THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, February 28, 1996 TAG: 9602270313
SECTION: MILITARY NEWS PAGE: A8 EDITION: FINAL
SOURCE: Tom Philpott
LENGTH: Medium: 72 lines
In accepting the report of his task force on Quality of Life last fall, Defense Secretary William Perry was particularly excited about a recommendation to ease the military housing crunch by creating a single oversight agency.
The Military Housing Authority could take charge of all housing, leverage assets into attractive business deals and ``tap private capital markets to replace or repair a large stock of inadequate housing,'' he said.
But four months later, the MHA concept is on life support. The services oppose it. Pay experts warn of dangerous tax consequences for military people. Some analysts say plans for the government corporation lack the marketplace incentives to succeed.
It seems likely, however, that without the MHA, Perry's goal of eliminating an eye-popping, $29-billion backlog in housing construction and maintenance will slip many years away.
The MHA would be a nonprofit corporation led by commercial housing experts and responsible to a board of military leaders. It would control all military housing and collect up to $6 billion a year in allowances, those forfeited by service members who live in the quarters. The assets would be used to entice private investors to repair or replace deteriorated housing.
But the MHA is also under attack. Some analysts say the corporation can't succeed if the government continues to subsidize roughly 30 percent of the cost of base housing.
A more critical issue is the possible effect on tax-free allowances. Service people would continue to forfeit housing allowances while living in quarters, but the services would transfer the money to the corporation in the form of ``rent.'' The Tax Reform Act of 1986 put the military on notice that no new tax benefits would come its way. In fact, it said, any change to compensation practices, particularly with allowances, could end the tax-exempt status. The MHA's treatment of housing allowances as rent could be the trigger. If so, the MHA is doomed.
Housing allowances ``wouldn't just be taxable for people living in the corporation's housing, about a third of our folks,'' Perry said. ``That same tax ruling would affect the two thirds living on the economy. That's a pay cut.''
The services, meanwhile, oppose the transfer of housing to a single MHA. ``Base commanders and more senior folks have a vested interest in seeing they keep control,'' he said.
The degree of opposition appears tied to base layouts. A lot of Navy housing is located away from the base, so the prospect of losing control is less wrenching, Perry said. ``But with the Army you may have to drive several miles through post property to get to housing. Their view is different; they want a lot of control.''
One option to be shown to Perry soon would allow each service to establish its own MHA, less efficient than a single corporation but the services would have more oversight.
Retired Rear Adm. Roberta Hazard, who co-chaired the housing portion of the task force report, said service MHAs still ``can make significant strides'' toward improving housing, but would move slower and have less influence on the housing industry and nationwide developers, less leverage too on Wall Street ``in terms of bond issuance.''
``One thing we heard all over the country was that developers are confronted with different approaches, different rules and regulations, from each service,'' Hazard said. In some areas, the hassle of dealing with service differences bumps the cost of military housing 20 to 30 percent over private housing contracts. MEMO: Comments and suggestions are welcomed. Write to Military Update, P.O.
Box 1230, Centreville, Va. 22020, or send e-mail to: milupdate@aol.com
by CNB