- The NAO estimates that by December 2024, the Ministry of Defence (MoD) was around £14.5 billion worse off than it would have been if it had not sold its Service Family Accommodation (SFA) estate to Annington Property Ltd (Annington) in 1996.
- The repurchase of the estate in 2024 puts a stop to what would have been billions of pounds of further lost value.
- Value for money ultimately depends on the MoD making the most of the opportunity – and some £9 billion – that it now could invest in service family accommodation.
- The MoD’s deal with Annington should remain a cautionary tale for government about the risks to long-term value for money that can be inherent in sale and leaseback transactions.
A new report from the independent public spending watchdog, the National Audit Office, looks at the process by which the MoD bought back 36,000 homes for service families; homes which were sold to Annington Property Ltd in 1996 and subsequently leased back at huge cost to the taxpayer.
The report estimates that the public purse is some £14.5 billion worse off as a result of the selling the properties to Annington in 1996.
Setting out an overview of the background to the 2024 deal, the repurchase agreement, and plans for the future provision of SFA, the NAO report finds that the repurchase puts a stop to what would have been billions of pounds of further lost value had the MoD allowed the Annington arrangements to continue.
The 2024 deal to repurchase was the lowest cost of the options considered in a process that was largely handled effectively, the report says.
Challenges remain for MoD, however, including delivering on the 2025 Defence Housing Strategy which requires MoD to become a property developer, regeneration organisation and a housing service. But, the report says, it doesn’t yet have the necessary expertise or capacity.
The NAO makes a number of recommendations for MoD who should:
- Seek to learn from others in government about the different models for bringing in the private finance and private sector expertise required to deliver its plans, and the benefits and risks of the different approaches;
- finalise its long-term funding plans for the defence housing estate;
- establish the Defence Housing Service with the powers and autonomy it requires to deliver the planned reform efficiently; and
- prepare, and publish a summary of, its plans and timeline for the refurbishment and rebuilding of the housing estate and release of land for housebuilding.
"Repurchasing MoD’s service family accommodation has avoided further lost value and now provides the opportunity to deliver the ambitions of the Defence Housing Strategy. The MoD’s experience remains a cautionary tale about the risks to long-term value for money that are inherent in sale and leaseback transactions."
Gareth Davies, head of the NAO