Military Housing Privatization Initiative

The MHPI illustrates the potential for private financing to benefit investment in public infrastructure. Originally a five-year pilot project run out of the Office of the Secretary of Defense, Congress authorized the MHPI in the mid-1990s to address an acute lack of adequate housing for military families.

According to a report issued by the Department of Housing and Urban Development, the Department of Defense (DOD) had privatized 98 percent of its domestic housing units by 2012-or 219,000 houses-using the MHPI. In addition, by 2011, the program had cleared a $7 billion backlog, built 137,500 new and renovated units, and generated a minimum six-to-one private/public investment ratio.4

The MHPI was approved under the otherwise unaccommodating A-11 rules because of the risk assumed by the private sector. The primary risk assumed by the private parties is that DOD families with housing subsidies can choose to live any-where and are not necessarily required to live in the MHPI homes. This factor created an incentive for the MHPI properties to be competitively priced and well managed. Under the program, DOD transfers land under a 50-year ground lease and then effectively leases it back with improvements through the military housing subsidy program.

Although there have been some issues with the initial speed of project ramp-up, concerns of more traditional commanders regarding the potential for diminished unit cohesion, and concerns raised by the U.S. Government Accountability Office, most of those involved consider the program a success because of meaningful quality-of-life improvements for military families. Despite challenges posed by base closures and troop drawdowns, the program continues to work well even while the Congressional Budget Office (CBO) has publicly criticized OMB's decision to allow the program under current scoring rules. Over time, OMB has incrementally changed its guidance to more closely align with the CBO's views.

Military family housing on Whidbey Island in Washington state.

Courtesy of Hunt Companies