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Updated: 14 Jan 2003

Background News

Thursday, January 06, 2000 - 2:57 EST
Subject: SECDEF Initiative to Increase Housing Allowances
Presenter: Senior Defense Department Officials

ADM. QUIGLEY: Okay. Now, ladies and gentlemen, we have three individuals here that are available to you on background, for the next 20 minutes, give or take.

Secretary Cohen is in Camp Pendleton, U.S. Marine Corps Base Camp Pendleton, California -- that's where we were hearing him from -- and he is moving, in this 15 or 20 minutes, from talking to the Marines and the families that you just heard, to a site where he will meet with Southern California correspondents. And we are told that that will take about 15 or 20 minutes. We'll use that time frame -- and then we'll pipe that in, as well -- but we'll use the minutes between the two events to ask that these three individuals take your questions. If you have any clarification you'd ask for from Secretary Cohen's remarks, these three individuals will try to help.

And again, on background please, as senior defense officials. We have one person who is a pay and compensation expert, one who is a privatization expert, and one who is an expert on military construction.

Gentlemen? Please step to the podium when you talk.

SR. DEFENSE OFFICIAL: Thank you, Admiral.

QIt's going to be $3 billion over five years. How much in 2001?

SR. DEFENSE OFFICIAL: Now, we are expecting an add of about $160 million in the '01 budget request.

QAnd where is this coming from?

SR. DEFENSE OFFICIAL: I am not prepared to talk about where it is coming from. I can assure you that it's fully funded. As the budget is put together, there is a lot of puts and takes that go into building the budget. But this is not a budget briefing. I can answer any question you have about housing. For the budgetary aspects, I'd recommend waiting until February, when the budget is formally briefed.

QHave you got a table that -- the secretary mentioned it would mean about $175 a month to an E-6, $111 to an E-4 -- have you got a table that would give us, for all those enlisted?

SR. DEFENSE OFFICIAL: I do. I don't have that with me. I'd be glad to take that and get it to you afterwards.

But it ranges from $111 on up. But it's important to realize that that's the five-year gain. Okay? It starts out more modestly in the first year and then builds up to that total.

Q (Inaudible) -- gain in '01. That's the gain, but over the five years?

SR. DEFENSE OFFICIAL: What the secretary mentioned in the case of the E-6, I believe he did say that the E-6 would see a $35-dollar gain in '01, building up to a cumulative gain of $175, when we have reached the point where the out-of-pocket expenses have been eliminated.

More for the E-4, it's $28 in '01, growing to a cumulative total of $111.

QWhat is the --

QAnd that --

QI'm sorry, go ahead.

QAnd that was a monthly gain, or --

SR. DEFENSE OFFICIAL: That is per month.

QWhat's the rationale for tying that pay to one's rank? I mean, if the idea is to cover housing costs, if, you know, an E-4 would, I would assume, would have the same housing costs as an E-6 in the same situation, the same base, the same size family. So why is that tied to rank?

SR. DEFENSE OFFICIAL: Generally it's not. As our more junior people come in, they tend to be largely single or married with only a spouse and the family grows as that person continues to advance in age as well. So the housing allowance is keyed to rank, which is also indicative of where we expect the family size to be for those individuals. Accordingly, an E-7 would be paid a higher allowance, expecting that there might be several children in the family, whereas an E-1, E-2, E-3 who is married might only have a wife or a husband or just one child.

QBut again, those who get an early start on their families, they don't get any extra relief? Because there might be an E-2 that has two or three kids or had twins the first time around, and they don't get any extra until they move up in rank, is that right?

SR. DEFENSE OFFICIAL: That's correct.

QHow many live off base?

SR. DEFENSE OFFICIAL: Well, we've got about 750,000 members that receive housing allowance.

QWell, what is the range of the allowance?

SR. DEFENSE OFFICIAL: I'll have to take that. It varies widely. We surveyed over 400 different geographic locations in building the housing rates that we provide, and it's going to range from in the hundreds of dollars to, in some cases, in high-cost areas, into the thousands of dollars, again, depending upon rank.

QWhat would the high-cost areas include?

