Pierre Daigle has written to Gen. Tom Lawson, saying his office has received "numerous complaints" about the home-equity assistance program.
The Canadian Press reported last week at least 146 military families faced financial hardship between 2007 and 2010 after being rejected for full compensation of losses when they were required to sell their homes in depressed markets.
The ombudsman looked at more recent data and concluded something must be done about the differing interpretations of federal policy when it comes to compensating soldiers for a mandatory transfer.
It is a growing problem that is eating into morale, Daigle said Tuesday.
"Money talks," the ombudsman said in an interview.
"When you sign on the dotted line for unlimited liability, you prepare to give your life to serve your country, you don't expect to be fighting a bureaucracy and administrative processes like that. It is not right."
The National Defence policy on relocation, written 20 years ago and largely unrevised since 1999, is outdated and the subject of complaints at every base Daigle has visited.
"While the average price of a house has tripled since then (as per statistics from the Canada Mortgage and Housing Corp.), the benefits under the policy have not been amended to more adequately respond to the needs of Canadian Forces members and their families," Daigle wrote in a letter last month to Lawson.
The letter and Daigle's comments came as news to Defence Minister Peter MacKay's office.
"Minister MacKay was not copied on this correspondence," said spokeswoman Paloma Aguilar.
She said the benefit is long-standing, and the Harper government has taken other action to ease the burden on military members, most notably limiting rent increases for base housing.
"The housing assistance benefit guarantees that Canadian Armed Forces members and their families are protected from a loss on their home if they are forced to move because of relocation. Thousands of Canadian Armed Forces members and their families have received support from this benefit."
Since the 1990s, the military has encouraged members of the Forces to live off base, buy property and build equity for their retirement, the ombudsman said.
But forced transfers, especially since the onset of the economic downturn in 2008, have eroded — and in some cases destroyed — those nest eggs.
"Times are tough for everybody," Daigle said.
"But what we demand of military people in this country we don't demand the same for the rest. If you're told you go to one place to do that job, and you've got to be loyal and agree to that, why would you pick up the bill at the end?"
Since the early 1990s, compensation is paid when a military member is required to transfer and sells a home in a depressed housing market, one where prices have dropped by 20 per cent.
But National Defence and the federal Treasury Board are at odds over how they define certain housing market boundaries, a dispute that has led to an increasing number of applications being rejected.
Military officials have been arguing since 2009, without success, for the policy to be rewritten.
When an application is approved, the member is entitled to a full reimbursement of their equity. If it is rejected, the maximum payout is $15,000 regardless of the loss.
No one at National Defence was immediately available to comment, but last week a spokeswoman said the department does what it can to help military members make educated financial choices.