Military homes inquiry

Difficult negotiations with Annington about future rent levels on the estate lie ahead later in 2019, and will have a critical impact on the Department’s whole accommodation strategy. The Department and Annington both told us that their relationship has become more constructive in the last year, and they are investigating ways to secure additional value from the estate. For example, they have agreed to operate a streamlined approach to the determination of new rents for the 480 sites at the upcoming rent review. The Department tells us that it will ‘play its hand skilfully and aggressively’ when the process begins in earnest in October, but acknowledges that the sale of the estate in 1996 leaves it at a disadvantage, not least in seeking to maintain the 58% discount in market rent applied since the sale. The Permanent Secretary acknowledged that the previous deal was a poor one which could not have been much worse and so, it is difficult to see how the Department can redress the balance. It will be relying on its property experts and the senior staff recruited following the termination of Capita’s contract to manage the Defence Infrastructure Organisation. Recommendation: We expect the Department to negotiate hard on behalf of the taxpayer who was badly let down by the terms of the original deal. It should provide us with regular updates on progress with the site review process, as well as agreement on other elements of the negotiations, initially in September 2019.

Levels of satisfaction with housing among service families remain far too low and are a continuing risk to retention rates among service personnel. This is unacceptable at a time when the Department’s budget is stretched to breaking point. The Department tells us that 95% of its housing now meets the nationally recognised Decent Homes Plus standard. In 2018–19, it spent £135 million refurbishing around 3,500 homes. Despite this, a department survey shows overall satisfaction with housing only rose slightly to 64% last year. The Department has not previously set itself specific targets for service family satisfaction levels. It suggests that roughly 80% is the highest level of satisfaction that is realistically achievable. Since our evidence session, the Department has informed us that it has set a target of 68% overall satisfaction in 2019–20. This is a start. It also told us that complaints about the quality of maintenance have fallen by one third, but satisfaction with this service is only 51%. The Department paid £109,000 in compensation for poor service in 2018–

It is now preparing to retender its maintenance contracts and will be seeking innovative approaches from bidders to incentivise high performance. Recommendation: The Department should continue to set itself stretching targets for continuous improvement in service families’ satisfaction with their accommodation, and incorporate demanding service quality targets into new contracts. These targets should be linked to contractor performance and incentives, and should take account of best practice elsewhere.

The Department has been slow to recognise that the traditional model of military housing, and who is entitled to it, has not kept up with changes in social attitudes and the needs of service personnel. Since 1 April 2019, all service personnel in what the Department defines as an established long-term relationship, have been ‘eligible’ for surplus service family accommodation. However, only those who are married or 6 Military Homes in a civil partnership (or with dependent children) are ‘entitled’ to accommodation. The Department says this is a temporary distinction while it finalises its plans to update its accommodation model, but it is a telling one. The payment of compensation in retail vouchers rather than cash also seems like a hold-over from an earlier era. The Department acknowledges that it still has more to learn about the nature and preferences of service families through improved communication that circumvents the limitations of the ‘chain of command’. Recommendation: The Department must develop a clearer approach to the housing needs of armed forces personnel, based on need, as well as a deeper understanding of the diverse real-life circumstances of service personnel and their families.

The delivery of a modern and flexible accommodation model is still a distant prospect, over three years after its announcement. The Department announced its new accommodation model for service personnel in the 2015 Strategic Defence and Security Review. The first Future Accommodation Model pilot has been delayed from 2018 to September 2019, with two more to follow in 2020. The pilots will take three years, and MoD will make its main investment decision in 2022, after evaluating the responses of personnel to the choices on offer. Assuming it opts to proceed, full roll-out will then begin—at least seven years after the initial announcement. Recommendation: The Department should provide us with updates on the Future Accommodation Model, initially in Summer 2020, to confirm that the pilots are under way, to explain how they will capture the varied circumstances in which service personnel and their families live.

The Department is still holding too many empty properties, while there are thousands of people across the country on housing waiting lists. The Department advised us in November 2018 that it expected to reduce the level of empty properties to 12% by 2022. This fell short of our July 2018 recommendation of 10% by 2021. The Department now tells us that it has a ‘stretch’ target to reduce the level of empty properties to 10% by Autumn 2021. Achieving this is dependent on several factors, including the rate of armed forces recruitment. It is incentivised by the terms of the agreement with Annington to speed up the rent review process. Annington has agreed to waive any dilapidations payments up to £7,000 on the 500 most dilapidated properties surrendered by the Department each year (provided that at least that many are surrendered). Annington previously told us they were developing plans to rent out surplus stock as ‘affordable’ housing. In advance of our evidence session it provided us with a small example of renting surplus stock to a local authority. Recommendation: The Department should provide us with an update on progress towards the 10% target for empty properties by 31 July 2020.

