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IMMEDIATE RELEASE

Release No: 246-95
May 08, 1995

DOD PROPOSES PRIVATE CAPITAL TO IMPROVE MILITARY HOUSING

Secretary of Defense William J. Perry today announced an innovative legislative proposal to improve housing for U. S. military men and women and their families. The proposal recommends using a variety of private sector approaches to build and renovate military family housing faster and at less cost to American taxpayers. The proposal is part of Secretary Perry's Quality of Life initiative announced last November.

"The readiness of our forces depends on retaining the high quality, experienced personnel we now have in the military. One of the most important factors in retention of senior personnel is our ability to provide decent and affordable housing for their families to live in. This inadequate housing affects our ability to retain a professional force and degrades our readiness. But the quality of housing has declined for more than 30 years becaurse of a lack of priority and because earlier attempts at solutions have run into regulatory or legislative roadblocks. Therefore, we have prepared this proposal to allow the Department, with the help of Congress and the private sector, to solve a 30-year problem in 10 years," said Perry in a Pentagon press conference.

The DoD proposal attempts to use market forces to help solve its housing problem. Engaging the private sector for capital and development allows DoD to leverage government dollars and make efficient use of limited recources. Using modified and new private financing tools and commercial standards and practices will help drive down the cost of quality housing while accelerating the solution from 30 to about 10 years.

The proposal includes measures to encourage upfront renovation or construction using non-government funding. In exchange for such development the DoD will be able to: guarantee rentals or mortgages; make fixed payment commitments, such as leases; or co-invest with developers (land and/or cash) to gain access to housing through means such as limited partnerships. Using these tools in combination provides flexibility to speed the improvement of housing projects at less cost and reduces the risk for potential investors.

The proposal covers a five-year test period with expenditures under this program capped at $1 billion over that period. The pilot program includes all Services and applies to bases where there is an immediate housing problem. The Secretary will report to the Congress each contract under this program. Additionally, he will submit an annual report on the use of the Housing Fund and within four years, make a recommendation on permanent authorities.

"Over the past 30 to 40 years, military housing has not kept pace with needs, leading to unacceptable housing for many of our men and women in uniform and their families. This proposal gives us the flexibility to provide for our forces by building more housing or by renovating existing housing sooner and at a much lower cost to the taxpayer. This will begin as a carefully controlled test of a variety of innovative housing programs, with the objective or identifying the most effective approaches. The best approaches will then be institutionalized to avoid this problem in the future," concluded Perry.