Amid reports of low military morale, Congress has sought reliable information to assess the proposals proffered by DOD to improve the quality of life for military members, such as the proposal to increase housing allowances for military personnel. In 1999, we worked with DOD to design the Survey of Active Duty Personnel to gather military members' views on wide range of issues, including their views on military housing and allowances. The Department administered the survey in the fall of 1999 to a stratified random sample of over 66,000 military personnel and received responses from 51 percent. In addition, Rand reported on the housing options available for military families in a 1999 study. The report analyzes military families' preference for types of housing, and the specific factors that influence their choices. Rand based its findings on responses to a survey designed to collect information on how military members selected housing as well as information about how military members might respond to changes in housing policies. DOD will spend more than $10 billion in fiscal 2001 to provide housing for military members and their families, either by paying a cash allowance for servicemembers to live in private sector housing or by assigning families to government-owned or –leased housing. The Department's policy is for its military members to rely on the private sector first for housing. Military members who live off base in civilian housing are entitled to the basic allowance for housing. This allowance is intended to provide servicemembers equitable housing compensation based on pay grade, number of dependents, and the local median monthly cost of housing. Housing costs include current market rent, average utilities, and renter's insurance. Currently, military members are expected to pay 15 percent of the housing costs themselves. (Table 1 shows the average out-of-pocket expenses, by pay grade.) DOD plans to reduce the out-of-pocket expense to zero by 2005 for those servicemembers who live in civilian housing. Personnel who live in government-provided housing forfeit their housing allowance but pay nothing out of pocket for housing or utilities. However, DOD reports that many of its government-owned houses are in poor condition. The Department estimates that it would take 30 years and $16 billion to upgrade or replace existing inadequate family housing. To improve military housing faster and more economically than could be achieved if only traditional military construction appropriations were used, the Congress enacted legislation at DOD's request authorizing a program termed the Military Housing Privatization Initiative, to allow private sector financing, ownership, operation, and maintenance of military housing. Under the initiative, DOD can provide direct loans, loan guarantees, and other incentives to encourage private developers to construct and operate housing either on or off military installations. About 919,000 personnel (74 percent of the active duty force) live in military family housing or receive an allowance for civilian housing. The remaining 329,000 personnel (26 percent) live in barracks (dormitories or bachelor quarters) or aboard ships. For the rest of the analyses, we will focus specifically on those that live in civilian or military housing and exclude those in barracks or aboard ships. Figure 1 shows the proportion of military personnel that live in civilian or military housing and the proportion that live in barracks or aboard ships. Of those living in civilian or military family housing, about 619,000 personnel (67 percent) live in civilian housing, while about 300,000 personnel (33 percent) live in military housing. Officers are more likely to live in civilian housing than enlisted personnel. Also, personnel are more likely to live in civilian housing as they gain seniority. By the time personnel have 20 years or more service, 75 percent live in civilian housing. Figure 2 shows the type of housing in which servicemembers live, by years of service. Home ownership also increases dramatically with years of service, while renting decreases. For military personnel with 5 years of service or less, 14 percent own their home. By 20 years or more of service, the proportion increases to 53 percent. In total, about 277,000 personnel (30 percent) owned a home when the survey was administered in the fall of 1999. It is important to note that while the housing allowance is calculated based on the rental market, military members may apply their allowance toward purchasing a home, potentially gaining equity and enjoying the tax advantages of home ownership. However, the frequent moves required by military service may make home ownership difficult or impractical. According to DOD's 1999 Survey of Active Duty Personnel, 72 percent of military personnel would prefer civilian housing if costs were equal (see fig. 3). Similarly, Rand reported that servicemembers prefer civilian housing if cost was not a factor, and concluded that DOD should consider decreasing military housing and encouraging military members to live off base. In making this conclusion, Rand recognized the inherent link between housing allowances and military housing; that is, increasing the housing allowance should lessen the need for military housing. Mismatches between where people would prefer to live and where they actually live were significant. Not everyone who prefers civilian housing is living in civilian housing, and vice