GAO to scrutinize financial solvency of DoD’s privatized housing programs

Source: Jared Serbu, Federal News Radio, October 24, 2016

The U.S. military’s program to privatize the living quarters on its bases — contentious and controversial at its inception 1996 — is now universally regarded as a great idea. Of on-base homes, 94 percent meet the Defense Department’s housing standards, compared to 22 percent when the government was in charge. But Congress and the Government Accountability Office are asking new questions about the long-term viability of the Military Privatized Housing Initiative (MHPI), particularly with regard to how it’s financed: Developers and investors were promised a steady income stream from each home they built, tied directly to military members’ basic allowances for housing (BAH) which are calculated to match leasing and utility rates in a given community. But Congress has since gone along with a DoD proposal which cuts those allowances by 5 percent, and occupancy rates are falling as the military shrinks in size. … Lepore said GAO will soon begin work on a new audit of each military service’s privatized housing projects, based on language the Senate suggested in its version of the 2017 Defense authorization bill. Although that bill has not yet passed, it tasks GAO to assess the financial solvency of each project because, in the Senate’s words, the BAH reductions “were implemented without an appropriate level of consideration on the impact such changes would have on the military housing privatization initiative.” … Until then, the Army is encouraging housing providers to offset any of their financial losses by cutting back on non-critical services — mowing lawns less frequently, for example — but Hammack said none of the Army’s housing providers have yet come forward with a case that the cuts are putting them in dire financial straits. Underutilized base housing is another concern. All of the military services are smaller than they were at the start of MHPI; the Army in particular is in the midst of a drawdown that will bring it to its lowest active duty level since midway through the last century. … The audit, which looked at several installations that had reached the bottom of the waterfall — Fort Detrick, Maryland; Naval Station Mayport, Florida and Barksdale Air Force Base, Louisiana — found installation officials had failed to conduct appropriate security checks: Of 128 tenants the IG sampled, only eight had been run through all of the proper databases and several were given installation passes for longer than their lease terms. …