To me, it is a no-brainer...
Government pays construction companies to build new houses on these MOD sites, encouraging construction company growth.
New infrastructure creates a demand for local shops and services, creating more economic growth.
Local councils get a share of the rental income from these new homes, as well as some property sales. Some goes straight back to MOD/government. No reason why some of the site's homes could not be made part rent/buy, with a fixed maximum ownership percentage of say 75% (so there will always be rent charged for 25% of each property).
Relative sudden boom in local rental supply reduces the vice-like grip on local rental prices set by private landlords, plus the cancerous growth of "money for nothing" letting agent fees.
etc.
If the MOD sites were owned by relatively small companies, I could see why they would sell them simply as land with planning permission for other companies to buy and build on (and make the big profit margin). But this is currently government land and in the grand scheme of things, the outlay for tendering out the building of new homes is peanuts compared to other expenditure.
Not only that, it should improve the returns that the government gets on the site and help alleviate the massive UK housing affordability problem with both renting and mortgaging that has developed over the last ~25 years.