Military Housing Privatization: New Concepts for a new Millennium

12 Jan 2001 | Capt. Steve A. Butler

The Marine Corps has a wealth of age-old traditions that are adhered to in a steadfast manner. Honor, courage, discipline and commitment are traits that shall never become obsolete. However, new ways of conducting business are needed in order to remain a viable organization during evolutionary times. An essential change in quality of life is currently in progress. A new military housing privatization project commonly known as Public/Private Venture is underway. Military housing construction, maintenance and management is being turned over to private industry. The future of building modern up-to-date housing for Marine Corps families is today. The Department of the Navy will rely, first, on PPVs to meet its housing needs where communities cannot meet housing requirements. Public/Private Ventures will focus on privatizing the replacement, renovation, maintenance, and operation of existing government housing. If additional housing is required, PPVs will be used to construct affordable units. Public/Private Ventures will also be the first choice for accomplishing whole-house revitalizations or replacements. Funding for PPVs is considered as a method of getting more housing for the same dollars, not the same housing for less money. Any savings achieved through PPVs will be re-invested in housing accounts.Experience has shown that degradation in benefits has a negative impact on retention. Good housing is important to military morale and retention. In 1996 Congress passed legislation authorizing DoD to team up with private developers to rectify the depleting quality of military family housing. The specific reasons are simple: there isn't enough available base housing and the existing structures are old with costly repairs required. Sometimes military families are on waiting lists for years or are subject to "substandard" living conditions due to aging infrastructures that could possibly be over 48 years old. The new housing privatization initiatives are specifically designed to reduce the worries of military service members whose families are subject to the care and welfare of base living. The private housing industry is a dynamic business entity that adjusts quickly to changing circumstances. A developer partners with the DoN with an understood level of ownership interest. The partnership provides low risk and maximum flexibility for DoN participation in PPVs. Further, this allows the private partner to realize the normal tax shelter benefits of ownership and, accordingly, enables the Marine Corps to apply a larger share of net cash flow to high-quality operations and maintenance, and the periodic re-capitalization of the units over time. When fully functional, the PPV projects will maximize the benefit of government investment by demonstrating a long-term cost effectiveness in comparison with a Military Construction project. Service members will have first priority on these housing units. Although highly unlikely, due to military housing shortages, PPVs will accommodate civilian rentals, with lease length limited appropriately, if units cannot be filled with service members. All housing units built on federal property will address emergency, security, and law enforcement services, as well as jurisdictional matters, for civilian occupants. One objective is to provide affordable housing at 0% out of pocket to the service member and still provide predictable cash flows for the developer/investor. To achieve 0% out-of-pocket over the term of the deal, rental increases must be equal to or less than Basic Allowance for Housing increases as well as reasonably accommodate utility expenses. Rents will be established in the same manner as in the private sector (i.e., by unit size and quality.). Rent scales and the mix of units will be developed to accommodate the needs of the region. Waiting lists will be developed for bedroom requirements. When a PPV unit becomes available for a particular family size, the local Housing Office will refer the first family on the appropriate waiting list to the property management office. The DoN utilizes a condensed acquisition process that both minimizes the time, effort and money interested parties must put into the process and ensures the selection of the most responsible/capable ("highly qualified") private company, investor, or development team with which the Marine Corps will partnership. Military site locations are subject to a series of investigations, evaluations and analyses carried out jointly by the activity, Naval Facilities Engineering Command, private contractors, and others to establish the preferred project concept for subsequent introduction into the acquisition process. The first PPV military housing ground breaking ceremony was conducted 4 December at the Deluz housing area on Camp Pendleton, CA. Approximately 712 renovated or newly constructed housing units are planned for this location. The first 200 new units are expected to be ready for occupancy within 9 to 12 months.Overall, privatization is intended to be more economical than ownership. Life cycle cost will be greatly reduced for DoN privatization vice ownership. The responsibilities of DoN ownership includes new/replacement construction costs, programmed and future re-capitalization requirements, design/source selection funding, projected operations and maintenance costs less referral and major repairs, and school impact aid for housing on government land which will diminish with privatization efforts. For example, PPV life cycle cost comparisons for San Diego indicate that privatization should result in a 9-11% savings over 50 years. Most importantly, this monumental effort will undoubtedly improve the quality of life for the service members and their families stationed aboard Navy/Marine Corps military bases worldwide.
Headquarters Marine Corps