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How Privatizing Military Housing Became a Nightmare for Soldiers – Mother Jones

How Privatizing Military Housing Became a Nightmare for Soldiers – Mother Jones

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In December 2021, Army Sergeant Johny Dudek, his wife, and their 2-year-old son moved into a three-bedroom house next to the Fort Bliss military base in El Paso, Texas. The Dudeks had a baby on the way, and they figured that living in military housing would help them save up for their growing family.    

Shortly after moving in, they noticed water damage in their kitchen and dining room. Soon, the family started falling ill with respiratory illnesses and other ailments. Dudek was afflicted with respiratory problems that their doctor said were “very likely” related to mold exposure, as well as severe skin issues and increased anxiety. After their daughter was born that spring, the newborn was frequently sick and had trouble breathing at night. She too began having severe skin problems. “The only times where she wasn’t sick was when we went on vacation,” Dudek says.  

Dudek suspected that the root cause of all these health problems was mold from the water damage; official Army guidance indicates water damage should be addressed within 48 hours to minimize the risk of mold. Soon, he began what he describes as a year of fighting with Fort Bliss Family Homes, a development of the international real estate conglomerate Balfour Beatty, which oversees a vast swath of military housing across the country.    

First, an employee at Fort Bliss Family Homes denied there was any mold problem at all and told him that black mold doesn’t grow in El Paso, recalls Dudek. At one point, after Dudek made multiple requests for the company to remediate the water damage in their home, the family was temporarily displaced while the company tried to address the issue. When they moved back in, the company said their water damage had been addressed. But Dudek says they were skeptical.  

While the family was displaced, Dudek says the housing company capitulated on their request to test the home’s dining room wall for mold; a contractor hired by the company reported that none had been found. (Dudek claims the company refused to test other parts of the house.) This seemed at odds with the findings of a separate company Dudek later hired to perform its own testing of a kitchen cabinet that was re-installed after the company had supposedly remediated the water damage. That company found multiple types of mold that have been linked to respiratory illnesses, skin infections, and cancer, according to medical experts. 

“Fighting with Fort Bliss Homes cost me my military career,” says Dudek, who left the Army in 2023 after serving 12 years and now is in the Texas National Guard while training to get certified as an EMT. He said his experience soured his opinion not only of military housing, but also of the military itself, after facing a “toxic and unsupportive” response from his unit during the year he spent battling the housing company. “I was basically forced out of my job, because all of my time was dedicated to dealing with this problem,” he says. He is preparing to sue over his housing issues.  

Former Army Sergeant Johny Dudek stands in front of his previous home, managed by Fort Bliss Family Homes, in El Paso, Texas, on February 22, 2023. Dudek claims their battle with the company over housing problems cost them their military career.

René Kladzyk

The housing issues that Dudek says derailed his military career were not news to the Defense Department. The same month the Dudek family moved into their home at the end of 2021, Balfour Beatty pleaded guilty to defrauding the US military of millions by falsifying maintenance records on military housing. Deputy Attorney General Lisa Monaco described Balfour’s scheme as the result of a “broken corporate culture,” and the company was ordered to pay over $65 million in fines. 

But Balfour continues to hold lucrative military housing contracts across the nation. It is one of 14 private companies that own and operate 99 percent of military family housing in the US, controlling 78 developments. It also isn’t the only company that has faced accusations of work order fraud: Hunt Companies, Inc., the largest of the military housing providers, agreed to a $500,000 settlement with no admission of guilt in a similar federal fraud case in 2022.  

Roughly 700,000 service members and their families live in privatized military housing, where they could be subject to dangerous living conditions created by substandard landlords.  

A spokesperson from Balfour Beatty declined to be interviewed but provided a statement saying the company takes the Dudek family’s concerns seriously and emphasizing the strides that have been made in improving the quality of military housing. The spokesperson also said the company “embraces oversight.”  

Hunt Military Communities did not respond to a request for comment, but in a statement released following the fraud claim settlement, the company’s president said Hunt Military Communities’ top priority was “serving our military families as well as our partners with honesty, integrity, and transparency.”

Meanwhile, hundreds of service members and their families have joined lawsuits against military housing companies after their lives were turned upside down by substandard and in some cases hazardous housing conditions like dangerous mold, lead-based paint, and rodent and insect infestations. 

