A policy change implemented in 2015 that gradually reduced the rate of increase in service members’ basic allowance for housing (BAH) has affected the finances of some privatized housing projects, but DOD has not fully assessed the impact on the future sustainment of each project, according to a recent report from the Government Accountability Office (GAO). The change has increased out-of-pocket housing costs for service members by one percentage point a year since 2015. 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. (Increases in out-of-pocket housing costs are slated to end in 2019 when they each 5 percent, under the fiscal 2016 defense authorization bill.)
In 2015, the military departments prepared estimates of the effect of the reduction in BAH on their privatized housing portfolios:
- the Army projected an average decrease in long-term sustainment accounts of $104 million per project through 2039;
- the Navy projected a decrease in long-term sustainment accounts across its portfolio of $2 billion; and
- the Air Force projected a decrease of $48 million per year across its portfolio.
But because DOD did not direct the military departments to include information that would detail the extent of impacts on the sustainment of each project, those reports do not enable defense officials to identify and respond to specific risks, GAO found. Without a more complete assessment, DOD “may not be well positioned to reduce any risks and meet their objective of providing quality housing for service members,” the agency concluded.
The Army has a policy allowing individual projects to request permission to charge service members their out-of-pocket costs, but it prefers they do not. As of August 2017, none of the Army’s 35 projects had begun charging soldiers rent in excess of their BAH payment. The Air Force and the Navy do not allow developers to charge the out-of-pocket amount.
GAO made eight recommendations, including that DOD improve the consistency and timeliness of the information reported on the financial condition of its privatized housing projects, and fully assess the effects of the reductions in BAH. DOD concurred with each recommendation and identified actions it will take to implement them, according to the report.