In an attempt to shore up the recapitalization accounts of privatized housing projects, the portion of the fiscal 2019 defense authorization bill approved last week by the House Armed Services’ Military Personnel Subcommittee would require DOD to make up the shortfall in revenue developers receive from service members as a result of a recent policy change reducing the rate of increase in the basic allowance for housing (BAH). Out-of-pocket housing costs for service members have increased by one percentage point a year since 2015, and in 2019 are slated to reach 5 percent.
But rents charged by the owners of privatized housing are tied to the BAH payments received by service members, resulting in a drop in revenue at certain projects. “The committee remains concerned about the reduction in BAH and its effect on the recapitalization of these housing units,” according to an explanation in the subcommittee’s mark of the defense policy bill. The reductions in BAH are one of the challenges affecting the financial health of housing projects, the military departments have said, according to a recent report by the Government Accountability Office.
The provision in the panel’s mark of the authorization bill also requires the department to submit by Dec. 1, 2018, a plan “to provide for a permanent solution to the long term [Military Housing Privatization Initiative] recapitalization problem.” The plan should include:
- efforts to mitigate the losses experienced by housing projects as a result of the reduction in BAH; and
- an assessment of the effect of the BAH reduction on the financial condition of privatized housing.
Photo courtesy of Corvias Military Living