Their ordeals have been made possible by the federal government: Contracts obtained by the Project On Government Oversight (POGO) as part of a yearlong investigation reveal the devil’s bargain the Defense Department struck when it handed over responsibility for military housing to the private sector in order to offload the expensive burden of maintaining these homes. These agreements include provisions that make them nearly impossible to terminate and that allow companies to evade some environmental, tenant rights, and consumer protection laws.  

Military housing advocates, legal experts, and lawmakers interviewed for this investigation say the lopsided terms woven into these contracts—which provide few mechanisms for accountability—helped cause the nightmarish housing conditions service members like Dudek have faced.  

Sandbags line a portion of the fencing around the Dudeks’ former home. Dudek said the backyard turned “into a swimming pool anytime it rains.” René Kladzyk
The Dudeks complained of water damage to their former home from water leaking through the back door and inside the carport, among other areas. René Kladzyk

Among the nearly two dozen service members and their families who spoke with POGO, recurrent themes emerged. Multiple families said they lost all their household belongings due to mold contamination. Several said family pets either died or became seriously ill under circumstances that the families suspected were due to toxic housing conditions. They reported severe pest infestations, rampant health and safety hazards, and told harrowing stories of young children with respiratory, skin, and stomach problems allegedly linked to mold. Service members interviewed by POGO said they faced pushback, incompetence, and sometimes outright deception by military housing companies when it came to housing maintenance and work orders.  

Following national media attention about substandard housing conditions for military families, in 2019, Congress took steps to address the issue by adding protections in the 2020 and 2021 National Defense Authorization Acts, including a “Tenant Bill of Rights” for service members. But according to legal experts and military housing advocates, those efforts have proven inadequate, largely because these new protections can’t escape the ill-conceived contracts underpinning the privatized military housing system—and the powerful players pushing to maintain the status quo. 

“These houses aren’t taken care of—they’re held together with popsicle sticks and bubblegum,” Dudek says. “Because despite our immense military budget, our government has sold off maintaining these homes—taking care of our soldiers and their families—to (companies that do) the minimum amount of work for the maximum amount of profit.”  

The privatization of military housing dates back to 1996, when the Defense Department’s housing stock suffered from a $20 billion maintenance backlog. Privatization offered lawmakers a solution: a massive infusion of capital into military housing. But it also promised an incredible deal for the companies poised to enter the military housing business, says Jean Coffman, executive director and board chair of the Safe Military Housing Initiative, a national military housing advocacy organization. “You had guaranteed tenants, a continuous flow of tenants, and no way for tenants to…fail to pay the rent,” Coffman says, since rent is often automatically deducted from service members’ pay.  

These private companies would go on to invest roughly $32 billion into maintaining the nation’s military housing stock, helping to build 75,000 new homes and renovate another 50,000, according to a coalition of military housing companies. 

But in exchange for their investment, these companies pushed for contracts that would ensure their involvement for decades—often 50 years—and lock the government into favorable terms that now shield the companies from having to adhere to new tenant protections established since these contracts were originally drafted. (Among the legal agreements obtained by POGO, most aren’t set to expire until the 2050s.) 

A spokesperson for the Military Housing Association, a lobbying organization for military housing providers, said the amount of private capital these companies were willing to spend was contingent on obtaining lengthy contract terms.  

THIS GROUND LEASE is granted subject to the following Conditions:
1. TERM
a. The initial term of this Ground Lease of all lands described in Exhibit A-1 is for a period of fifty (50) years, commencing on the Effective Date and expiring September 30, 2053. The initial term of this Ground Lease for the Future Barracks Parcel described in Exhibit A-2 is for a period commencing on the Effective Date and expiring December 31, 2006. Notwithstanding the initial term of this Ground Lease, upon written notice from the Secretary to the Lessee, this Ground Lease shall be modified to exclude the Future Barracks Parcel described in Exhibit A-2 and the Lessee will quitclaim (or cause to be quitclaimed) the Improvements located on the Future Barracks Parcel to the Secretary, free of the Sublease and/or Building Lease. Unless the parties agree to the contrary, the Future Barracks Parcel shall be released from the Ground Lease and deeded to the Secretary no later than December 31, 2006.

