The Ministry of Defence is set to spend £6billion buying back more than 36,000 military homes from private equity billionaire Guy Hands' Annington Homes.
The properties will now return to public ownership, bringing an end to a bitter battle between the Government and Hands over control of the homes.
The MoD has said that owning the homes outright will save £230million annually in rent payments and enable significant improvements to military housing.
The estate is now valued at £10billion, according to the MoD.
Defence Secretary John Healey visited military housing near RAF Northolt
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In 1996, under John Major's government, around 55,000 military properties were sold to Annington Homes for £1.7billion and then leased back by the MoD.
The deal has since faced intense scrutiny from watchdogs, including the National Audit Office which found taxpayers lost more than £4billion on the sale, concluding the MoD had severely underestimated future property value increases.
The Government also remains responsible for both rent and maintenance costs.
Meg Hillier, then-chairman of the Commons parliamentary affairs committee, branded it a "rotten deal for the taxpayer" in 2018.
The MoD had initially claimed the 200-year lease would free up funds for improvements.
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Defence Secretary John Healey called the new deal a "once-in-a-generation opportunity" to improve the military housing estate and create jobs.
The agreement means the Government will no longer have to plan for £4.3bn of liabilities related to the previous arrangement with Annington, unlocking budget headroom for "substantive redevelopment and improvements" to military housing.
The £230million annual rent savings will be reinvested into improving the estate.
Now, the MoD is set to submit a planning application for 265 new houses and apartments at RAF Brize Norton in Oxfordshire.
A further 300 new houses have been planned for Catterick Garrison in North Yorkshire, with plans to be submitted in spring.
Now, the MoD is set to submit a planning application for 265 new houses and apartments at RAF Brize Norton in Oxfordshire
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The Imjin Barracks in Gloucestershire showcases the MoD's vision, with 176 homes being built with low-carbon heating systems and solar panels to reduce energy bills for military families.
Admiral Sir Tony Radakin, chief of the defence staff, said: "We understand the importance placed on this for people's morale and decisions on whether to continue in the Armed Forces long term."
"This work will provide military families the higher-quality houses they fully deserve. It is very significant and very welcome."
Previously, Hands had filed a legal claim against the Housing Secretary with the European Court of Human Rights in September over concerns about the Leasehold and Freehold Reform Act.
A separate dispute between Annington Homes and the MoD over property rights has also been settled.
Richard Hands, managing director of Terra Firma, said: "This deal ensures long-term value for both parties and brings an end to the legal disputes which had created uncertainty for both Annington and UK service families."