The whole issue of military housing needs to be given far greater priority within senior levels of the MOD. The Annington Renegotiation must not be allowed to be used as an excuse for making far greater progress on all the other issues listed above. We expect the target dates set out in this report to be met. Military Homes 7 1 Negotiations with Annington Property Limited

Last year, we warned that Annington was better placed for negotiations than the Department because of its unbroken knowledge of the estate since the 1990s, in contrast to the Department’s frequent changes in structure and personnel.15 The early termination of DIO’s contract with Capita as “strategic business partner” means it will have an entirely new leadership team when negotiations with Annington start in September.16 DIO said it was working hard to make the transition as seamless as possible, and that it has now filled almost all senior posts. We asked how the handover would be achieved and heard that DIO plans to bring in further private sector support, particularly for project and programme management.17 DIO assured us that its housing and accommodation team would be relatively unaffected by the changes.18 Handing back empty properties

In 2017, the Department was paying rent on over 10,000 empty properties on the Annington estate (approximately 19%), roughly the same number as in 1996.19 Last year we recommended that the Department reduce this to a more acceptable level of 10% by 2021.20 In its response, the Department stated that it had a plan to reduce the void rate 7 Letter from Ministry of Defence, 17 May 2019, para 8 8 Qq 21, 38, 40, 41–46; Letter from Ministry of Defence, 28 March 2019, para 5 9 Q 42 10 Qq 21 11 Qq 100 12 Qq 23, 38 13 Committee of Public Accounts Report, Ministry of Defence’s contract with Annington Property Limited, Session 2017–19, HC 974, July 2018, para 4 14 Qq 38, 39 15 Committee of Public Accounts Report, Ministry of Defence’s contract with Annington Property Limited, Session 2017–19, HC 974, July 2018, conclusion 4 16 Q 53 17 Q 54 18 Q 55 19 C&AG’s report, The Ministry of Defence’s arrangement with Annington Property Limited, Session 2017–19, HC 762, January 2018, Figure 16 20 Committee of Public Accounts Report, Ministry of Defence’s contract with Annington Property Limited, Session 2017–19, HC 974, July 2018, para 5 Military Homes 9 to around 12% by 2022.21 It now tells us that it has a more ambitious plan to achieve our recommended void rate of 10% by 2022. In addition, it has set a “stretch” target of achieving the 10% rate by autumn 2021. DIO explained that several variables would affect its ability to meet these targets, including: the number of service personnel recruited, the take-up of the Future Accommodation Model pilots, and the changing eligibility rules for service family accommodation.22 Now that Annington has relaxed restrictions on subletting, the Department also hopes to reduce the number of empty properties by renting out some homes.23

Annington and the Department wrote to us to explain that they have agreed measures to incentivise the Department to return empty properties it no longer needs.24 The Department said it hopes this will ensure a programme of at least 3,500 homes is returned to Annington over the next seven years.25 Under the terms of occupation, the Department pays ‘dilapidations’ when surrendering a property to Annington, to cover the cost of restoring the property to the state required by the lease. Provided it hands back at least 500 properties per year, Annington has agreed to waive any dilapidations payments up to £7,000 on the 500 most dilapidated properties (as chosen by the Department) surrendered by the Department each year.26

Given the many people across the country in need of affordable housing, last year we asked the Department to come up with a plan and timetable to return more properties to Annington.27 However, out of the 243 properties handed back since then, we heard that only 32 will be set aside for social housing tenants.28 The Department explained that it is not within its power to decide what happens to properties once they are returned to Annington.29 Annington told us that the other properties handed back by the Department since last year were not in a state to be occupied and that it had not yet determined their future use.30 21 Government response to the Committee of Public Accounts on the Forty Third to the Fifty Eighth reports from Session 2017–19, Cm 9702, October 2018 22 Q 27 23 Letter from Ministry of Defence, 28 March 2019, para 2 24 Letter from Annington Limited, 7 March 2019, para 4, Letter from Ministry of Defence, 28 March 2019, para 2 25 Q 36 26 Letter from Annington Limited, 3 May 2019, para 3; Qq 16–20 27 Committee of Public Accounts Report, Ministry of Defence’s contract with Annington Property Limited, Session 2017–19, HC 974, July 2018, summary 28 Qq 30, 31; Letter from Annington Limited, 3 May 2019, para 2 29 Q 32 30 Letter from Annington Limited, 3 May 2019, para 2 10 Military Homes 2 Improving military homes Meeting the expectations of service personnel

If the Department does not ensure service families are happy with their accommodation, it risks losing some of its highly-skilled service personnel.31 The Department told us it had invested £135 million refurbishing around 3,800 homes last year, such that 95% of available homes are now at the nationally recognised Decent Homes Plus standard.32 The DIO plans to continue with a similar programme of refurbishing 3,500 to 4,500 homes this year, including work on bathrooms, kitchens, windows, external wall insulation and roofs.33