When Congress passed new oversight measures, including the Tenant Bill of Rights for service members, the housing companies were involved in the process of drafting them, according to Elizabeth Field, a director at the Government Accountability Office (GAO) who specializes in military housing. Their input was necessary, she says, because the Tenant Bill of Rights would ask the companies to voluntarily go beyond their preexisting contractual obligations. Despite that, many of the contractors still don’t seem to be following the protections they helped write: In September 2022, the Department of Defense’s inspector general reported that more than a third of housing companies weren’t complying with the Tenant Bill of Rights.  

Pentagon spokesperson Jeff Jurgensen said in an email that the department believes all military installations will be fully compliant with the Tenant Bill of Rights in 2024. But according to a recent POGO investigation and a GAO report, implementation of these rights has been problematic, even among the housing companies that the Defense Department deems fully compliant. 

For example, the Tenant Bill of Rights entitles military families to a “formal dispute process,” providing a third-party mediator if there’s a housing problem that the service member can’t get resolved by working directly with the housing company. Military housing advocates say few service members use this option because it is so convoluted. A GAO report found widespread confusion across military branches about the mediation process for housing disputes; the number of families who had actually used the process was in the single digits for most branches of the military as of November 2022. (The Department of Defense declined requests from POGO to provide an updated tally on the number of service members who had used this process.) 

Bernard Rostker, a former undersecretary of defense for personnel and readiness during the early days of privatized military housing, said that when this system was implemented in the 1990s, he pushed for alternatives until he was “blue in the face,” arguing that the profit motive would create perverse incentives for military housing companies.  

“In Australia, there is a government entity which manages military housing,” Rostker says. “There is no reason that could not have been done here. But it wasn’t.”  

Rostker, who prefers to call the current arrangement “a public-private partnership” rather than “privatization,” said this system misguidedly relied on the hope that the private sector would take a long-term view when it came to maintaining the houses. 

The Pentagon’s logic had been that the companies would be motivated to maintain good conditions to compete with off-base housing markets. Rostker has been skeptical of that premise. In many places, service members may not be able to afford to live off-base using the military’s basic housing allowance, making them a captive market for military housing, he said. 

Coffman, of the Safe Military Housing Initiative, shares Rostker’s concerns about the built-in incentives for the private sector to neglect homes. The result, she says, is pervasive problems in military housing that are not limited to one company; her organization has helped thousands of service members and their families around the country who are facing the consequences of these companies’ harmful practices. 

Laura Pugh and Stephen Stewart, one of those families, live in military housing on Fort Riley in Kansas that is managed by Corvias, another military housing company. They decided to live there because they couldn’t afford off-base rent with Stewart’s roughly $1,200 monthly allowance, Pugh says. While her husband was deployed overseas, she often had a hard time getting Corvias to address housing maintenance issues, including, Pugh says, structural problems that resulted in warped doors and sagging flooring and a moldy laundry room that she couldn’t be in for more than 20 minutes.  

Like many military spouses, Pugh wasn’t even listed as a tenant on her lease—a problem that Coffman says is common in military housing and can create myriad problems for military spouses. As Pugh notes, “The (housing company) supervisors always…have the attitude of ‘you’re just a dumb wife.’” (Pugh and Stewart moved out of that house in early 2023.) 

Corvias did not respond to a request for comment.  

Coffman argues that tenants like Pugh and Stewart need to have a real choice between on- and off-base housing for the rationale of market competition to motivate housing companies to provide better maintenance. Instead, she said the unique conditions of military housing—service members who have constrained housing options and are acculturated to obeying authority rather than questioning it—only further the status quo of poor upkeep and barriers to holding housing providers accountable. 

The military culture of loyalty and obedience has helped make military housing a lucrative business opportunity for decades, according to Mahlon “Sandy” Apgar, a real estate consultant who is considered the “father” of the privatized military housing system. A 2004 Harvard Business Review article co-authored by Apgar focused on this particular quality to describe the advantages of investing in military homes. Military consumers, he wrote, are a “large and loyal market,” and the group’s defining characteristic is “an affinity for the military that is rooted in institutional culture.”

There is yet another factor unique to military housing that stacks the odds against service members: Present-day environmental, housing, and personal injury laws don’t always apply on military bases. This is because of a little-known legal concept—called the “federal enclave doctrine”—that’s being used as a defense in military housing cases around the country.  

