The government is planning major redevelopment of military homes after a £6bn repurchase of stock from a private owner, the chief of the Defence Infrastructure Organisation has said.

The Ministry of Defence (MoD) announced this morning that it had bought back the 36,347 military homes which comprise the married quarters estate, reversing a sale undertaken by the government in 1996.

The purchase by the MoD, supported by UK Government Investments, will bring to an end a legal dispute between the government and the estate’s previous owner Annington.

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The MoD is planning a major overhaul of the homes it has now bought back from private equity

Billionaire Guy Hands, whose private equity company Terra Firma owns Annington, had taken the government to court over its leasehold reforms earlier this year.

Around 55,000 houses were sold in 1996 to Annington for an average of just £27,000 each, with the government renting them back at a discount.

Despite this, the government has estimated that taxpayers are £8bn worse off as a result of the 1996 deal.

It claims that, when not subject to leases, the estate is now valued at £10.1bn.

The deal that had passed ownership to Annington also prevented the MoD from being able to demolish properties or build additional homes for service families.

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The announcement comes in advance of a new military housing strategy, which will be published next year.

Mike Green, chief executive at the Defence Infrastructure Organisation, told Building that “it is the intention to invest significant amounts of money in the estate”.

“It’s not because we want to be a developer. It’s because we want great houses for armed forces families,” he said.

Green described the 1996 sale as a “very bad deal” and said its reversal brought “numerous” opportunities.

“First off, we can hopefully turn military housing from tolerable to aspirational,” he said, citing damp and mould as persistent issues.

He said around two-third of the estate needed rebuilding and said the existing lack of density meant there could be room for up to 150,000 additional houses.

“There isn’t one solution. MoD may want to sell some land to generate some money to develop other bit,” he added. 

“We may want to use private finance. We may want to work with builders to build houses. We may be doing swaps.

“It will be a whole mixture of how we get this done. We may well sell some sites, we may well do some partnerships. We may well develop some ourselves.”

The government already has plans to submit applications for 265 new houses and apartments at RAF Brize Norton in Oxforshire and further plans, to be submitted in the spring, for around 300 new houses at Catterick Garrison in North Yorkshire.