Industry insiders and corporate watchdogs have warned that “cowboys” making unrealistic promises about investments in disability housing may be breaching consumer law, while urging extreme caution from investors.
Social media ads and emails with misleading claims about returns continue to circulate several years after regulators first expressed concern, in part due to extensive media coverage. The claims often appeal to a sense of social responsibility.
The National Disability Insurance Scheme provides up to $700m a year to participants with extreme or very high support needs to live in specialist disability accommodation. This money is then distributed to registered SDA providers.
The funding has attracted long-term institutional investors seeking to meet demand for new specialist homes. But agents have also started charging retail investors to help them buy SDA properties based on misleading claims.
Social media ads seen by Guardian Australia, which often used NDIS logos, spruik annual returns of up to $20,000 for each home, with weekly rental incomes of several thousand dollars and tenancy guarantees.
One email described the investments as “government backed”, while flagging high annual returns with capital growth.
Others promised gross rental yields of more than $200,000, and some flagged returns of up to half a million dollars from dual-income SDA homes.
One established operator, with eight years of experience in the SDA sector and who declined to be named, said: “These sort of advertisements are unethical, misleading, and downright destructive to an industry that is reliant on private investment to substantiate growth.
“Most leases incorporate fine print that removes the responsibility of these agents to find funded participants, leaving homeowners with untenanted houses for months, if not years, on end, and the advertised income assumes participants are funded at the maximum level and homes are always fully tenanted.
“This is not accurate, it is immoral, and advertising like this needs to be addressed before the industry is permanently scarred by these cowboys.”
In 2023 a survey of SDA providers conducted by the non-profit Summer Foundation found that 25% of newly built properties were vacant. Most providers reported delays of three to six months to fill a single vacancy, and six to 12 months to fill a group of dwellings.
“Vacancy rates pose significant financial risks for providers operating in the SDA market and thus urgent action is needed to identify and address the factors contributing to these high vacancies,” the Summer Foundation report said.
SDA providers also told the foundation that “spruikers were spreading inaccurate or misleading information about the nature of SDA and the revenue produced by an investment in SDA”.
The foundation called for help from government to “address misinformation” and “tackle incorrect perceptions about SDA returns”.
“Hundreds of homes and millions of dollars are being spent building SDA homes in areas of zero demand, and that have zero services that are able to operate in those locations,” one anonymous provider warned.
A spokesperson for the Australia Competition and Consumer Commission said “misleading representations relating to guaranteed SDA investment returns may raise concerns under the Australian consumer law”.
“We cannot comment on individual businesses or potential investigations,” the spokesperson said.
The Australian Securities and Investment Commission does not regulate direct property investments but has taken an interest in SDA housing due to the potential for people to be “lured into investing on the back of false or misleading claims”.
“Investors should be aware that investment schemes, generally, are not government-backed and are run independently from government,” the spokesperson said. “Investors should exercise caution if investments are based on these promises.”
“People should always do their due diligence and be very sceptical about anything promoted as ‘government-backed’ or providing ‘guaranteed or secure returns’. As we understand, any government funding is attached to the NDIS participant, and not the property itself.”
