The £6bn repurchase deal from Annington, a property company linked to the billionaire private equity investor Guy Hands, will unlock new-build housing projects for military families plus essential refurbishments.

In 1996, the MoD sold all 55,000 properties in the Married Quarters Estate to Annington for £1.67bn or around £27,000 per house as part of a broader process of privatisation of state assets, making Annington the largest owner of residential property in England and Wales.

In buying the houses back, the government will control properties worth almost ten times that average value and will no longer be paying £230m annually in rent.

Despite most of the properties having been built in the 1950s and 1960s, the previous deal with Annington prevented the MOD from being able to demolish properties or build additional houses for Service Families.

Following today’s deal, the MOD can start work on substantive redevelopment and improvements.

The agreement frees up our ability to build on the Service Family Accommodation estate with a more modern estate, helping reduce maintenance costs and, as part of work facilitated by the deal, programmes to build new houses are being accelerated.

Planning applications will be submitted in the coming days for 265 new houses and apartments at RAF Brize Norton, and further plans will be submitted in the Spring for around 300 new houses at Catterick Garrison.

Defence secretary John Healey said the move marked a “decisive break” with the failed approach of the past, which woulkd enable the first steps to be taken to fix the long-term decline in housing for military families.

“This deal shows our government is determined to deliver homes fit for our heroes. This is a once in a generation opportunity, not only to fix the dire state of military housing but to help drive forward our economic growth mission, creating jobs and boosting British housebuilding.

“Our armed forces and their families make extraordinary sacrifices: theirs is the ultimate public service. It is shameful that in the lead up to Christmas, too many military families will be living with damp, mould and sub-standard homes – issues which have built up over the past decade.”