Bonds that finance the construction and renovation of on-base military housing projects remain stable, but could face weaker revenue streams if federal budget cuts kick in, Moody's Investors Service said Friday.

"The reliability of the basic allowance for housing — the BAH — as the primary revenue stream and management's ability to control operating expense growth have also been positive factors," said Moody's analyst Carlos Calderon.

To date, most of the transactions are performing well due to solid occupancy levels and the controlled growth of expenses. In addition, the bonds benefit from the competitive advantage on-base housing has in the marketplace.

"Construction risk for about half of the portfolio has also been eliminated by completion of their IDPs — the initial development phases," Moody's said.

Currently, Moody's has 54 ratings on 24 privatized military housing projects that include approximately 87,000 housing units.

The transactions have about $9.56 billion in outstanding debt and are secured mostly by rental income.

kpanchuk@housingwire.com