Soldiers face prospect of paying rent for on-base housing

A reduction in soldiers' housing allowances cut revenues of private companies that operate military housing. The Army may allow those firms to assess rental cos...

The Constitution’s Third Amendment is treated as an historical anachronism these days, but the drafters’ thinking seems to have been that members of the military ought to be housed on the government’s dime.

214 years later, at least some soldiers are faced with the odd prospect of having to pay rent in order to live on the Army bases that they’ve been assigned because of a complex brew of  real estate financing mechanisms and military compensation legislation the founding fathers likely did not foresee.

At issue is the Residential Communities Initiative, under which 98 percent of the Army’s on-base family housing has been privatized since the project began in 1995. RCI and similar projects in the Air Force and Navy are widely regarded as some of the most successful public-private partnerships in the federal government’s recent history. They attracted private financing to replace dilapidated living quarters at a time when the military could not afford to do so. In exchange, developers were promised rental payments equal to a service member’s monthly Basic Allowance for Housing (BAH).

But in both of the last two annual Defense authorization bills, Congress went along with Defense Department proposals to reduce personnel costs by gradually reducing BAH payments so that they’ll only cover 95 percent of  rental costs in a given housing market. By 2019, service members living off-base will be paying 5 percent of those costs out-of-pocket. The change also means private housing operators on military bases will have seen a 5 percent reduction in the annual revenue stream they’d counted on when they signed the deals with the government and secured the financing to build the residences and their neighborhoods, which now serve 44 bases in the Army alone.

Katherine Hammack, the assistant secretary of the Army for installations, energy and environment, said the Army’s housing operators have  already begun to feel the effects of the new legislation, which is now in its second year and has cut payments by 2 percent thus far.

“The first thing they’re doing is taking a hard look at the services they provide on our bases, and they’re going to stop doing some of those services,” she told the Association of the U.S. Army at a meeting in Arlington, Virginia on Wednesday. “Maybe they’re not going to mow lawns as frequently, maybe they’re not going to run a water park or a swimming pool or community center in the summer. But we’re asking them to cut optional services without affecting their prime service, which is quality housing for our soldiers.”

But if the cost savings gleaned from those service reductions fail to make up for the reduction in BAH payments, the Army is open to company proposals that would charge service members for some of the cost of their on-base housing.

“We’ve talked a lot about this with the secretary of the Army and the sergeant major of the Army. They are very concerned, and we really don’t want that to happen. But we also can’t afford to force any of our housing partners into bankruptcy because of this situation,” Hammack said. “We’ve asked them to come back to us and justify where there’s a financial need to charge a service member for on-base housing. We’re reviewing that very carefully to ensure that optional services are cut first before service members pay out-of-pocket.”

So far, no housing operator has been allowed to assess fees directly to soldiers in order to make up for their loss in revenues. In a high-cost living area such as Washington, D.C., a hypothetical staff sergeant and her family would pay about $109 per month if the Army allowed the housing company to recoup the entire 5 percent reduction in BAH payments. In the same scenario, that noncommissioned officer would pay about $62 per month if stationed in Huntsville, Alabama, where the cost of living and housing allowances are much lower.

Lt. Gen. David Halverson, the commander of the Army’s installation management command, also said the Army is doing all it can to cut back on services before allowing on-base landlords to begin charging rental fees. A series of recent surveys of base residents should help the Army and its housing providers distinguish between what soldiers and their families see as “optional” services on military bases and what they consider to be bare necessities.

“We got some good feedback, and we’re going to continue to mature that survey process. Part of this is the expectation management that we must do, and it’s a tough issue,” he said. “We’re looking really hard to make sure the soldier and the family is not being impacted and maintaining the fiscal viability of our housing partners at the same time.”

The original demand for the RCI project grew from the fact that government-operated family quarters were growing more and more squalid during the 1990s, when overall Defense budgets were shrinking and investment in base facilities was a low priority.

That budget situation is repeating itself today, but it’s arguably even worse, at least with regard to facilities. The 2017 military construction budget the Army submitted in February was its smallest since 1993, and the Army has already redirected the personnel savings it garnered from the BAH cuts in to make up for shortfalls in military training and readiness, so it can’t simply reimburse housing developers for their losses, officials say.

The barracks, office and commercial buildings the Army continues to own and operate itself are quickly falling into disrepair for some of the same reasons its family housing was in poor shape 20 years ago.

“This isn’t the way we think we should manage our real estate,” Hammack said. “We’ve got a lot of great professionals who know how to manage real estate. But all of our budget conversations right now are about risk. The risk of undermanning, undertraining and underequipping our people is loss of life or limb. The risk of underfunding in our installations is degradation of our facilities. Given those choices, installations drop to the bottom of the pile. We know it’s a risk, and we’ve taken that risk. It’s caused a lot of challenges.”

The Army was only able to fund 31 military construction projects in its 2017 budget proposal. Often, those funds are boosted by members of congressional appropriations committees seeking the best outcomes for bases in their home districts before a final budget is approved. The House Appropriations Committee’s version, marked up earlier this month, would add 17 percent to Army construction funds. But because of last year’s spending deal, which set an overall cap on discretionary federal spending for 2017, that added funding would have to come from other agencies’ budgets.

And for what little new construction the Army has committed to, it has programmed very little funding to renovate and eventually replace those buildings, let alone chip away at a maintenance backlog for its existing facilities that now stands at more than $3 billion and continues to grow.

Hammack said the new facilities the Army Corps of Engineers is building right now are meant to have a 50-year lifespan.

“But our back-of-the envelope math tells us that the funding levels we have now is only enough to let us replace those facilities every 200 years, even though they’re designed for 50,” she said. “The next question is how often we renovate our buildings. In the private sector, it’s about every 10 or 15 years, but we’re funding that at about every 100 years.”

Hammack said the Army’s inability to adequately maintain the facilities it already owns is one more reason it needs another round of Base Realignment and Closure (BRAC), something the department has requested for several consecutive years but that Congress has repeatedly denied.

“BRAC is about readiness,” she said. “We’re spending about $500 million per year on excess or unneeded facilities. We’re going to have about 21 percent excess infrastructure by the time we finish our current drawdown plan. We must get authority from Congress to consolidate into our highest-value bases and divest the ones that have low military value. Today, facilities that are needed to support readiness are deteriorating because the resources are spent to support installations that could have been closed. The Army cannot continue to carry the costs of maintaining this excess infrastructure.”

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