SR. DEFENSE OFFICIAL: For example, Boston, San Francisco, Washington, D.C. -- would be a representative sample of those high-cost areas.

QDoes this program also include full funding for military construction, the MILCON program?

SR. DEFENSE OFFICIAL: Not a budget brief, but as I understand, military construction is funded.

ADM. QUIGLEY: Any other questions, ladies and gentlemen? (Inaudible) -- for three individuals?

SR. DEFENSE OFFICIAL: Yeah. I think the important point to remember, as the secretary said, is that it does build upon the successes in the past.

We're excited about it, and we see it as a positive accomplishment for our people.

Thanks, Admiral.

ADM. QUIGLEY: Thank you very much.

QCan you tell us more about how the privatization works? I'm just reading the bluetop now, so maybe it's answered. But how will that work?

SR. DEFENSE OFFICIAL: I'm your privatization guy, so --


SR. DEFENSE OFFICIAL: Basically, when we do housing privatization, what happens is we turn the units over to a private developer, and then we pay the allowances to the service members. So what the developer has to fund whatever work he's going to do on the houses, in terms of rebuilding or renovating, comes from the income stream that's generated by the allowances. So therefore, obviously, if we're going to make the allowances higher, it's going to make the projects work better.

Right now what happens is the allowances don't match what it costs to build or renovate houses in an area. So in addition to the allowances, we would have to kick in usually something else to make the project work, in terms of a differential payment or give him a second mortgage to make up the difference in what he could get based on the income stream he has. What this will do is it'll increase the income stream, so therefore, hopefully, we will be able to do it without having to put in any extra subsidies and get better housing and more of it.

QSo you're not going to have -- as I understand it, some of these raises of the past -- you've made certain guarantees, for example, that the building will be 80 percent full or something like that, and it is not, we'll give you a subsidy. Do you anticipate not having to make those kind of guarantees now?

SR. DEFENSE OFFICIAL: No, actually we don't do that anymore. We did -- in the privatization projects of the '80s we did do that. We don't give any guarantee to the occupancy in these. The service member gets his allowance, and he has to choose to go there. The idea is that we want the guy to in fact keep them up well enough so that the guy would want to -- the member would come live there.

We do sometimes provide a guarantee in the event of political decisions, such as major deployments, closures, downsizing, against the private-sector loan that they have to go get. That would probably still occur in places where there was a -- the market perceived there was a risk that that might happen.

QAs I understand it, this is pegged now to average rents. In other words, you're expected to absorb 15 percent of the average rent in the area where you're living.

Is there any concern that as you increase that to -- if I'm wrong about that, please tell me. But is any expectation that as you increase that to 100 percent, that in military communities like Norfolk or San Diego, where you've got large concentrations, that the response will simply be to raise the rent, because suddenly they know that these service members have more dollars in their pocket and that that -- all you're going to do is really push the average higher?

SR. DEFENSE OFFICIAL: A two-part question there. First, the 15 percent, which is the -- what's legislated right now is against the national median housing cost.

That was enacted as part of the '97 Defense Authorization, which moved us towards basic allowance for housing. The benefit of that was that it allowed us to pay standard out-of-pocket costs dollar-wise to members regardless of where they were in the country. So for that E-6 that we've been talking about, where the current out-of-pocket is $175, that E-6 can count on $175 out-of-pocket regardless of where assigned. Regardless of whether they're in a low-cost area or a high-cost area, it's constant. And it's that part that's going to be brought down.

With regard to the local housing markets and the influence that the increased housing allowances may have, our methodology is to survey the actual market conditions, not where our people are living. We used to have them report what their rent rates were and we would establish it. Old methodology. Now we go out and we survey the housing market that is consumed not only by the military members but by their civilian counterparts in the community. So to the extent that we have an area that's very military heavy and that occurs, we will see that rise in our surveys and adjust the rates accordingly. In larger metropolitan areas, we believe the military population would not be of sufficient size to have a measurable influence on the overall community housing prices.

QDoes this represent any change in the other two programs, which is the basic military construction program and the privatization, or just -- (inaudible)? The big change has been in the housing allowance today. Is there any change in the other two programs?

