Armed Forces families have been "badly let down" for years after being provided with homes so bad they often don’t have heating and hot water, according to MPs.
The cross-party Public Accounts Committee (PAC) blamed the Ministry of Defence and contractor CarillionAmey and said the conditions "may be driving some highly-trained personnel to leave the military".
CarillionAmey’s performance was found to be "totally unacceptable", after it failed to carry out small-scale repairs and left families without heating, hot water or cooking facilities.
The PAC chair, Meg Hiller, said:
"Forces families are suffering because of poor service, under a contract agreed on terms that were wrong-headed from the start."
"Responsibility for this lies with both CarillionAmey and the government. The MoD seriously misjudged CarillionAmey's capacity to deliver a service which CarillionAmey accepts it was not equipped to deliver."
"It is completely unacceptable that families should have to move into dirty houses with broken appliances, or be left to care for children in homes without hot water or heating."
The committee said CarillionAmey only made an attempt to improve its services after the Defence Secretary Michael Fallon intervened in February and described the condition of the homes as "unacceptable".
It welcomed news that ministers were considering whether to terminate their contract.
It said the contractor won all five of the Next Generation Estates maintenance contracts it bid for simply because it was the lowest bidder.
The MPs said CarillionAmey or any new contractor must "meet or exceed" its obligations and any future deals should be subject to an effective penalty incentive.
The Managing Director of CarillionAmey, Daniel Easthope, said:
"Our housing service is now performing well against key contract indicators following the delivery of an aggressive improvement plan, and we are sustaining that performance."
"We are also working closely with Defence Infrastructure Organisation to improve service families' experience by delivering improvements to the housing stock and through engaging with service families and the family federations to discuss how we can further support their needs.”
However Ms Hillier said:
"Reports of improvements in recent months are still to be verified and will be of little comfort to those who have borne the brunt of long-standing failure."
"We are now at a crossroads and the Government has a decision to make. Either it works with CarillionAmey to improve and sustain standards, or it takes steps to ensure a new contractor delivers the service required."
The Armed Forces Covenant contains a government commitment that service personnel and their families are to be provided with good quality accommodation, in the right location, at a reasonable price.
Defence Minister Mark Lancaster said action had already been taken by the government: "The service our personnel and their families were getting from CarillionAmey was simply not good enough. They deserve much better, which is why we took swift action once the problems became apparent.
"CarillionAmey rightly apologised and developed an aggressive plan of improvements. Progress is being made, but we will absolutely not hesitate to take further action if they don't deliver for our personnel and their families."