To the contrary, it's actually supporting him to find specialist provision quicker, if that's what is being applied for.
IF they officially moved him year groups (not always possible anyway if they've reached PAN for their new Reception intake), he would be seen as a Reception child with needs (which sadly will mean he isn't such a priority as many SEN children's needs can be met in Reception, due to the nature of the curriculum, but not in Key Stage 1, where there's generally less space and far more structure). If he's seen as a Year 1 child who is needing to access the EYFS still as his own classroom isn't appropriate to support his needs, he'll be considered a much higher priority for specialist provision.
By keeping him on roll in Year 1, but still offering him the EYFS curriculum and classroom he needs, his school are supporting him as best as they can. Changing year years could prolong the process as you're back to square one, with him being seen as a child just starting school. He's not, he's a Year 1 child. It just so happens that he still needs to access the Reception curriculum. That doesn't make him a Reception child.
It's really not as unusual as a couple of posters are making out to you. Just because they don't have experience of it, doesn't mean it doesn't happen. In fact, it's probably more common now than ever due to the shocking lack of specialist provision places currently.