The sell-off of military housing has cost the taxpayer almost £15bn, the public spending watchdog estimates.

A new report from the National Audit Office calculates that the Ministry of Defence (MoD) was around £14.5 billion worse off than it would have been if it had not sold more 55,000 homes for military families to a private property company in 1996 – only to lease them back.

It says the government’s repurchase of more than 36,000 homes from Annington Property Ltd in 2024, at a cost of almost £6bn, put a stop to what would have been billions of pounds of further lost value. 

At the time of the repurchase the MoD was paying £230m per year to lease the homes back.

Had it not done so, the cost to the taxpayer would have been an additional £10.6 billion to lease the homes for the next 30 years

The huge loss to the public purse should remain a “cautionary tale” to ministers about the risks to long-term value for money inherent in sale and leaseback transactions.

The NAO says that in order to ensure value for money for taxpayers going forward it is vital that the MoD invest in service family accommodation and learn lessons from the past mistakes.

It says challenges remain for MoD, including delivering on its £9bn Defence Housing Strategy, set out in 2025, which requires MoD to become a property developer, regeneration organisation and a housing service. 

But, the report says, it lacks the necessary expertise or capacity.

The MoD should learn from others in government about the different models and private sector expertise required to deliver its plans, the report recommends.

NAO head Gareth Davies says: “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.”

Committee of Public Accounts chair Sir Geoffrey Clifton-Brown says: “This report lays bare the effect that an ill-conceived deal can have for taxpayers for many years.

“It stands as a stark warning to government on the risks of selling critical assets to address short-term affordability concerns, without due consideration of the consequences in the decades to come.

“While the 2024 repurchase finally draws a line under this sorry saga and stops the haemorrhaging of public money, it must mark a turning point.

“The Ministry of Defence now has both the incentive and the opportunity to deliver the decent homes service families deserve.

“The £9bn Defence Housing Strategy will make or break value for money, and will prove essential in strengthening recruitment and retention across the armed forces.”