Rental rancor; Realtors accuse Navy of fixing rents

While a new argument festers between the real estate community and the Navy’s housing officer Navy tenants and landlords on Guam are losing out on leasing properties.

David Mathews housing director for Naval Forces Marianas is the target for criticism by property owners realtors and appraisers for actions he has taken in recent months. He came to Guam in 2001 and discovered what officials term abuse of the rental market by landlords leasing to military tenants. (See “Housing high jinks” in the Jan. 26 issue of the Journal.)

Realtors and other members of the real estate community told the Journal Mathews has been using dubious methods to set monthly rental prices.

Gina P. Campos property owner and associate broker with RE/MAX Diamond Realty said Mathews is overstepping his authority by dictating what rental prices should be and the methods used to justify those. “Nowhere other than Guam are mandates being implemented as far as to tell a private property owner what their home is worth. That is the whole issue here and the problem is getting worse every day.”

Campos said 90% of people looking to rent a place to live on Guam are military members.

Local appraisers said they are frustrated because Mathews is telling them how to do their job. Mathews is allegedly telling appraisers to group certain unlike rentals together calling them “comparable” rentals in order to lower market prices.

“Comparable housing” is a realtor/ appraiser term used to describe like units in like locations with like pricing.

Robert Peryon licensed appraiser with Robert & Robert Associate Appraisers Inc. told the Journal “My company decided to stop appraising properties for the military after being told by Mathews how to do our job. We were told to lump ‘comps’ [comparable] listings together and I can’t do a creditable appraisal according to industry standards.” In effect Peryon said he was being told to create artificial markets to meet the Navy’s wants.

“The problem with rental property as I see it is no two are the same and I am being asked to appraise it like they are ” Peryon said. “The market is the market and if someone is willing to pay the asking price then so be it.”

One of the problems Campos said is that it is difficult to use comparable pricing because of the diversity of housing on Guam.

Mathews was contacted for comment to this story but declined. The Journal was referred to the Navy Public Affairs office. “It would be inappropriate for the government to discuss individuals housing cases. However the government is committed to providing fair compensation to landlords for off-base housing. The government solicits landlord and real estate agent participation to ensure housing meets these criteria ” the Navy said.

Another rift over rent pricing centers on price calculations. The Navy said rental prices should be based on the intrinsic value of an asset and not on the government’s or service member’s ability to pay. On Guam service members desiring to live in off base housing are provided an Overseas Housing Allowance. The Navy said the OHA provides fair market value for suitable quarters for personnel in terms of size amenities and location. It is the difference between what the government is considering fair market value and what property owners are asking for rent that is in dispute.

The Overseas Housing Allowance helps to offset housing costs and is made up of monthly rent; utilities recurring maintenance expenses; and a —one-time — move-in housing allowance.

Housing allowance amounts are determined for each area where the Department of Defense has bases. Rent ceilings are set according to pay grade and rank. The Per Diem Travel and Transportation Allowance Committee sets rent ceilings for each particular area. A formula based on surveys conducted is used to determine the amount a service member receives and is reviewed every six months or sooner should the need arise.

Effective Aug. 16 Overseas Housing Allowance for service members on Guam ranged from $1 740 per month for an enlisted service member in pay grade E-1 without dependents to a high of $2 600 per month for an officer in pay grades O-6 with dependents. An across-the-board monthly allowance of $520 for utilities and maintenance is paid for members in approved off-base private housing.

There are approximately 1 300 Navy leases on Guam to the value of $23 million and about 470 Air Force leases with a value of $9.4 million.

Scott Campbell principal broker for Coral Sea Realty said the Navy — and its housing director — is “overstepping its boundary.” He characterized Matthews as a “civilian employee of the government who is causing grief among service members property owners realtors and appraisers all in the name of potentially saving a few dollars. Mathews has all the realtors on-island up in arms ” Campbell said.

Campbell and Campos both told the Journal the price of housing in the market is determined by the value that comes as a result of supply and demand. Both said Matthews was calculating rents on Guam differently and is thwarting the free enterprise system.

“He feels that he knows the rental values better than the appraisers and other professionals who have been working this market for decades ” Campbell said. “In this business it’s the licensed appraiser who is the only one that is authorized to give appraisals which are used to set prices.”

Bruce Dinsman is a licensed appraiser and owner of Pacific Island Appraisals. He said he is busier than ever appraising assets for property owners agents and the military. He said the current rental market could be divided into three areas: 80% military; 10% low-income subsidized public housing also referred to as Section 8; and 10% local renters.

When it comes to appraising properties for rental to the military Dinsman said he has to use a set of instructions issued by the housing office of Naval Forces Marianas. The housing policy covers all branches of the armed services in the Mariana Islands: the Navy the Air Force and the Coast Guard.

Following complaints by property owners appraisers and realtors Navy officials established a private rental housing policy to ensure off-base housing meets DOD criteria for suitability in terms of location cost and structure. In response to this story Navy officials said. “We continue to solicit landlord and real estate agent participation to ensure assets meet these criteria.”

