australia is the lack of products that have the capacity for investment at scale – the SDA market is well positioned to leverage this private capital,” Dr Winkler said.
“SDA is still somewhat of an unknown quantity for some investors.”
“The SDA Explainer provides a succinct analysis of the SDA demand and supply outlook and investment principles to support investors considering SDA investment opportunities.
“These principles relate to the properties, the quality of the new dwellings, the tenant selection process, disability support and ensuring that the investment is set up for a long term positive social impact.”
What impact investors need to know about SDA
- Since the commencement of the SDA market in 2017, there has been a steady increase in the growth of SDA supply. The most significant growth has been in the number of dwellings for people with high physical support needs with a four-fold increase. However, there is still a need for new dwellings for at least 19,000 people given the unmet demand and the need to redevelop or reconfigure most of the SDA built before 2016.
- A recent desktop scan of investment opportunities found 32 entities raising funds to build new SDA. Some of the advertised returns were unrealistic. Only a small group of funds were investing in SDA at scale. The findings of this study demonstrate the level of interest and momentum generated by the SDA market.
- A recent survey of active SDA investors provided valuable insights into the SDA market. Although there were only 9 participants, together they had provided $700 million to 13 SDA providers to house over 1,200 NDIS participants. This survey found that at this stage, the SDA market is suited to sophisticated investors with a substantial portfolio looking to diversify and interested in a long- term investment with stable returns and a social impact.
- As with any developing market and new asset class, potential investors need to do a significant amount of research to understand the risks and returns associated with each specific investment opportunity and the risks associated with the market as a whole.
Dr Winkler said that SDA, as an emerging market, has enormous potential to provide both long-term stable returns to investors, while also meeting the housing needs of people with disability.
The Summer Foundation SDA Explainer for Investors has been published on the Summer Foundation website.