DOD’s housing management manual states that military-owned, -leased, or -sponsored housing may be budgeted to meet long-range requirements in areas where the local community cannot support the housing needs of military members. Military housing may also be required if available housing in the community has been determined to be unacceptable or if personnel must reside on the installation for reasons of military necessity.Each service is responsible for determining family housing requirements. In general terms, the services should determine their on-base housing requirements based on the number of military families at an installation that are seeking housing, minus the affordable and acceptable supply of existing rental housing units available to the military in the private sector. The supply of private sector housing should be calculated through a detailed housing market analysis and should include a count of available houses in the private sector based on the housing allowances for each pay grade, considering family size. An installation has a housing deficit if a greater number of personnel are seeking housing than the private sector can support. Conversely, a surplus of on-base housing occurs if the private sector housing supply is greater than the number of families seeking housing. DOD has acknowledged the need for further reductions and the streamlining of its infrastructure. In the most recent Annual Defense Report, the Secretary of Defense stated that the Department continues to seek congressional approval for additional rounds of base realignments and closures. By eliminating excess infrastructure and consolidating its forces at fewer bases, the Department believes it will be able to spend its resources on forces and equipment critical to its modernization effort. As part of our ongoing Performance and Accountability Series, we reported in January of this year that infrastructure costs continue to consume large portions of DOD’s budget. Our recent analysis of DOD’s Future Years Defense Program documents for fiscal years 2001-2005 showed that the proportion of resources devoted to direct infrastructure relative to mission has not changed, despite expectations that it would decrease. After years of effort, DOD has not yet implemented a DOD-wide process for determining requirements for family housing on its installations. As a result, the Department cannot know with assurance how many housing units it needs and where it needs them and may be investing in infrastructure it no longer needs. The Department has worked to develop the framework for a process to determine family housing needs that requires reliance on the private sector first to house its servicemembers. However, it has not adopted the process because of a lack of consensus across DOD on common standards such as the definition of affordable housing and acceptable commuting distances. Moreover, a recent study by the Center for Naval Analyses indicates that the services seem to be protecting their existing family housing infrastructures because of concerns about a potential loss of military community. Over the past several years, the Congress, GAO, and the DOD Inspector General have been critical of the inconsistent methodologies used by the services to determine the availability of housing for military families in private sector areas surrounding military installations. In September 1996, we found DOD had not maximized the use of private sector housing because, among other reasons, the housing requirements analyses often underestimated the ability of the private sector to meet housing needs. The Department’s Inspector General recommended in a 1997 report that DOD develop a Department-wide standard process and standard procedures to determine family housing requirements. Further, the Inspector General cautioned that the Department and the Congress did not have sufficient assurances that requests for funds for housing construction on military installations addressed the services’ actual needs in a consistent and valid manner (see fig. 1 for a chronology of selected reports concerning military family housing). Appendix I provides a summary of recent reports concerning the military family housing program. “The Department continues to work on the development of a single model for determining the government-owned housing needs using a set of standard DOD-wide factors along with flexible variables that accommodate service differences. This model will help DOD determine the number of government-owned housing units that need to be constructed or maintained as well as determine the size of the Department’s housing privatization projects.” DOD and the services have worked to develop the framework for a single, consistent process for determining housing requirements. The proposed framework would require the military services to conduct a market analysis surrounding each installation to determine the amount of adequate, affordable housing the private sector could provide. Once this was determined, available housing would be compared to military personnel needing housing and the difference would be the military housing requirement. According to Department housing officials, the proposed process would provide the services latitude in applying service-specific criteria and military judgment in developing housing requirements. For example, the requirement could be adjusted for the retention of housing for key and essential personnel, a percentage of personnel in each pay grade, and for the retention of historic housing. According to DOD housing officials, each of these factors would usually have a relatively small impact on the requirement. In our view, some flexibility in the process is warranted because of the differences in private sector housing around each installation, but DOD must carefully monitor the services use of this flexibility to ensure that they adhere to Department policy to use the private sector first for housing their service families. While DOD has worked to develop the framework for a consistent process, Department housing officials stated that several issues remain unresolved. Issues such as what constitutes affordable civilian housing and reasonable commuting distances have slowed the adoption of the process. For example, the Air Force recently reduced the acceptable commuting distance from the 60-minute standard used by the other services to a 30-minute standard. According to a recent Center for Naval Analyses report, the services will need to agree on each element of the new requirements procedure before it can be finalized. The report further stated that the Office of the Secretary of Defense must obtain agreement among the services or be forced to impose the standards. Department housing officials stated that once a new process is in place, it will take years to update the housing requirements DOD-wide, since the detailed market analyses must be performed base by base. This is of concern, because the Department risks investing valuable resources in housing that it does not need. In late 1999 and 2000, each of the military services submitted Military Family Housing Master Plans to Congress that document deficits in military housing. These plans indicate that, DOD-wide, the services want about 12 percent more military housing units than they have. In addition, the plans show that about two-thirds of the approximately 285,000 aging government-owned houses are in inadequate condition. The housing plans show that the services plan to address inadequate and deficit family housing through a combination of military construction and privatization initiatives. About 3 percent of family housing units were deemed surplus. (See fig. 2 for a status of military family housing units for each service.) The DOD Inspector General and GAO have previously reported that the services use inaccurate housing market analyses when determining the need for military housing. According to a July 1996 Inspector General report, the requirements for seven military family housing projects at a Marine Corps base were unsupported because the number of needed family housing units was unknown. The report recommended that all of these construction projects be placed on hold and that the Marine Corps perform a new housing analysis to justify the family housing construction projects. Although management concurred with the recommendations, the Marine Corps proceeded with two of the projects. We reported in 1996 that according to Army and Air Force information, many military installations in the United States had not maximized the use of private sector housing to meet military family housing needs. For example, the Army’s housing requirements model estimated that 844 of Fort Eustis’ 1,330 family housing units were surplus. If the model had matched housing requirements against adequate private sector housing before matching them against government housing, the model would have estimated that 1,170 of these units were surplus. The Department still does not maximize the use of private sector housing. As part of its effort to develop a standard requirements-setting process, DOD asked a contractor to perform housing market analyses at selected installations. We reviewed the results of three of these market analyses. Two of the three installations were projected to have substantial surpluses once the private sector’s ability to provide housing was factored in. Based on these analyses, over half (1,599 of 3,039) of the military houses at these installations would be surplus. According to DOD housing officials, the third base—a remote, rural installation—had a modest shortage of military housing units. Surplus military housing is the nearly inevitable result if the Department starts by setting housing requirements based on the availability of private sector housing for its members. Surplus housing identified by the proposed process will be disposed of at the end of its useful life, according to DOD housing officials. During the 5-year transition period, the housing officials said the Department would avoid investments in surplus housing units, but admitted that this would be difficult to do without firm requirements. Demand for military housing—evidenced by long waiting lists and high occupancy rates—could be seen as evidence that military housing is needed and that DOD does not have surplus family housing. However, as we have previously reported, waiting lists can be misleading because many personnel on them do not accept military housing when offered because they have already found suitable civilian housing while waiting. One service’s policy is to use occupancy rates to adjust the requirements- setting process: for example, if an installation’s family housing is filled to capacity, all of it must be needed. This rationale is not consistent with DOD’s stated policy of relying on the private sector first. The services— through their referral offices—guide military families to find housing and thus control occupancy. Essentially, the referral offices offer military families a choice between free military housing or an allowance for private sector housing that generally does not cover the total cost of rent and utilities. However, the planned increases in the housing allowance will gradually remove the financial disincentive associated with civilian housing and should make living off base more attractive.