Service accommodation will always be available because we couldn't post a family from, let's say Scotland to London and expect them to pick up the bill for the move (minus the first 5k) and the substantial difference in house costs. Servicemen will be UNABLE to move and therefore the situation is untenable. Someody would (have to) take it to court. MOD would always settle out of court. The story gets around that you can contest it, end of policy.
FQ rents are likely to increase, but it cannot be possible to charge a realistic local rent in expensive areas such as London. If all rents go up, people would prefer to move out into better quality private accommodation, but the MOD would have to keep FQs but wouldn't be getting a rent. Own goal.
It's common for commercial leases to place the burden of repair on the tenant, but not for residential. However, the MOD will have leased them on commercial terms to ensure they have an assured contract that cannot be terminated within the lease period. As we occupy them under license we have none of the normal tenant's rights afforded to normal residential properties. It's a strange anomaly caused because the tenant of the property doesn't sign the lease.