MoD Strikes £6 Billion Deal to Buy Back Sold-Off Military Homes

Undated file photo of the sign for the Ministry of Defence in London. Tim Ireland/PA Media

Thousands of sold-off military homes will be brought back into public ownership at a cost of almost £6 billion following a High Court decision that ruled their sale was a “bad deal” for the government.

Ministers and officials said the deal will bring to an end the £230 million annual rental cost of the homes and is intended to improve the “dire” state of military accommodation.

The Ministry of Defence (MoD) will buy back 36,347 homes from property firm Annington, reversing the 1996 privatisation process under the premiership of John Major, which saw 55,000 houses sold for an average of just £27,000 per property.

The service family estate is now valued at £10.1 billion when not subject to leases and is being purchased for £5,994,500,000.

‘Dreadful Deal’

Healey said in a statement the “dreadful deal” to privatise the service family estate was a “fire sale” by the Conservatives in the run-up to the 1997 general election.

“Today ends one of the worst-ever government deals,” he said, adding that it is “shameful” that many military families are living in “substandard” homes riddled with damp and mould.

He added that problems with military accommodation have built up “over the past decade” and will not be “fixed overnight,” but hailed the buy-back as “a decisive break with the failed approach of the past and a major step forward on that journey.”

He said, “This is a once in a generation opportunity, not only to fix the dire state of military housing but to help drive forward our economic growth mission, creating jobs and boosting British housebuilding.”

Healey praised the armed forces and their families for their “extraordinary sacrifices,” which he called “the ultimate public service.”

“We are determined to turn this around and renew the nation’s contract with those who serve,“ he said, adding that the deal would bring ”important savings” to the defence budget.

Legal Battle

The process of bringing the homes back into public ownership began under the previous Conservative government, with the MoD winning a legal battle in 2023 to take some of the properties back under the leaseholder rights, which it had retained.

The arrangement with Annington, owned by private equity billionaire Guy Hands, meant homes were rented at below market rate but the taxpayer was responsible for maintenance costs, with improvements potentially driving up rents.

MPs from the cross-party Public Accounts Committee in 2018 described the sell-off as “disastrous for taxpayers”  because it did not include clauses to give the government a share of future price rises for the properties.

Despite most of the properties dating from the 1950s and 1960s, the Annington deal has prevented the MoD from being able to demolish them to build newer accommodation.

The MoD said the previous deal left the taxpayer nearly £8 billion worse off, with £4.3 billion in rental payments and vacant properties worth around £5.2 billion handed back to Annington, partially offset by the £1.7 billion income generated in 1996 as part of the original deal.

Because the deal eliminates the liabilities associated with the leases, the impact on net financial debt will be limited to £1.7 billion despite the near £6 billion outlay.

‘Landmark Deal’

Chief Secretary to the Treasury Darren Jones said: “This is a landmark deal that will start saving the taxpayer money immediately, all while driving forward our mission to create growth across the country.

“Not only does it open the door to major development and improvements across the military housing estate, but most important of all, it will help us on our mission to build more houses and deliver our service personnel the homes they deserve.”

The announcement comes as the government begins work on a new military housing strategy, to be published next year, following Labour’s “Homes for Heroes” manifesto pledge.

Key principles of the strategy will include a generational renewal of armed forces accommodation, new opportunities for forces home ownership, and better use of MoD land to support the delivery of more affordable homes across the country.

Labour plans to exempt veterans, as well as care leaders and victims of domestic abuse, from rules requiring a connection to a local area before accessing social housing.

Chief of the Defence Staff Adm. Sir Tony Radakin said: “Housing provision is a constant part of life for service personnel and their families, who support them closely throughout their military careers.

“We understand the importance placed on this for people’s morale and decisions on whether to continue in the armed forces long-term.”