Frequently Asked Questions (FAQs)


Please note: Each MHPI project is unique and some of the answers to questions below may vary between project and Military Service - for more information contact the individual Military Service privatization office or your installation housing office. For ease of navigation, questions are listed in the following categories:
(click on the heading to go to that section)

Program Objectives

Program Implementation

Business/Developer

Tenants




PROGRAM OBJECTIVES

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PROGRAM IMPLEMENTATION

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BUSINESS/DEVELOPER FAQS

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TENANT FAQS

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PROGRAM OBJECTIVES

  • What is military family housing privatization?
  • The Military Housing Privatization Initiative (MHPI) is a public/private program whereby private sector developers may own, operate, maintain, improve and assume responsibility for military family housing, where doing so is economically advantegeous and national security is not adversely affected. The MHPI was enacted on February 10, 1996 as part of the National Defense Authorization Act for fiscal year 1996. In 2004, Congress approved the removal of the statutory limit on the amount that can be invested in projects to build or renovate military family housing, and made the MHPI authorities permanent. Under the MHPI authorities, the Department of Defense (DoD) can work with the private sector to revitalize military family housing by employing a variety of financial tools-including: direct loans, loan guarantees, equity investments, and conveyance or leasing of property or facilities. For more information on these authorities, see MHPI Overview. (Return to Top)

  • What does DoD’s “community first” policy mean?
  • It means that DoD looks to the private sector first to house its Service members. DoD believes the private sector can offer secure and convenient housing to its military personnel and that the military personnel’s presence in the community is a positive influence. Therefore, DoD provides “on-base” privatized housing or military construction housing only when the private sector cannot provide adequate affordable housing. (Return to Top)

  • What percentage of DoD military personnel live off post?
  • Approximately 65 to 70 percent of Service members live in housing in the private sector. (Return to Top)

  • Why is DoD interested in privatizing military housing?
  • The MHPI program was created to address two significant problems concerning housing for military service members and thier families. The first problem was the poor condition of DoD-owned housing. At the beginning of the program, DoD owned worldwide approximately 257,000 family housing units both on and off-base. Over 50 percent of the units needed to be renovated or replaced because over the past 30 years they have not been sufficiently maintained or modernized. The second problem was a shortage of affordable private sector housing of adequate quality.

    This situation led to a decline in readiness and morale among Service members. DoD was unable to address the critical housing needs because of existing budgetary constraints. Using the traditional approach to military construction, it would cost taxpayers nearly $25 billion and it would take 20 years to solve this housing problem. MHPI provides a creative and effective solution to addressing the quality housing shortage. For DoD, MHPI results in the construction of more housing built to market standards, for less money than through the military construction process. Commercial construction is not only faster and less costly than military construction, but private sector funds significantly stretch and leverage DoD’s limited housing funds. At the same time, developers and financiers are interested in participating since privatization opens the military construction market to a greater number of development firms, stimulates the economy through increased building activity, and the projects can provide a continuous inflow of capital to investors over a long period of time. (Return to Top)

  • To whom is the MHPI program primarily targeted?
  • Although it is DoD policy to rely on the private market for its housing, in many instances the junior enlisted personnel cannot afford quality private housing within a reasonable commuting distance. Therefore the MHPI program is targeted to these Service members. (Return to Top)

  • Who is permitted to live in MHPI housing?
  • Priority to occupy homes is given to Service members assigned to the installation. However, if there is not enough demand for housing from military personnel and, as a result, occupancy rates drop below a certain level for a defined period of time, the developer can rent to other personnel. The developer must follow a priority list of other possible tenants as defined by the tenant waterfall. For example, the waterfall could be: (1) other military members not assigned to the installation or unaccompanied service members, (2) federal civil service employees, (3) retired military, (4) guard and reserve military, (5) retired federal civil service employees, (6) DoD contractors/permanent employees and then the (7) general public. (Return to Top)

  • What impact will privatization have on individual installations?
  • Ideally, privatization will bring about a dramatic improvement of the installations’ housing conditions for service members and their families, and consequently, an increase in their quality of life, readiness, morale and retention. Major improvements include the quality of housing and responsiveness of maintenance on the housing units. However, some inconveniences will be experienced throughout the transition period during which houses will neeed to be either renovated or constructed, service members may have to relocate from older to improved/new homes, and property management will be handed over to the developer. Nevertheless, this period will hopefully be short, the transition will be relatively smooth, and its benefits will outweigh all of the costs incurred. (Return to Top)

  • How much will privatization save the DoD?
  • Given that the money saved by the government avoiding the long-term operation and maintenance costs is offset by paying service members their housing allowance, government dollar savings over the long-term are estimated to be about 10 percent of total costs over the 50 year life of the project.

