MoD loses billions of pounds after selling military housing, NAO finds
I admit it. It was my experience of the bit of this deal in terms of RAF Scampton that in part led me to prepare the note on the need for a rural sovereign wealth fund. I hope in the light of this story you might read it again and help me build interest in a better way forward – you can access it here.
This story itself tells us:
Had the MoD retained the housing stock, due to the property price boom, it would have stood to gain between £2.2 billion and £4.2 billion, the watchdog concluded in a report out today.
The MoD sold the homes, used to house members of the armed forces, to Annington Property Limited, in a deal worth £1.6 billion in 1996.
Since then, the MoD has been renting the homes back from Annington in a deal that is set to be renegotiated in 2021.
Amyas Morse, head of the National Audit Office, said today: “The department carried out a sale and leaseback deal almost twenty years ago, based upon pessimistic views of the future growth in property values, but with the mitigating feature that the rents charged to the military families who lived there were restricted for the first twenty years.
“This has cost the public sector a great deal in capital growth, and it has been a great deal for the landlord.”
When the current agreement ends in 2021 Annington Homes is expected to demand a huge increase in rent.
Currently, the MoD pays £178m a year in rent, with a discount rate of 58%, but this could rise by £250m a year when the current deal ends.