Housing: Privatized Housing - Military Housing, rentals, home buying, real estate, VA home loans - Air Force Times

Housing: Privatized Housing

Having private companies build, own, maintain and operate housing on government land is helping the services repair or replace inadequate housing and build new housing much more quickly than the services could on their own.

The Army, Navy and Marine Corps have privatized virtually all their family housing within the continental U.S., although there will be some additional projects to accommodate “grow the force” initiatives at Army and Marine Corps bases. The Air Force has seven remaining projects involving about 17,500 units at 20 bases that are expected to be privatized within the next year.

Through privatization, new houses have been springing up at military installations, and old houses are being demolished, replaced or undergoing major renovations. The houses and their improved amenities — many have garages, for example — are comparable to housing found in surrounding civilian communities, since they are built to local and/or state construction standards.

At press time, about 20 of the 97 housing privatization projects have completed the initial development phase, including construction and renovation. Generally, once the agreement is signed between a military service and a developer, the initial work takes between five and 10 years to complete. Overall work associated with all privatization projects should be completed by 2020, depending on the developers and the contracts that will be awarded.

By tapping private-sector resources and expertise, defense officials are speeding up the pace of new construction, replacement and renovation. Privatization results in the construction of more housing built to market standards, for less money than through the military construction process.

Under privatization, service members pay rent that is based on BAH. The rental income helps the private companies borrow private capital for upfront construction needs, including renovation and quality new construction built to community standards. The rental income stream, like any private-sector housing, covers the normal operating expenses of the project. In addition, reserve accounts are established to provide for long-term maintenance, renovation and modernization of the houses.

The privatization projects are structured to provide preferential occupancy and rent to military members assigned to the installation. But if occupancy rates drop below a certain level for a certain period of time because there is not enough demand among military personnel, developers can rent to other people, but they must follow a priority list of other tenants, called the “tenant waterfall,” which includes single troops, military retirees and civilians.

Service members have a choice whether to use their BAH to rent a privatized unit or other residence on the community, or forfeit their BAH and reside in government housing, if available. Service members’ housing allowances generally cover the rent and, in some cases, utilities and insurance for privatized housing.

Rent includes trash collection, water and sewer, common area grounds and facility care. Depending on the specific provisions of the project documents, electrical, gas and other heating costs may be paid from the member’s utility allowance. Also, depending on the specific provisions of the project, renter’s insurance may be paid by the developer (but the member is responsible for payment of any deductible).

There may be much more flexibility for residents in privatized housing. Families may negotiate with developers to extend their stay after the service member is transferred to another base, or for other reasons, such as allowing families to stay so their children can finish school.

Spouses of service members who die on active duty may be able to negotiate to stay longer than government policy would normally allow. Much depends on the demand for housing at the base.

As of December 2009, the Defense Department had entered into transactions for 97 privatization projects totaling 186,870 family housing units.