The Failure of Legacy Systems: Why Group Homes Cannot Be Saved

For decades, disability policy in Australia has clung to the group home model as if it were a solution. Born in the 1970s and 80s as part of the deinstitutionalisation push, group homes were meant to replace sprawling institutions with “community-based” alternatives. In reality, they simply replicated institutional life at a smaller scale: congregated living, rostered staff, little personal choice, and limited community participation.

Today, those same group homes are collapsing. The subsidies that kept them afloat are ending, providers say they are running at a loss, and governments are scrambling to respond. But the truth is stark: group homes are not failing because of underfunding. They are failing because they are a legacy system designed around control, not rights. No amount of patchwork can revive a model that was unsustainable from the start.

Legacy systems dressed up as reform

When institutions like Peat Island (NSW) and Kew Cottages (VIC) closed, group homes were touted as progress. Six people in a suburban house sounded better than six hundred in a sprawling facility. But the DNA of institutionalisation remained.

• Residents had no choice over housemates.
• Lives revolved around staff rosters, not personal preferences.
• Homes were owned and controlled by providers, not people.
• Community inclusion was promised but rarely delivered.

These are not homes in the true sense. They are institutional accommodations in disguise.

The economics of collapse

Providers argue that NDIS funding does not cover the costs of running group homes. They are right in one sense — but the problem is deeper than dollars.

• Staffing dominates costs: Rostered 24/7 staffing is inflexible, expensive, and labour-intensive. Wage increases outpace NDIS pricing, locking providers into deficit cycles.
• No economies of scale: Unlike hospitals or aged care, group homes cannot “get cheaper” per resident. Each person’s support needs are unique, but the model treats them as interchangeable.
• Outdated housing stock: Much of the housing inherited from the states is ill-suited, inaccessible, and expensive to maintain.
• Thin demand: Younger people do not want to live in group homes. Occupancy is declining, reducing revenue but leaving fixed costs intact.

In short: the group home model is economically unsustainable and socially unwanted. Propping it up with endless subsidies is throwing good money after bad.

The rights case against group homes

Australia is a signatory to the UN Convention on the Rights of Persons with Disabilities (CRPD), which enshrines the right to live independently and be included in the community (Article 19). Group homes violate this standard. They separate people with disability from mainstream life, restrict autonomy, and force congregated living.

The Disability Royal Commission went further, finding that group homes are unsafe environments with heightened risks of violence, abuse, neglect, and exploitation. They recommended a phased transition out of group homes, not a reinforcement of them.

Continuing to pour public money into this model is not only poor economics — it is a breach of Australia’s human rights obligations.

Fear, distress, and transition

None of this diminishes the reality that group homes are still home for many people. For long-term residents and their families, the fear of upheaval is real. Abrupt closures would cause trauma and insecurity.

That is why the solution cannot be a sudden withdrawal. It must be a managed transition:

• Support for residents to move gradually into individualised living.
• Investment in alternative housing so that options exist before closures occur.
• Clear communication with families to build trust in change.
• Safeguards to ensure continuity of support.

The answer is not to patch up a broken system. The answer is to help people move beyond it without leaving anyone behind.

What people with disability actually want

The preferences of people with disability — especially younger cohorts — are not ambiguous. They want:

• Homes of their own, not forced co-tenancy with strangers.
• Flexible support that adapts to their lives, not rosters.
• Inclusion in real communities, not segregation behind a fence.
• Dignity, autonomy, and the right to decide where and how they live.

Models like Individualised Living Options (ILO), Specialist Disability Accommodation (SDA), and co-housing are already showing what is possible. They are often more cost-effective, more flexible, and more consistent with human rights.

The failure lies not in the aspirations of people with disability, but in the refusal of providers and governments to invest in scaling up these alternatives.

The politics of patching legacy systems

Why, then, do group homes persist? The answer is political convenience.

• Governments see group homes as a “safe pair of hands,” outsourcing risk to large corporatised providers.
• Providers cling to the model because it suits their existing infrastructure, workforce, and funding arrangements.
• Families, understandably fearful of instability, sometimes resist change, and governments use this fear as an excuse to delay reform.

This politics of inertia locks everyone into the same failing cycle: subsidies, deficits, panic, repeat. Meanwhile, people with disability remain trapped in settings they never chose.

Beyond legacy systems: what must change

The way forward is not complicated. It requires political courage and investment in evidence-based, rights-driven models.

1. Stop pouring money into broken systems. Subsidies for group homes are not value for money and perpetuate harm.
2. Invest in alternatives at scale. Build SDA, expand ILO, and partner with mainstream housing sectors to open up real choice.
3. Guarantee transition supports. Every person in a group home must have a supported pathway to move if they choose.
4. Shift accountability. Fund people, not providers. Publish transparent outcomes and rights benchmarks.
5. Embed lived experience in design. Reform cannot be led by the same organisations that created the problem. It must be led by people with disability.

A reckoning for large providers

Large providers who doubled down on group homes despite eight years of state subsidies had ample warning. They knew the model was unsustainable, yet failed to innovate. Their current financial losses are not a reason for further bailouts. They are a reflection of poor strategy and misplaced priorities.

In any other sector, clinging to a failing business model would be recognised for what it is: bad governance. The same accountability must apply here. Providers should not be rewarded for entrenching institutional accommodation.

The human cost of delay

Every year of delay means thousands remain stuck in unsafe, outdated models. Every subsidy propping up group homes is money not invested in alternatives. Every excuse to maintain the status quo is a betrayal of the promise of the NDIS: choice and control.

And every time governments prioritise provider survival over resident rights, the message is clear: the system still values institutions more than people.

The choice ahead

We are at a crossroads. One path tries to resuscitate a failing legacy system with more subsidies and more excuses. The other path acknowledges the truth: group homes are a dead end.

Legacy systems cannot be saved. They must be replaced with models that are rights-based, economically sustainable, and genuinely aligned with what people want. The opportunity is to finally move beyond institutional accommodation and build a housing system that respects choice, dignity, and inclusion.

Final thought

The collapse of group homes is not just an economic failure. It is a moment of reckoning. Will governments and providers cling to the past, or will they embrace a future built on rights, innovation, and genuine inclusion?

The time for patching is over. The time for transformation is now.

What do you think — should governments keep propping up group homes, or finally make the leap into individualised living?