Owning Property As An Alternative to Costly Leasing

Federal agencies rely extensively on leasing to meet building space needs, occupying about 398 million square feet of leased space domestically in fiscal year 2006, according to available data. While the General Services Administration (GSA), U.S. Postal Service, and Department of Agriculture lease the majority of this space, GSA, most notably, is increasing its use of leased space and predicts that in 2008 it will, for the first time, lease more space than it owns.

Although ownership through construction is often the least-expensive option over the long term to meet agency building space needs, federal budget scorekeeping rules require the full cost of construction to be recorded upfront in the budget, whereas only the annual lease payments plus cancellation costs need to be recorded for operating leases, making them “look cheaper” in any year even though they generally are more costly over time. GAO designated federal real property management as a high-risk area in 2003 because of, among other things, overreliance on costly leasing.

While the Office of Management and Budget (OMB) and agencies have made progress addressing other problems related to real property management, efforts to address the leasing dilemma have been limited. Whatever change is under consideration—whether involving scoring leases upfront like construction or using other incentives to spur ownership—will involve making choices among competing priorities for limited federal resources.

Increasing funding for ownership in the interest of long-term savings at the expense of other programs and initiatives is properly a policy decision that only Congress and the President can make. Nonetheless, OMB has not implemented GAO’s recommendation to develop a strategy to reduce agencies’ reliance on costly leasing where ownership would result in long-term savings. Such a strategy—which could include an assessment of viable alternatives—could inform future decision making on this difficult issue.

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Federal Real Property: Strategy Needed to Address Agencies' Long-standing Reliance on Costly Leasing

GAO-08-197, January 24, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 45 pages)   Accessible Text   Recommendations (HTML)

Federal Real Property: Progress Made Toward Addressing Problems, but Underlying Obstacles Continue to Hamper Reform

GAO-07-349, April 13, 2007

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 89 pages)   Accessible Text   Recommendations (HTML)

Federal Real Property: Reliance on Costly Leasing to Meet New Space Needs Is an Ongoing Problem

GAO-06-136T, October 6, 2005

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 13 pages)   Accessible Text