SR. DEFENSE OFFICIAL: It's directed at the allowances, obviously. When we put it together, we were considering all the alternatives, and we were taking into consideration the impact it would have on the other programs. So it's clearly (best ?) that the problem is solved by this three-pronged approached that's mentioned in the (bluetop ?).

Q (Inaudible.)

SR. DEFENSE OFFICIAL: No, there are about 12 of them in solicitation right now. I can give you a list afterwards if you want.

QYeah. Thank you.

QWhat's the number of inadequate housing -- (inaudible)?

SR. DEFENSE OFFICIAL: The department has about 300,000 houses, and about 60 percent of them are considered to be inadequate.

QThis is on base?


QSixty percent is inadequate?

SR. DEFENSE OFFICIAL: About 60 percent.

QThree hundred thousand houses. And how about housing units, is that the same figure?

SR. DEFENSE OFFICIAL: Some of them are multiple -- you know, some are townhouses, some are what we call stairwells, apartments.

QAnd nobody can say where this money is coming from, we have to wait till February? I mean, are these inflation savings? Are you going to rob some budget -- can you give us any sense?

SR. DEFENSE OFFICIAL: Again, I'd just say it's not a budget brief. I can assure you that it is funded. And when the budget is reported in February, you will see that it's funded. But I don't want to get ahead of the budget right now and brief the aspects of the budget when the formal brief of that is still to come.

QIs it coming from the F-22 program? (Laughter.)

SR. DEFENSE OFFICIAL: (Chuckles) This is not a budget brief.

QCan you tell us if you had to defer any other housing programs or personnel programs in order to pay for this? Is that -- I know it's not a budget brief, but can you at least go that far?

SR. DEFENSE OFFICIAL: We have not had to defer any personnel programs. As a matter of fact, the secretary has made personnel his number one priority and protecting those. And as we see his announcement today, in looking at housing, and medical care which he will announce at a later time, he is continuing to focus on the gains achieved over the past year through what the administration proposed, and had strong bipartisan support in Congress.

SR. DEFENSE OFFICIAL: And I would add to that, to follow-on to the question that was asked before was, we see this as a three-prong approach. So obviously, taking it away from somewhere else doesn't solve the problem. So clearly, we're maintaining levels of MILCON at the same time we're increasing the allowances.

QOne of the complaints from families is that the military construction funding hasn't been -- that's the first pot that's robbed when there's a problem. (Inaudible) -- is military construction going to be fully funded?

SR. DEFENSE OFFICIAL: We're maintaining the level of effort we've devoted to our family housing, I can tell you that. I'm the housing guy, and we have not robbed our housing account.

QDoes anyone have any good stats on rents that you based this allowance on, let's say for San Francisco or Dubuque? Do you guys have any tables that you could give us?

SR. DEFENSE OFFICIAL: I don't have the tables on what the rents are. But we surveyed rent for everything from one-bedroom apartments for our single service men and women, all the way up to single-family homes with multiple bedrooms. We generate 27,000 individual rates in these over 400 locations, again, with the -- in the (WIF ?) without categories.

So the actual rental rates that we have determined would be too voluminous to share. If you have specific questions, you can direct them our way, and we can try to help you on that.

(Pause.) (Inaudible)?


SR. DEFENSE OFFICIAL (?): (Inaudible.)

SR. DEFENSE OFFICIAL: (Inaudible) -- say the same thing.

SR. DEFENSE OFFICIAL: (Inaudible) -- with me, I'll make sure we get back to you. We are going to check out the questions.

ADM. QUIGLEY: Our subject-matter experts will get the answers to your questions back to Tom Begines. And then if you will just please check with Tom. And by the same token, we'll try to catch you. But we'll do that.

Now, it should be about another five minutes, if they are running true to schedule out there in California, before we will again pipe the secretary back in there. So if that's something you want to hear, please stay.

By the same token, if another question pops into your head later, please check with Tom Begines or Bowman (sp).

Q (Inaudible.)

SR. DEFENSE OFFICIAL: The transcript eventually will, yes. Yes.


Q (Inaudible.)

SR. DEFENSE OFFICIAL: Probably more than that, Tom, I suspect. There's just been a lot of talking today, and our transcribers will be busy.

(Cross talk.)




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