    However, another measure used to estimate the potential benefit privatization offers, over budgeting and project execution with traditional Military Construction funding, is leverage. DoD policy requires a minimum leverage of 3 to 1 for a privatization project to be considered. This means that a privatized project must generate at least $3 of housing development for every $1 appropriated by Congress to support the project. The leverage ratio is calculated by dividing the estimated cost of a project under Military Construction by the project’s total budget score (appropriated dollars needed to support a project at the time of obligation). For the program as a whole, the leverage has consistently been over 10:1.

    It is important to note, however, that the biggest advantage of privatization is not monetary, but rather the speed at which these homes can be renovated and constructed by the private sector, and the quality of the housing and housing maintenance that the residents receive almost immediately. (Return to Top)

  • What is the status of the Military Housing Privatization Initiative?
  • As of December 2008, the Department has entered into transactions for 93 privatization projects totaling over 183,000 family housing units. (Return to Top)

  • How much housing is DoD planning to privatize?
  • At the beginning of the program, DoD had an inventory of approximately 257,000 family housing units. Current plans are to privatize roughly 190,000 to 195,000 or about 75 percent of existing family housing units worldwide. However there is no ceiling set on the number of units expected to be built or reconditioned under the MHPI. (Return to Top)

  • What about privatizing barracks, and DoD lodging?
  • Under the FY 2003 Defense Authorization Act, the Navy was provided unaccompanied personnel housing (UPH) authority to execute three pilot projects. The Navy has contracted to build two of the UPH projects and is currently studying locations for a third project. The Army is also moving forward with UPH privatization projects, but only for senior enlisted and officers already receiving BAH. As an extension of the family housing program, the Army is working with several of their development partners to provide these units at installations that are located in remote locations or have existing unmet requirements. Several of these projects have already been approved and are being built.

    The Army is also providing the initial pilot for DoD lodging. They have contracted with a developer for a group of thier lodging locations and are working with the developer to create a blueprint for the improvement of the initial group and future lodging facility projects.
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PROGRAM IMPLEMENTATION

  • How does DoD budget for Military Housing Privatization projects?
  • The amount of money that must be allocated for the MHPI depends on the scored cost of the projects that have been approved for a given fiscal year. See question below for more details. (Return to Top)

  • What does Office of Management and Budget (OMB) scoring of a project mean? What’s involved with scoring a project?
  • Budget scoring is the percentage of dollar value (from 0% to 100%) of a project’s cost that must be allocated to an agency’s budget in a given fiscal year. For example, if a project cost of $1 million is scored at 10%, then $100,000 of the agency’s budget authority for that year must be used to cover the assessment. According to OMB scoring guidelines, a project must be fully funded with sufficient budget authority in its first year to cover the government’s long-term financial commitment to the project.

    Each of the authorities created for the MHPI has an associated budget score. Due to variations in applying the authorities (10 U.S.C. Sections 2873-2879), OMB scores privatization projects on a case-by-case basis. The scoring impact is assessed based on a realistic risk of potential long-term liability. For example:
    • For partnership transactions, the credit subsidy represents 100% of the cash equity provided by the government.
    • For government limited guaranteed private sector loans, the credit subsidy represents the net present value of the cost of estimated defaults, net of recoveries.
    • For government direct loans, the credit subsidy represents the net present value of 1) the difference between the interest rate on the loan and the interest rates included in the basket-of-zeros discounting method which utilizes a yield curve of zero coupon Treasury securities that have the same maturity as each cash flow, plus 2) the estimated cost of defaults, net of recoveries.

    The scoring used for the MHPI was drafted to comply with the Credit Reform Act of 1990 and the Budget Enforcement Act of 1990 (both laws were included within the Omnibus Budget Reconciliation Act of 1990 [P.L. 101-508]), as interpreted by Office of Management and Budget (OMB) Circular A-11 and specific MHPI Guidelines issued by the OMB on June 25, 1997. (Return to Top)

  • How long will the DoD legislative authorities last?
  • In 2004, Congress made the MHPI legislative authorities permanent. (Return to Top)

  • How are small, local, and minority owned businesses addressed in the MHPI authorities?
  • Although the Defense Authorization Act does not include any language addressing small, local and minority owned business requirements, developers are using them on their projects. To search for a synopsis of ongoing housing privatization projects, go to the FedBizOps website, enter 'housing privatization' in keyword search, select an Agency and click search. Select the project you want to review. After viewing the synopsis of the project, you may register to be put on email distribution list for that project. (Return to Top)

