Terry Gerton Military housing is a topic that we have talked a lot about here on the Federal Drive in a variety of ways. It’s also, of course, been the subject of congressional hearings and IG reviews and media investigations and reform efforts for years, probably almost as long as it’s been out there. And yet we still keep seeing many of the same complaints. You’ve got a new report out from POGO. What does your reporting suggest that we are missing about the underlying problem here?

René Kladzyk Well, our most recent investigation focuses on a real estate conglomerate that was contracted by the Pentagon to be the watchdog of military housing companies. And I haven’t really seen any reporting on them fulfilling this role in the past. So I think this is pretty unique reporting in that regard. But really what we dug into were the extensive and long-standing business ties that this military housing watchdog has with the very companies it’s supposed to be independently overseeing as a neutral third party. So, of course, that raises some very serious questions about conflicts of interest and to what extent they are really in a position to meaningfully hold these companies accountable when they’re doing something that they shouldn’t be.

Terry Gerton What is it about this particular relationship in regards to privatized military housing that might make it difficult for other watchdogs, like the GAO or the DoD IG, to figure out what these relationships are and see them in their completeness?

René Kladzyk Well, on the one hand, the military housing apparatus is a pretty complex beast. It exists outside of typical contract regulation law. These are not your standard federal contracts; these are actually public-private partnerships. And the legal agreements with these housing companies vary by company and by installation in many cases. So, it’s hard to make universalizing statements about the nature of these companies or the nature of oversight. That said, my understanding from former Pentagon officials I’ve spoken to, from experts and advocates, is that there were really a lot of failures in the early days of privatization to set up the system in a way that would have actual teeth. And while there have been congressional efforts more recently to try to rein in the housing companies to improve oversight, you have the problem that these in many cases are companies that have 50-year-long ground leases and property management agreements with the federal government, where you cannot alter the terms of those easily. So that can be a real constraint toward accountability. I don’t know that that really answers your question of why this particular company has … not gotten notice from the oversight agencies that do exist, that would be in a position to hold them accountable. I don’t really have the answer to that question other than maybe people just weren’t aware of all the business ties that we found. But hopefully they are now.

Terry Gerton Perhaps, as you say, this report will elevate some visibility here. But let’s walk through what the practical implications are for military families as a result of this arrangement. You have one company that is the advisor to the Pentagon on privatization of military housing monitoring the privatization and military housing and also an industry participant in privatized military housing. So when one company plays all of those roles, what impact does it have on military families, especially when those families have a complaint or an issue or a concern that maybe is not getting resolved?

René Kladzyk Well, the role of this company — I think it is hard to see it on the more micro scale, because they are operating at such a macro level. They have their hands in so many different types of both on-base and off-base sectors. But in our investigation, we focus on a military family in Washington, which this company, Jones Lang LaSalle — that is the military housing watchdog; they are also a co-defendant in a lawsuit in the state of Washington over allegedly being part of a price-fixing conspiracy to drive on- and off-base rents up. So this family that I spoke to, they were living on base and dealing with mold in multiple houses, trying to get out so that they could be in safe housing. The whole family was sick. They could not afford off-base rentals. The allegation in this lawsuit is that this company that’s a military housing watchdog was part of what was driving off-base housing prices ever higher. And that is doubly problematic, because they also are so closely interwoven in on-base pricing and oversight. That’s kind of a central contention of our piece, is that they are at a unique juncture where they can be part of a system that is driving both on- and off-based housing prices ever higher. And of course, there’s a nationwide affordability crisis when it comes to housing, and military families are really at the forefront of this because they have to move so frequently and may face very limited housing options where they’re making choices in a really constrained marketplace.

Terry Gerton René Kladzyk is a senior investigator at the Project On Government Oversight. René, Congress and the Pentagon have not ignored this issue. There have been numerous attempts at reforms, at tenant protections, at a bill of rights for military housing members. And yet, we still keep having the same kinds of problems of military families struggling and facing illness in substandard, privatized military family housing. Why do these same problems keep resurfacing?

René Kladzyk  I actually have a quite simple answer to this question, which is that they’re all business partners. The Pentagon is in a business partnership with these companies. The military services are in business partnerships with these companies, and with the companies that are hired to oversee them. So it’s a quite mangled system when you have, say, tenants’ bill of rights for service members where the housing companies participate in the drafting of those to ensure that they’re on board with all of what gets written, because their contracts would need to be modified to have any enforcement. So when those companies have a seat at the table as they’re being overseen, when they’re helping to write the way that they are overseen, that of course introduces real problems for those oversight efforts having actual teeth.

Terry Gerton Let me ask you to take that one step further and talk really about the incentives that are in play for all of these different parties in military housing. You’ve got the companies, you’ve got the Pentagon and the services, the states and communities may be engaged here in creating arrangements. Have we created a system where the incentives are actually weighted against the wellbeing of military service members and their families?

René Kladzyk That’s certainly the conclusion that a lot of experts and former Pentagon officials I’ve interviewed have landed on — when you inserted a profit-seeking motive into what was formerly considered a public good, you introduced all sorts of problems. So you have the fraud lawsuits by the DOJ against multiple housing companies, one of which was found guilty of defrauding the federal government over falsifying housing maintenance — pretending they were maintaining the houses in order to get incentive fees when they weren’t. That company continues to keep their contracts with the federal government, even though they were found guilty of doing this. Another company, the nation’s largest military housing provider, Hunt, they paid a settlement with no admission of guilt in those same allegations. And then a couple of years later, the OIG did an investigation and found that that company was being improperly overpaid in incentive fees. So, you know, the system is set up in a way where I think there is this tendency — these are profit-seeking entities. All of these companies are massive real estate conglomerates, and they do have an incentive to maintain the houses at a way that helps their bottom line, which in military housing, they don’t control rent because of BAH. So what’s the main way that they can control their profit margin? It’s how much money they’re putting into maintaining the houses.

Terry Gerton René, when you think about this arrangement and words like “rent-seeking” and “regulatory capture” come to mind, are there other sectors of the federal government that ought to be taking a lesson here? I mean, I can think about higher education, healthcare provision, anything that involves benefits, as you say, privatizing a public good. What should we be warning other agencies about to make sure they’re looking at so they don’t create a similar sort of structure?

René Kladzyk Well, I think that for one, when these contractual agreements are getting drawn up in the first place, there should be a very close eye paid to who you’re bringing on and what are the guardrails around the terms of that relationship. But I’ll mention one example that we briefly get into in the investigation we just published, but I’d love to look into in greater depth. So this same company that we investigated, Jones Lang LaSalle, they’re also a major contractor with the General Services Administration, which oversees and controls all of the real estate of the federal government. So Jones Lang LaSalle has a huge advisory role with federal government rental properties for commercial use. Meanwhile, in June, Jones Lang LaSalle is now also a co-defendant in yet another price-fixing lawsuit over commercial real estate. So you have very similar problems that we talk about in relation to military housing also in the commercial real estate sector, where the same company is also in an advisory role to the federal government. So I just think it speaks to the fact that when the government gets in bed with these massive conglomerates, they have to be very careful of the different motives that may be at play.