Few know the legal peculiarities of this argument better than Ryan Reed. A San Antonio-based commercial litigator and a landlord himself, Reed got interested in military housing cases four years ago after agreeing to help a friend of a friend on Randolph Air Force Base with a moldy and pest-ridden home. (A federal judge recently awarded the family more than $91,000; the housing company, Hunt Military Communities, has said it is considering appealing.)  

Reed is now representing 12 military families in a federal court case against Balfour Beatty, alleging the company ignored dangerous housing conditions that included sewage backups, toxic mold, cockroach infestations, and violations of a law meant to reduce lead paint hazards in homes. He is also working on similar cases brought by military families against housing providers Hunt Military Communities and LendLease. 

Reed says the federal enclave doctrine has contributed to his clients’ subpar housing conditions by making it harder to protect military housing tenants. A “federal enclave” is territory a state has ceded to the federal government; most military installations fall into this designation. These enclaves are typically governed by the laws that existed when the land was handed over to the military, no matter how much those laws have changed in the years since to offer stronger safeguards. 

The result is that military housing providers have a legal justification to operate outside the bounds of present-day protections, Reed says. In 2014, for example, after a 7-year-old drowned at a military housing unit, the housing company attempted to fend off a wrongful death lawsuit by arguing that personal injury law did not apply because the land the base was built upon was ceded to the federal government in 1917, before such laws existed. The case was eventually settled out of court. 

8. APPLICABLE FEDERAL, STATE, COUNTY AND MUNICIPAL LAWS, ORDINANCES AND REGULATIONS

a. The Lessee shall comply with all applicable Federal, state, county and municipal laws, ordinances and regulations.

b. The Lessee shall comply with the Americans with Disabilities Act of 1990, as amended (the “ADA”), and the Uniform Federal Accessibility Standards to the extent each may be applicable to the Project and the use thereof.

c. Each Party shall have the right to contest the applicability or enforcement of Federal, state, county and municipal laws, ordinances and regulations and, upon Lessee’s request, the Lessor shall reasonably cooperate with Lessee in Lessee’s taking such actions as may be necessary, in accordance with such applicable Federal, state, county and municipal laws, ordinances and regulations, to contest applicability, enforcement, or otherwise minimize or assert any exemption which may be available with respect to applicable Federal, state, county and municipal laws, ordinances and regulations or otherwise dispute the validity of any applicable Federal, state, county and municipal laws, ordinances and regulations. The Lessor shall not be required to join in any such action brought by Lessee except to the extent required by applicable Federal, state, county and municipal laws, ordinances and regulations in order to make such action effective.

Where Reed works in Texas, residents at Laughlin Air Force Base benefit from current Texas landlord-tenant laws because of that land’s enclave status when it was ceded to the federal government. But service members at neighboring Randolph Air Force Base are subject to pre-1952 state laws, before a range of consumer protection and landlord-tenant laws had been passed. 

These complexities make oversight that much harder: The military can’t effectively enforce the rights of tenants when it’s so difficult to nail down what rights apply where, Reed says. He pointed to the first piece of the Tenant Bill of Rights set forth in the 2020 defense bill—it promises “the right to reside in a housing unit and a community that meets applicable health and environmental standards.” 

“What in the world are the ‘applicable health and environmental standards’?” Reed asks. “That, in and of itself, exemplifies the problem.”  

Balfour Beatty Communities—the company that owns the Dudeks’ former home—oversees military housing on 55 Army, Navy, and Air Force bases around the country. Between 2013 and 2019, the Department of Justice found that the company engaged in an $18.7 million fraud scheme in which it lied about making repairs to the houses it was contractually obligated to maintain. The fraud meant that military families experienced lengthy delays in housing repairs while the company pretended the problem had already been solved, falsifying property maintenance data and resident comment cards. It did this to gain lucrative incentive fees awarded by the DOD for timely maintenance of the houses, according to the plea agreement.  

Four months after the company was ordered to pay millions in criminal fines as punishment, a Senate probe found that Balfour Beatty had continued to engage in similar misconduct into 2022, after it had already pleaded guilty to the DOJ’s charges. In an April 2022 Senate hearing, an Army captain testified about the potentially lethal dermatitis his young daughter developed while living in a Fort Gordon home with toxic mold that Balfour Beatty had inadequately remediated. 

