The report mentions the "scandalous" number of empty service housing.
The armed forces' homes deal was disastrous for taxpayers and could see significant increases in rent amid low satisfaction and accommodation standards, a report has said.
A Public Accounts Committee Report into the Ministry of Defence's contract with Annington Property Limited also highlighted the number of empty properties as "scandalous" during a time of national housing shortage.
In 1996, the MoD sold off most of its married quarters (now referred to as service family estate) to Annington Property Limited and agreed to rent them back for up to 200 years - a deal which led to the MoD missing out on billions of pounds according to a National Audit Office report.
The deal comprises a sale and leaseback arrangement with the private sector involving over 55,000 residential properties.
It has allowed Annington Property Limited to make excessive returns, while taxpayers have lost billions of pounds, the report highlights.
An Annington spokesperson said they welcome the report, and that they "are engaged in constructive discussions with the MoD over the upcoming site review and are determined to work towards a mutually satisfactory outcome".
They go on to say: "We share the Committee’s concern about the current level of empty properties in the estate, and would welcome any opportunity to bring these properties back into use to help address the UK’s current housing shortage."
Meg Hillier MP: 'MoD faces huge negotiation on housing'
The report draws attention to the "scandalous" number of empty houses "at a time of a national housing shortage".
"The Department has failed to reduce the number of empty properties it holds; the number currently stands at over 10,000, roughly the same as 21 years ago."
The vacancy rate on the Annington estate is still at around 21% and the MoD is required to pay rent on them, whether or not they are empty and even if they have been demolished.
Forces News visited one site in Uxbridge in west London, where 85 homes have stood empty for decades.
Annington says it has received £6 million in rent from the site, which it is understood has previously been used for military training.
PAC Chair, Meg Hillier MP said: "The deal was wrong from the outset but this renegotiation has a smidgen of a chance of getting some of that sorted."
The 1996 deal is also said to be linked to the falling standards of service housing.
The report reads: "The Department has failed over many years to meet the reasonable expectations of service personnel and their families for good quality accommodation.
"We are not convinced that the Department treats housing as a priority.
"Satisfaction with the standard of service family accommodation has remained at around 50% for some years."
In response to the issue of the quality of accommodation, an MoD spokesperson said: "We take very seriously the quality of the accommodation provided for our Armed Forces and their families, including spending £49 million on improvement works.
"We hold CarillionAmey to account over the quality of its services and scrutinise their performance rigorously, including seeking further improvements to the maintenance services they provide."
The rent, which has been subject to a 58% downward adjustment to date, is to be reviewed from 2021. Depending on the outcome of negotiations, the Department’s costs could increase significantly at a time when the defence budget is already being scrutinised.
The report continues: "The Department and its Defence Infrastructure Organisation, which is again being reorganised, do not yet appear to be well prepared in terms of having the necessary staff and information.
"The uncertainty over the outcome of these negotiations is part of a wider lack of clarity about the future form of service housing support that will be available.
"This is fuelling continuing low levels of satisfaction with the overall standard of service family accommodation, which is concerning at a time when the Armed Forces are struggling to retain the personnel it needs."
Meg Hillier MP said: “Taxpayers have lost billions as a result of this appalling deal and there could be worse to come if the MoD fares poorly in rent negotiations.
“The uncertainty over those negotiations is a further slap in the face for those Forces families who, for far too long, have endured poor standards of subsidised accommodation.
“It is not at all clear what impact different outcomes will have on the level of housing support available to service families in future, nor how the negotiations fit into the MoD’s wider estate strategy.
“At this critical time it is difficult to see how restructuring the Defence Infrastructure Organisation will do anything other than undermine the MoD’s efforts to prepare.
"The MoD needs to move quickly to shore up its negotiating position and bring some overdue coherence to its estate strategy.
"A priority must be to set out its plans for reducing the number of empty properties it holds to a more acceptable level."
In response, an MoD spokesperson told Forces News:
"A percentage of our housing stock needs to be empty between occupancies to allow for essential maintenance to take place before new tenants move in.
"Military personnel also move around the country regularly and a certain number of houses need to be kept in reserve to accommodate them."