Dinsman said his “bible” for appraising property for the military comes from a June 16 instruction issued by Naval Forces Marianas. “The instruction states that appraisers are deemed to be independent impartial and objective. The government reserves the right to conduct an appraisal review or obtain an appraisal but it does not state that the government can manipulate or dictate to landlords the price they are asking.”

Dinsman said the reason the rules were published was that some landlords were caught overcharging. “They [the Navy] have a jaundiced eye towards landlords. They have had bad experiences with a few landlords that have jacked up rents to people receiving housing subsidies trying to get the most that they possibly can in most cases for property that may have been valued higher than it should have been.”

Campos said she is vocal about the situation because as a property owner she has had to endure a subjective process caused by one person. She said she squarely puts blame on Matthews for allegedly strong-arming the market by forcing delays which in turn forced a property owner to accept lower monthly rentals.

In a June 22 letter to Thomas C. Moody attorney with the law firm of Klemm Blair Sterling & Johnson who is representing Campos Edward J. Lynch Navy Force Judge Advocate said the military [in Guam] took a comprehensive review of the OHA program and determined that the program was subject to abuse by some landlords.

Lynch said whenever federal funding and entitlements were involved the federal agency entrusted with those funds had a duty to ensure the funds were expended in an appropriate manner. “Given the magnitude of the outlays of federal dollars for rent payments on Guam in this time of fiscal constraint it is increasingly important to ensure federal program funds are not lost to fraud waste and abuse ” he said. Avoiding preventable losses is the primary objective of the restrictions placed upon military off-base rentals.”

Lynch said it was Mathews’ duty to oversee the safety of the OHA funds as well as make decisions on the payments of those funds to landlords.

“A key control in the overall program is the requirement that the COMNAVMARIANAS housing director who has a fiduciary responsibility over the OHA funds make the final decision on OHA payments.”

Guam Housing Allowances Effective Aug. 16 2004
Members with dependents — monthly rental allowances

NOTE: Monthly utility and maintenance allowance
$520. One-time move allowance $416.

O – Officer E-Enlisted
Source: The Per Diem Travel and Transportation Allowance Committee.

Helen Anderson realtor at Blue Pacific Realty met in July with an enlisted Navy couple regarding the rental of residential units listed by Campos of RE/MAX one in Tamuning and another in Agat. The couple said they had been told the properties were declared “off limits” by the housing office.

“I was told by the service member that other military families had approached the housing office about these two units and they were being told by staff that the houses were completely off limits and not even to be considered ” Anderson said.

The reason the units were declared off limits by military housing was that the rental prices had been disputed. The Tamuning property was priced at $4 200 per month. The housing office said the rental price should be $3 500 per month. The Agat unit was priced at $3 700. Mathews also disputed that figure Anderson said. She said an appraisal was done and it corroborated the owner’s listed price but the housing office was still unwilling to accept the rental price.

Anderson said she empathized with RE/MAX as they were the listing agent. “This situation ultimately affects all realtors hindering our ability to effectively market homes to the military community. I seriously hope that certain listed properties are not being blacklisted by the military housing office.”

She said the situation affected all Realtors hindering their ability to effectively market homes to the military community.

Peryon said the market does have pricing ambiguity and he saw two separate markets on Guam: military and local. “In my opinion it is a no-win situation. I talk to a lot of property owners that are renting to Navy people and they have mortgages. On numerous occasions they would say ‘We heard that the housing allowance for this type of home was raised to $2 600 per month. I raised my rent to $2 600.’ In a sense the Navy is dictating the market because of the increase in housing allowance.”

Not too long ago Peryon said a townhouse could be rented in Dededo for $900 a month. Now the same unit leases for $1 500 and local tenants had difficulty meeting that amount.

“So simply put there are two markets going on — the local and the military. If you can get them [military] that is good. If you are having trouble renting your units drop the price and rent it on the local market. Something is better than nothing ” Peryon said.

Realtors and appraisers said rental prices and appraisals were rarely if ever questioned by the Air Force. Lt. Christine D. Millette deputy chief public affairs officer for the 36th Air Expeditionary Wing at Andersen told the Journal that the housing office at Andersen Air Force Base had not received any complaints regarding rent pricing in the past two years.

Campos said she asked the Chamber to help — and initially received support – but was then told to drop the matter.

“I have been asked to back off by the Chamber of Commerce who told me that such a pursuit would only make the island look bad particularly when the military is building up its force.”

A similar appeal to Madeleine Z. Bordallo Guam’s delegate to Congress also went nowhere Campos said.

A homeowners’ meeting was held with Bordallo in late June with more than a dozen people in attendance with the same concerns as Campos.

“Our concern was if the Navy Housing Office is primarily concerned about expenditures of housing allowance and they felt too much money was being spent on private housing why not control the allowance amount from the military side and let free enterprise work?”

Bordallo said she discussed the issue with Rear Adm. Arthur Johnson commander of Naval Forces Marianas and was satisfied that a more uniform and clarified off-base housing policy had been put in place in June.

“The military has the responsibility of ensuring that certain accountability standards are followed. Ultimately increased transparency and accountability in the off-base military housing market will help ensure the sustainability and growth of this market ” Bordallo said. MBJ

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