versa. Overall, the number of personnel in civilian housing would increase by about 45,000 if the preferences of all personnel were satisfied, and the number in military housing would decrease by a like amount. This is because about 176,000 personnel that prefer civilian housing now live in military housing. And about 130,000 of those that prefer military housing now live in civilian housing. It must be noted that the availability of housing varies location by location, so it would likely never be possible to satisfy all servicemembers' preferences. According to DOD officials, civilian housing is often unavailable in sufficient numbers in remote locations; conversely, some bases have relatively little military housing. Department officials anticipate that increasing the housing allowance will decrease demand for military housing. At least part of this conclusion is based on Rand's 1999 report, which noted that only 18 to 20 percent of the military members surveyed preferred military housing, regardless of cost and waiting time. Using Rand's estimate, the core requirement for those preferring military housing would be more than 120,000 less than the number now living there. Department officials also believe that the housing allowance increase will ultimately change the composition of the population in military housing. Rand's analysis indicated that demographic characteristics are the main factor in the demand for military housing. Those who prefer military housing include lower income personnel (especially junior enlisted personnel), those with spouses that do not work outside the home, and those with a greater number of children. Military members with larger families are entitled to a larger residence in military housing than they would likely be able to afford on the civilian market (civilian housing allowances increase by pay grade). Some installations have long waiting lists for military housing, which would seem to evidence a strong demand for military housing. Department officials warned us that the lists can be misleading because many personnel on them do not take military housing when offered because they have already found suitable civilian housing while waiting. In addition, DOD recognizes concerns among service leaders that housing military personnel off installations in civilian housing would weaken the sense of military community. According to Rand, however, the demand for military housing seems largely dependent on it being economical; servicemembers simply want to avoid the additional costs associated with civilian housing. More than 60 percent reported that they lived in military housing for economic reasons. The economic benefit dominated all other factors, including security, proximity to work, availability, better schools, and having military neighbors. Military members in focus group discussions "scoffed" at the notion that being in military housing helped them to do a better job. DOD should not expect a substantial increase in personnel retention solely from its initiative to increase the housing allowance. Although increased dissatisfaction with military housing and allowances is linked with dissatisfaction with the military way of life, the proportion of military personnel that indicated an intent to stay in the military for a 20-year career does not change as dissatisfaction increases (see figs. 4 and 5). This is not unexpected, since we previously testified that the retention decision is complicated, highly personal, and usually a function of many factors including the prospects for other employment. Because pay is the top factor cited in retention decisions—both to stay and to leave, DOD may accrue some benefit from increasing the housing allowance because the military member's paycheck will increase by the amount of the allowance. Responses to another survey question lend additional support to the conclusion that housing and housing allowances do not seem to drive the retention decision for many personnel. Survey respondents were asked to choose among 37 aspects of military life to identify the top issues causing them to leave, or think about leaving, the military. Military housing was cited as the top reason by only .2 percent, while housing allowances were cited by .5 percent—together, less than 1 percent of the active duty force. The top reasons included basic pay (27 percent), amount of personal/family time (9 percent), quality of leadership (8 percent), and deployments (7 percent). Concerns about the quality of military housing are warranted but seem overstated as a factor in retaining personnel, based on the survey data. Overall, more personnel who live in military housing were satisfied than dissatisfied. Of those living in military housing, about 45 percent were satisfied, while 36 percent were dissatisfied (see fig. 6). The perception of military housing appears to be worse than the reality experienced by those living in military housing. Those personnel living in civilian housing at the time the survey was administered that chose to rate military housing had much less satisfaction (9 percent) with it than those living in military housing (45 percent). On the basis of our analysis of specific attributes of military housing, personnel living in military housing were more satisfied than dissatisfied with all of the measured characteristics. The greatest dissatisfaction was with the space, privacy, and quality-related characteristics of their housing, as shown in figure 7.