Economic Analysis of Military Family Housing: Should the Government Continue to Privatize

摘要

Providing military family housing has always been a difficult task for the United States Government. To solve the latest housing shortfall, the government signed the Military Housing Privatization Initiative (MHPI) into law in 1996. Under this program, the government contracts private developers to build, own, and operate housing units. The developer then collects rent via housing allowance payments. At the time MHPI was approved, military members were expected to pay 15 percent of their housing costs out of pocket. Subsequent legislation has increased the housing allowance to provide 100 percent of all housing costs, thus eliminating out-of-pocket housing expense to the military member. Given the increased housing allowance, the objective of this research was to determine if there is financial value to the government to retain ownership of military family housing. This was done by calculating the Net Present Value (NPV) of recapitalizing BAH payments into family housing operations over 50 years, the contract period for privatized housing projects. The results show that MHPI provided the greatest financial benefit to the government at the time it was signed into law. This advantage changed, however, when the housing allowance increased, eliminating out of pocket housing expense to the military member.