Privatized Housing Overview
The quality of military housing — as part of the military quality of life — is a key component of military readiness. Our national security relies on the quality and commitment of the men and women who serve. The National Defense Authorization Act for Fiscal Year 1996, Public Law 104-106 (110, Stat 186, Section 2801)
supports this commitment by allowing DoD to work with the private sector to build and renovate military housing.
Unlike their civilian counterparts, military personnel cannot unilaterally terminate their employment any time they choose during their period of service. On average, about once every 2 to 3 years, military personnel receive orders to relocate to a new assignment. Typically, the length of the assignment is known from the start; however, in a few rare instances, assignments are curtailed early due to the pressing needs of the military or certain types of unforeseen family emergencies.
Service members face demanding schedules—having to be available for work 24 hours per day, 7 days per week, 52 weeks per year. They are often called on to place the needs of the military above the needs of their families. Because of this contractual arrangement, military leaders understand their legal and ethical responsibility to care for Service members and their families.
Composition of Military Personnel
Distribution by Rank and Grade.
The 1.5 million service men (85 percent) and women (15 percent) who are in today's active duty military fall into two categories:
Marital and Family Status.
- Enlisted Personnel. The E-1 through E-9 enlisted ranks number 1.2 million. Of this group, 42 percent are E-4s and E-5s and 75 percent are in the E-3 through E-6 ranks.
- Officers. By contrast, officers number more than 216,800. They range in rank from warrant officer to general/admiral. Of these, 31 percent hold the rank of captain or lieutenant, and 13 percent hold the rank of commander.
The number of married persons in the military has steadily increased. In FY 2002, 58 percent were married, up from the 51 percent of over 20 years earlier. For career personnel, senior enlisted and senior officers, the rate is 93 percent. About 66 percent of military spouses are employed, and 90 percent of those with preschool children live in homes where both parents work full-time. Like income, marital status is key factor in credit status; married people are far less likely to default on the mortgage or rent.
Education and Training.
Like income and marital status, educational status also indicates an individual's ability to maintain regular and timely mortgage and rental housing payments. During FY 2002, 93 percent of all military recruits held a high school diploma, a substantial increase over the 60 percent who held a high school diploma in FY 1974.
DoD's Housing Difficulties
Quality housing helps DoD retain the best personnel for its all-volunteer military force. The proportion of personnel remaining in service from bases with high quality housing is about 15 percent higher than for those stationed at places with low housing quality. Today's Service members want to live in communities that offer stability and continuity as a backdrop for deployment, reassignment, and day-to-day life.
DoD's long-standing policy is to rely first on the private sector for its housing, paying housing allowances to its Service members, where roughly 63 percent of military families live. However, as of FY 2007, it currently houses about 10 percent of its families on-base, owning and operating about 134,000 housing units worldwide. In addition, privatized housing is where roughly 24 percent of members live and this number is increasing. About 3 percent of Service members live in 801/802 leased housing. DoD provides military housing in areas where private-sector housing falls short, considering cost, commuting area, and other established criteria. In these cases, it operates barracks for unaccompanied personnel, military family housing for members with dependents, and temporary lodging for Service members changing station or on temporary duty.
Military Family Housing.
Military personnel who have one or more family members living with them are eligible to apply for and occupy military family housing. Approximately 10 percent of all families live on-base, in government -owned military housing that is often dilapidated, too small, lacking in modern facilities—43 percent (or 58,000 units) are substandard. On-base housing has an average age of 33 years, and 25 percent is over 40 years old.
Unaccompanied Housing Quarters.
Single junior-enlisted Service members are required to live in barracks, where they share a room with at least one other person and with a communal bathroom and a telephone down the hall. About half a million single Service members live in these quarters, which are often substandard, inadequately maintained, or obsolete.
A 1992 survey of single Service members living in barracks found that most of them would prefer to live outside the barracks, regardless of cost. Their preferences in order of priority were for larger rooms, more privacy, a private bath, and more storage for personal items. To help improve conditions, DoD has a new policy that will increase barracks living space by 31 percent.
About 43 percent of DoD base housing, 58,000 units, are old and in need of extensive repair. Tight budgets have exacerbated this problem in recent years. Traditionally, DoD addresses the need for housing improvements through its military construction, or MILCON, program, but using MILCON practices and funding, DoD would need 20 years and $16 billion dollars to complete the required renovations and improvements.
As a result, the President and the Secretary of Defense set a goal of revitalizing, replacing, or demolishing all inadequate housing by 2007 using MILCON and privatization. MHPI, enacted into law in 1996, provides the tools to help achieve this goal. It offers quality, affordable housing (primarily for junior enlisted Service members and their families) using private-sector expertise and capital. The MHPI, which Congress provided permanent authorities to in FY 2005, helps DoD eliminate traditional costs by revising the way it funds and builds housing:
- Offering incentives to the private sector for assistance
- Leveraging private-sector financing
- Giving the authority for government direct loans and guarantees of private-sector loans
- Using conveyance or lease of property and housing, investments in joint ventures, and differential lease payments.
Service members living off base in private sector/community housing, or in "military privatized housing", are entitled to a basic allowance for housing (BAH). BAH provides uniformed Service members accurate and equitable housing compensation based on housing costs in local civilian housing markets. BAH is a critical ingredient in privatization projects, providing the income stream to support initial and long-term financial viability of a project. If a military member lives in government-owned military housing -- they do not receive BAH.
In FY99, DoD increased service member allowances. These increased allowances will stimulate more and better quality privatization projects. By making the privatization deals more attractive economically to the private sector, DoD will get better projects through increased competition and realize greater leveraging of housing appropriations. More important, Service members and their families gain access to better quality housing.
Rights of Military Tenants
Military housing tenants are protected by the same state and federal fair housing and consumer protection laws as civilian tenants. Due to the DoD's authority to relocate military members to new assignments without their consent, Congress enacted legislation that permits military tenants to lawfully terminate rental contracts early without penalty when they receive military orders to relocate. In time of war, members may be deployed for extended periods without the worry of owing back rents on rental units that they could not occupy.
For such contingencies, the landlord is afforded full protection. DoD housing privatization legislation provides safeguards against any disruption in the flow of rental payments in the event of base closure, downsizing, or deployment.
This profile shows that the military housing tenant exceeds the generally accepted eligibility criteria for multifamily rental markets. Experience and evolving concepts of good rental underwriting practice show that the military housing tenant has the required stability of income to support an uninterrupted flow of monthly mortgage or rental payments under the new DoD housing privatization program.
Other powerful incentives further safeguard against the likelihood of tenant defaults. Landlords may elect to contact base housing authorities directly if a military housing tenant is delinquent or in default on regular monthly rental payments. The legislative guarantees against risk, the income stability of the tenant, the effective default reporting mechanism, and the generally strong discipline of the military combine to practically eliminate the risk of default for prospective military housing tenants under MHPI.