Nevertheless, many service families remain dissatisfied with the accommodation provided, and the Department’s internal satisfaction measure of housing satisfaction only increased slightly from 62% to 64% in the past year.34 The DIO said it had not set targets in this area. It suggested that a satisfaction rate of around 80% would indicate a satisfactory balance between a good level of service and cost-efficient use of resources.35 It has since written to say that it has now set a target of 68% for 2019–20, which it considers a ‘demanding’ one in the context of its contracting and resource constraints.36 The Department admitted it could do more to ensure that messages about accommodation (particularly about how it is responding to problems) get through to service families, rather than relying on communicating via the serving member.37

The Department told us it measures separately the level of satisfaction with property maintenance, and that it uses this information to hold its contractor to account. While the number of complaints has reduced by a third over the past year, less than half of personnel surveyed said they would recommend Amey’s maintenance services.38 We welcome the introduction of a compensation scheme for maintenance issues, but under it the Department currently pays out even when the contractor is at fault.39 The Department paid £109,000 in compensation during 2018–19, for around 3,000 complaints about missed appointments and for 121 significant defects at move-in.40 The Department told us it plans to build better incentives into new maintenance contracts when Amey’s contract expires later this year.41 It intends to divide up the contract into three or four regional contracts to encourage innovation and competition.42 It is not clear whether the Department has sought examples of good practice from other large landlords.43 31 Qq 73, 79 32 Qq 61, 62 33 Q 112 34 Q 64 35 Qq 68, 69, 109 36 Letter from Ministry of Defence, 17 May 2019, para 11 37 Qq 116, 122 38 Q 65 39 Qq 129, 130 40 Q 129 41 Qq 129, 137 42 Q 125 43 Qq 141, 142 Military Homes 11 The Department’s attitude to service families

The Department acknowledged that it had been slow to recognise that its accommodation offer did not match the way people live today.44 Those in long-term relationships have only recently become ‘eligible’ for surplus family accommodation, while ‘entitlement’ to accommodation remains the preserve of those who are married or in civil partnerships.45 We were told this is a temporary measure while the Future Accommodation Model is finalised and rolled out.46

We asked why the Department did not know enough about individuals’ relationship status to inform decisions about the provision of accommodation.47 It told us that it had tried to use next-of-kin information, but that this gave an inaccurate picture. For example, on one RAF base, next-of-kin information suggested that there were five individuals cohabiting, but survey data revealed that there were in fact 50. Rather than surveying every individual in the armed forces, the Department told us it had decided instead to simply widen the eligibility criteria for service family accommodation.48 We pointed out that there was currently no reason for individuals to volunteer information about their relationship status (other than established long-term relationships) because there were no benefits in doing so.49

We also questioned the Department’s approach of paying compensation to families for poor performance by its contractors in the form of retail vouchers. The Department claimed it paid vouchers rather than cash compensation in order to maintain financial controls, but it was unclear whether individual vouchers would be useable for service families in all locations.50 The Department acknowledged that it could always do more to understand its people and said that there were challenges in dealing with the families of service personnel directly.51 Nevertheless, it highlighted that it has regular conversations with families via, for example, the accommodation teams, family federations, ministers and commanders. We questioned whether families would feel able to be honest and open when speaking to someone higher up in the chain of command, but the Department claimed that it did not think this was a concern, and that it received sometimes painfully honest feedback from families.52 Modernising the Department’s accommodation offer

In the 2015 Strategic Defence and Security Review, the Department announced that it would develop a Future Accommodation Model to provide more choice, flexibility and better value for money in the provision of housing for military personnel. The new model would enable service personnel to have access to the wider housing market through subsidising private rented accommodation, or supporting personnel to buy their own home.53 44 Q 79 45 Qq 79–83 46 Q 84 47 Qq 88–94 48 Q 89–91 49 Q 92 50 Qq 130–134 51 Q 116 52 Qq 119–121 53 C&AG’s Memorandum, Service Family Accommodation update, January 2017, para 2 12 Military Homes

The Department’s plans for piloting the new model have slipped and are still not yet underway. In 2016, it expected to undertake thorough research and costing of options and to roll-out a pilot from 2018.54 In early 2019, the Department said the three-year pilots would be underway by mid-2019, but it has now pushed back the start date for the first to September 2019. The other two pilots will only begin in 2020. The Department said it had delayed the pilots to carry out more research and consult with local authorities about how they might help.55

We asked how the Department would find out what long-term impact the model has. It said that that there would be some rotation of people living on the pilot sites during the three years, which would help it gather information about the decisions service personnel make at different life stages.59 It also told us that by the time the business case for the Future Accommodation Model goes forward, the outcome of the rental negotiations with Annington will be known and this will inform decisions about the future speed and direction of change.60 54 C&AG’s Memorandum, Service Family Accommodation update, January 2017, para 2 55 Qq 29, 70–73 56 Qq 75–77 57 Qq 103, 104 58 Q 74 59 Q 105 60 Q 78 Military Homes 13