But does housing REALLY matter? Time for me to play devils advocate here - please bear that in mind when replying, I'm just trying to explore this in a bit more depth.
The assumption seems to be that this will kick off in about 8 years time, so in line with the FR2020 assumptions, and also post at least one SDSR which will doubtless see manpower shrink further, and also about the time the 2020 SDSR is kicking off, which will see even further cuts.
For years provision of housing has been a reasonable provision of service -as MOD notes in its news blog, the current employment model dates back 40 years, and the deal has been that people had limited mobility back then, and could expect regular postings across the world, and it wasn't always easy to find the means to subsidise a second career for the wifes / husbands. Additionally, people married a lot younger, and had kids far earlier. So, historically provision of cheap housing made sense as a means of encouraging people to stay in when they had a family to look after, and they were travelling across the globe.
In todays society, and particularly in 8-10 years time the forces are going to be far more sedentary - an RAF of 6-10 main bases, plus support stations seems a not unreasonable assumption. We will be looking for supporting a smaller force of people, who will by and large be in their early twenties and thirties, with a smaller pool in late thirties onwards. This manpower pool will probably be mainly single / relationship based, and not necessarily as heavily marriage based. Peoples expectations change, and less people will probably marry at 21-22 and then expect a service quarter for life. Additionally, the massively increased social mobility through cars and easy transport, plus the realisation that many partners need a career too, means that I can see there being less demand for service family housing, as people have kids later on, and don't settle down.
So, you have a more socially mobile population, and a workforce who are less likely to be married in future. Therefore, the need for MQs diminishes. Add to this the realistion that with static bases, the number of Hong Kong - Germany - Cyprus - UK moves are going to massively reduce in number, and suddenly you have the ability to have a fairly static movement plot, in which settling down and weekly commuting becomes more feasible.
I can see a new model emerging whereby MOD says that it will provide top quality singly accommodation, encouraging people to move back into messes (and in the process reinvigorating mess life, which currently suffers through far too many people choosing to live out). Then service members can chose to maintain a home at their own location of choice, and commute weekly to said location. It reinvigorates the unit as a hub, and means families can settle down. Retain a limited pool for housing for people who go to special places, or overseas, or remote locations, but make clear that for 95% of HM Forces, their private lives are their business. What MOD will provide is the ability for you to stay cheaply on site if you wish to do so, or let you live off at your own cost.
I think the future mainly single / loosely attached workforce is less concerned about married quarters than our predecessors. Even now, many of my peers chose not to live in quarters, but weekly commute and either live in a mess or flat.
As for why would anyone join? For the reason people have joined since time immemorial - adventure, excitement, good comrades and lots of fun. People dont at 21 worry about cheap housing or PAYD or DII - thats the sort of thing you get cynical about over time, but everyone is cynical about some aspect of their workplace experience. I'd argue this won't hit recruitment, although it may hit retention if brought in too soon.
Personally this could be an interesting move which could have unforseen and hugely positive consequences for Mess life (and bars)...