  • Is DoD involving the local communities and governments?
  • Leaders from surrounding communities are contacted about the projects during the site visits that take place early in the privatization process. Moreover, most military installations already have well-established direct lines of communication with all key stakeholders (e.g., chambers of commerce; boards of realtors; elected and appointed officials; city and county planners; and, school boards). Each Service strives to keep these lines of communication open and work closely with local communities and governments to keep them informed and ensure they have their support. Developers are likewise expected to work very closely with the communities, to conduct a community impact assessment, and to adhere to local building and environmental standards. (Return to Top)

  • What impact will privatization have on local school districts' Impact Aid funding?
  • Because each state and locality funds public education differently, any reduction in Impact Aid will have a different impact depending on the location. However, most of DoD’s on-base projects envision long-term leases of government land, which does not affect the level of Impact Aid. (Return to Top)

  • How is a site chosen as a housing privatization candidate? Who makes the final decision whether to privatize?
  • In October 1998, DoD’s Office of the Secretary of Defense (OSD) devolved execution of housing privatization projects to the individual Military Services while maintaining basic oversight responsibility in OSD. Under this management structure, each Military Service is responsible for assessing current and future housing requirements and for determining the best course of action necessary for revitalizing inadequate housing units and for keeping its housing inventory in good condition. Each Military Service assesses the viability of a privatization project on an installation-by-installation basis, taking into consideration housing needs and available resources, and makes the final decision whether to privatize. (Return to Top)

  • Does each Military Service have their own privatization program? How does that work?
  • Yes, although they do have to follow certain general DoD policy guidelines, each Military Service has its own privatization program. The Navy’s program is referred to as “Public Private Ventures”, the Air Force program is called “Housing Privatization”, and the Army’s program is the “Residential Community Initiative”. Each Service is responsible for: evaluating the housing needs of their servicemen; determining which of their installations should be privatized; establishing their program’s policies and procedures; carrying out the private developer solicitation process; and monitoring their projects. (Return to Top)

  • How does a Military Service select a developer for a MHPI project? What is an RFQ? What is an RFP?
  • The Request for Qualifications (RFQ) and the Request for Proposals (RFP) are the documents through which the Military Services communicate to the development community regarding the privatization project’s existing conditions, arrangements, requirements and management (if applicable), the instructions to offeors, the basis for selection, and other general information. Each document is associated with a different solicitation approach applied by the Services.

    The Air Force and the Navy follow a similar approach. After conducting an industry forum to introduce the project to the development community, an RFP is issued which they post on a designated website. Developers then go through a two-step selection process based on first, the developers’ qualifications, and second, their project development and management plan. The process terminates with the selection of one developer for the project. The Air Force has modified its process into a one-step solicitation after which they will negotiate exclusively with the highest ranked offeror to finalize the privatization transaction.

    The Army, on the other hand, first issues an RFQ and then selects one developer based only on its qualifications. After the selection, the Army gives a stipend to the developer and works together with the latter to develop a Community Development and Management Plan (CDMP) tailored to the specific installation selected. If the Army is satisfied with the CDMP and the working relationship with the developer, the Army may choose to issue a notice to proceed to execute the CDMP. (Return to Top)

  • Why are there so many different approaches to housing privatization? Can’t DoD figure out how best to accomplish the privatization of housing? Isn’t DoD wasting a lot of time recreating deals?
  • DoD’s privatization deals are different because they are each designed to address the Military Service-specific housing needs of a particular installation. While using a cookie-cutter approach to privatization may be “easier,” it would not allow DoD to maximize the use of its limited resources in meeting housing needs. In fact, DoD has found the inherent flexibility in the legislative authorities provided to it by Congress (i.e., it can pick and choose which authorities to use at each site) to be ideal for solving its housing problems. (Return to Top)

  • Who are the Military Service points of contact (POC) for Military Housing Privatization?
  • Please contact us for a list of Military Service POCs. (Return to Top)

  • How can I find out about upcoming MHPI projects?
  • Specific information about upcoming industry forums and privatization projects (including requests for proposals or requests for qualifications) can be obtained from the housing privatization websites maintained by each of the military services (Army RCI, Navy PPV, Air Force HP).

    Another way to search for business opportunities within the MHPI is through the Federal Government’s FedBizOps website. Through this website, commercial vendors seeking Federal markets for their products and services can search, monitor and retrieve opportunities solicited by the entire Federal contracting community.

    To search for a synopsis of ongoing housing privatization projects, go to the FedBizOps website, enter 'housing privatization' in keyword search, select an Agency and click search. Select the project you want to review. After viewing the synopsis of the project, you may register to be put on email distribution list for that project. (Return to Top)

BUSINESS/DEVELOPER FAQS

TENANT FAQS

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