As a result of these initiatives, DOD’s Office of Economic Adjustment has  identified 26 domestic installations significantly impacted by the growth in  military populations. The National Defense Authorization Act for Fiscal Year 2010 required the  Secretary of Defense to conduct a review of two aspects of the housing  allowance program and submit a report by July 1, 2010. DOD’s Data-Intensive Process Helps to Ensure the Accuracy of Housing Allowance Rates, and Some Enhancements May Further Strengthen the Process

DOD uses a data-intensive process to set housing allowance rates that  officials said generally meets the goals of the program, although  enhancements related to providing information to installation officials and  service members, defining a key term for data collection, and developing  more accurate cost estimates for the allowance to use in budget requests,  could further strengthen the process. DOD sets its housing allowance rates for an area based, in part, on current  market rental cost data, which DOD collects annually for each housing  area. Installation Officials and Service Members Do Not Have Access to All Three Housing Allowance Rate Cost Components

Installation officials and service members do not have access to  information on the amount or proportion of the housing allowance rate  derived from each of the three costs that comprise the housing allowance. Definition of “Available” May Limit the Number of Properties Submitted in the Rate-Setting Process

Officials at four of the five installations we interviewed said that, in areas  with low vacancy rates, it can be difficult to find rental properties for some  housing profiles that are adequate and meet the definition of currently  available housing used in the data-gathering process. However, because the  definition of “available” used in the data collection process limits data  submission to only those properties that were available for rent within 4 to  6 weeks prior to data submission, the properties that some installations  submit may not be as fully representative of current market costs for  adequate housing for comparable civilians in the same area or properties  that are representative of such costs may be excluded, increasing the  possibility of inaccurate rates for the area. While the services have processes in place to  develop housing allowance cost estimates, budget officials in the Office of  the Under Secretary of Defense (Comptroller) and the military services, as  well as our analysis, indicated that the services have consistently  underestimated the total cost of the housing allowance in part because the  services’ processes do not allow them to accurately estimate the number  of service members who will receive the housing allowance. The housing allowance is an entitlement for service  members. However, shifting funds from another program  could disrupt the funding of the other program. Additionally, while an  official from the Office of the Under Secretary of Defense (Comptroller)  said that DOD’s budget provides the best estimates available, as a result of  consistently underestimating the amount needed to pay the housing  allowance, DOD’s budget does not provide decision makers in Congress  and DOD with the full picture of housing allowance costs, limiting the  ability of both Congress and DOD to make more fully informed funding  decisions. Service Members Have Encountered Housing Challenges at Some Growth Installations and DOD Does Not Have a Formal Information- Sharing Process for Tools to Address Such Challenges

Some service members have encountered challenges in obtaining off-base  housing near some installations that are increasing in size due to several  major defense initiatives, such as BRAC, Grow the Force, Army  Modularity, and Global Defense Posture and Realignment. DOD officials  have used a number of tools to address challenges in obtaining off-base  housing, but DOD does not have a formal process that allows installation  officials to share information on these tools. Housing Deficits Exist at Most DOD Growth Installations and Are Expected to Continue or Worsen

According to the military services’ data, demand exceeds the supply of  housing at 19 of the 26 growth installations, resulting in housing deficits. DOD partially concurred with our recommendation to provide service  members with information on the three elements that comprise the  allowance (rent, utilities, and renter’s insurance). DOD concurred with our second recommendation to assess the benefits  and drawbacks of revising the definition of “available” rental properties  used for data collection purposes. To determine whether service members relocating to installations that  DOD projects to experience significant growth have encountered  challenges in obtaining off-base housing and the extent to which DOD is  using and sharing information on tools to address these challenges, we  reviewed and analyzed applicable documentation and interviewed  knowledgeable officials.
Why GAO Did This Study

The Department of Defense (DOD) paid active duty military personnel over $18 billion in housing allowances in fiscal year 2010. DOD sets housing allowance rates annually based on market costs of rent, utilities, and renter's insurance. Also, DOD has identified 26 installations significantly impacted by expected growth in personnel due to various rebasing actions. The Senate report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2011 (S. 3454) directed GAO to review DOD's rate-setting process, among other issues. GAO determined (1) whether there are enhancements to strengthen DOD's rate-setting process and (2) whether service members have encountered challenges in obtaining off-base housing. GAO reviewed program documents, including a 2010 DOD report to Congress, analyzed data, and interviewed DOD officials and subject matter experts.

What GAO Found

DOD uses a data-intensive process to set housing allowance rates that officials said generally meets program goals. Key quality assurance steps in DOD's process include involving installations in the rental data collection process and verifying data prior to calculating allowance rates. However, some enhancements related to (1) providing additional information to installation officials and service members, (2) defining a key term for data collection, and (3) developing more accurate cost estimates for budget requests could further strengthen the process. First, installation officials and service members do not have access to information on the three costs that comprise the allowance--rent, utilities, and renter's insurance--because DOD issues a single rate for each pay grade. As a result, installation officials cannot help ensure the accuracy of the rates and service members are not fully informed of potential housing costs. Second, in areas with low vacancy rates, officials said it can be difficult to find enough rental properties that meet the definition of available because the definition is limited to rentals on the market within 4 to 6 weeks prior to data collection. As a result, properties that some installations submit may not be fully representative of rental costs in the area or representative properties may be excluded, increasing the possibility of inaccurate rates in an area. Third, the military services have consistently underestimated the amount needed to pay the allowance by $820 million to $1.3 billion each year since 2006 when preparing budget requests, in part because the services' processes do not allow them to accurately estimate the number of service members who will receive the housing allowance. GAO recognizes the difficulties in developing accurate housing allowance cost estimates. However, as a result of consistently underestimating the amount needed to pay the allowance--which is an entitlement for service members and must be paid--DOD has had to shift funds that were budgeted for other programs, which could disrupt the funding of the other programs. Also, DOD's budget does not provide the full picture of housing allowance costs, limiting the ability of Congress and DOD to make fully informed funding decisions. Some service members have encountered challenges in obtaining off-base housing at some growth installations. Military service data show current housing deficits, ranging from about 1 percent of total demand to more than 20 percent, at 19 of 26 installations DOD identified as significantly impacted by growth. Installation officials GAO interviewed expect such housing challenges to continue or worsen. DOD uses a number of tools to address these housing challenges that could be used at other installations, such as expanding housing privatization projects and encouraging collaboration between installations and communities. GAO found that installations share information on these tools on an ad hoc basis, such as through e-mail messages or at conferences, because DOD does not have a formal communications process that would allow them to store and share such information. As a result, DOD cannot ensure that installations that are currently experiencing housing challenges or may experience such challenges in the future will have the needed information on various tools that can be used to address these challenges.

What GAO Recommends

GAO is recommending that DOD (1) provide information on the costs that comprise the housing allowance to installation officials and service members, (2) assess the benefits and drawbacks of revising the definition of "available" properties for data collection, (3) improve its processes to estimate allowance costs for the budget, and (4) develop a formal process for installations to share information on housing tools. DOD generally concurred with all four of GAO's recommendations.