What are public-private partnerships (PPPs)? Have they proven to be an effective solution to improve the quality of military housing?

To find out, the Brooking Institution examined the results of the Military Housing Privatization Initiative (MHPI) – a program conceived in the 1990s that leveraged PPPs to address the Department of Defense’s shortage and substandard quality of family housing.

Brookings concluded, “The [MHPI] has been transformative—significantly improving the quality of life for military families while allowing base commanders to focus on their core mission.” This success can be attributed to how the military services structured PPPs to meet their unique family housing needs by shifting investment, risk, and control to private companies specializing in development and property management.

Key excerpts from Brooking’s research paper titled “‘Privatization’ of non-inherently governmental functions: Why public-private partnerships are so effective—and so rare—in the federal government”:

In 1996, Congress enacted the Military Housing Privatization Initiative (MHPI) to enable DoD to attract private capital and expertise to address the massive family housing problem. Most significant, Congress authorized DoD to provide housing allowances, or BAH, to all families, not just those living off base. By creating a stream of payments for families that opted to live on base, policymakers hoped to entice private firms to partner with DoD to tackle the shortage and poor condition of the housing. (Although Congress must appropriate the funds for BAH on an annual basis, private firms apparently viewed the continued availability of BAH as a given.)

In addition, through MHPI, Congress gave DoD a “toolbox” of real estate authorities, some of which had been used in previous family housing construction programs. Among other things, the MHPI legislation authorized DoD to make or guarantee loans to a housing company for a specific project; take an equity stake in a project; and include ancillary facilities such as child care centers that would make the housing more attractive. Congress also authorized the replacement of cumbersome military specifications with market-driven standards (e.g., more storage space and better plumbing fixtures) and provided limited guarantees to cover the possibility that a military base would be closed or downsized.

MHPI achieved exceptional results during its first 20 years. The housing companies invested more than $30 billion of private capital, leveraging DoD’s investment by an eight-to-one ratio, to generate 140,000 units of new and renovated family housing built and maintained to market standards. The housing companies were not allowed to charge a rent that exceeded the individual service member’s BAH; thus, some of the projects required a loan, loan guarantee, or other sweetener from DoD to pencil out. In many cases, however, the stream of BAH payments was sufficient for companies to cover renovation and new construction, operating expenses, and long-term sustainment of the housing. Base commanders were able to exit the day-to-day management of family housing—a complex business in which the military has no core competency.

Privatized housing proved highly popular with military families. As one spouse put it, “This is not only a house I am proud to call my home, it shows that our nation respects the sacrifices [we] have made for our country.” Three- and four-star admirals and generals—some of whom had been skeptical of MHPI initially—came to see it as the single most effective initiative DoD had undertaken to improve military families’ quality of life.

MHPI was more than just attractive homes designed to appeal to young families. The housing companies pioneered mixed-use projects that combined residential and retail facilities; built beautiful community centers and offered popular social programs; and incorporated special-purpose homes for Wounded Warriors. Another MHPI innovation was the introduction of walkable neighborhoods that emulated the traditional look and feel of 18th and 19th century military posts such as Fort Riley, Kansas, and Fort Sam Houston, Texas. Army MHPI projects have won scores of awards, including the Urban Land Institute’s prestigious Award for Excellence.

Today, the MHPI program continues to modernize and strengthen military communities around the country. Through innovation and private sector expertise, housing providers partner with the Armed Services and military families to deliver exceptional housing experiences.

Visit the Military Housing Association’s Resources page to learn more about the MHPI program.