During the hearing, Sen. Jon Ossoff (D-Ga.), who led the investigation, asked if military housing companies that engage in wrongdoing could simply lose their contracts: “Why should a company convicted of major criminal fraud, that engaged in a scheme to defraud the United States, remain in a position of trust, responsible for the safe housing of the heroes—service members and their families—on installations across the country?” he asked. 

But whether canceling contracts is an option for military housing companies is a question that even some congressional leaders haven’t been able to answer. 

“What would these companies have to do in order to cause enough damage in order for you to consider terminating their contracts?” Rep. Tony Gonzales (R-Texas) asked the Department of Defense’s head of housing during a 2022 House subcommittee hearing, emphasizing that the department has not only maintained, but actually expanded its business partnerships with Balfour Beatty and Hunt even after both companies’ fraud cases. 

Pentagon Chief Housing Officer Patricia Coury responded that terminating housing company contracts is “a very complicated process” and would be “extreme.” In fact, the Defense Department has never canceled a contract with a military housing company. A 2023 GAO report cited unnamed Pentagon officials saying that “the likelihood of project termination is low.” And a senior DOD official who asked not to be named said that doing so, while possible, would compromise the ability of the government to provide quality housing to service members. 

That is in part due to the role third-party lenders play in the military housing landscape. These firms provide military housing companies with financing for capital improvements and maintenance in exchange for a return on their investment. Because of that role, military housing contracts typically give these investors the ability to intervene to protect the housing companies’ agreements with the Defense Department from being terminated.  

9.5 Right of the Leasehold Mortgagee To Cure Before Termination.

9.5.1 Notwithstanding any provision of this Lease to the contrary, if any Event of Default shall occur under this Lease, then the Government shall have no right to terminate this Lease or the Lessee’s rights hereunder, unless, following the expiration of the period of time given the Lessee to cure such default pursuant hereto (or, if the Lessee has no right to cure same, following such default), the Government shall deliver a written notice (the “Proposed Termination Notice”) to the Leasehold Mortgage of the Government’s intent to so terminate. Any such Proposed Termination Notice must state in reasonable detail the uncured Event of Default and must be received by the Leasehold Mortgagee (a) not less than (redacted) in advance of the proposed effective date of such termination (the “Proposed Termination Date”), if such Event of Default is a Monetary Default, or (b) not less than (redacted) in advance of the Proposed Termination Date if such Event of Default is a Non-Monetary Default, as applicable.

9.5.2 The Government shall not have the right to terminate this Lease or the Lessee’s rights hereunder, if during such (redacted) or (redacted) period (as applicable) the Leasehold Mortgagee (or its nominee, assignee or designee), at the Leasehold Mortgagee’s option, shall: (i) notify the Government in writing of the desire of the Leasehold Mortgagee or its nominee, assignee or designee to nullify the Proposed Termination Notice; (ii) cure or cause to be cured all Monetary Defaults identified in the Proposed Termination Notice during such (redacted) period; and (iii) cure or commence to cure during such (redacted) day period with reasonable diligence and continuity all Non-Monetary Defaults identified in the Proposed Termination Notice (it being acknowledged and agreed, however, that the Leasehold Mortgagee shall not be obligated to cure or attempt to cure Lessee Specific Defaults and nothing in this Lease shall be construed to require any Leasehold Mortgagee to cure or attempt to cure a Lessee Specific Default as a condition to preserving this Lease or to obtaining a replacement lease).

During the House subcommittee hearing, Rep. Debbie Wasserman Schultz (D-Fla.) said it would cost at least $40 billion to terminate existing military housing contracts and buy out the creditors. And companies like Balfour Beatty, she said, understand this; their contracts are virtually untouchable, which make potential penalties for wrongdoing seem like just the “cost of doing business.” She added: “They basically can act with impunity.”  

Balfour Beatty Communities disputed this characterization. “Nothing could be further from the truth,” a spokesperson wrote in an email to POGO. “We care deeply about our military housing projects, our ongoing partnership with the U.S. Government, and our commitment to provide high-quality housing to our residents.” 

But former tenants such as Johny Dudek, who is working on taking his family’s housing disaster to court, don’t see it that way. “I want justice for myself, my family, and all of the other families…that Balfour Beatty has ruined,” he says. He expressed his anger and frustration that the military passed off responsibility for military housing to private companies, forcing service members to battle multinational corporations to protect their families.  

“The thing that kills me is these people are under contract to do a thing,” he says. “They are not doing the thing. Why do they still have the contract?”