Housing allowance to rise in January

By Tom Philpott: Military Update

Basic Allowance for Housing (BAH), paid to 950,000 service members living off base in stateside areas, will rise in January by an average of 5.9 percent, or $53 a month, say Defense Department pay officials.

For 2006, as in years past, changes to individual BAH rates will vary by rank, marital status and assignment area, with allowances rising sharply for persons assigned to certain high-cost areas such as Honolulu and Washington D.C.

But for the first time in five years, service members newly assigned to some housing areas will draw less in BAH than members of equal rank and martial status already assigned there. This will result from a scheduled end to “geographic rate protection” under the BAH program.

BAH rates are adjusted each year based on changes in rental cost data for different types of housing across 370 military housing areas. The data are gathered by base housing offices from local Realtors, renters and classified advertising. A defense contractor, Runzheimer International, conducts surveys to verify the accuracy of the rental data collected.

Since 2000, when the Defense Department and Congress adopted a five-year plan to close a 19-percent gap between BAH rates and local rental costs nationwide, service members living off base have enjoyed two types of BAH rate protection: Individual and geographic.

Individual rate protection, which remains in effect, guarantees that BAH will not fall for service members while they are assigned to an area, even if local rental cost drop. This protects members facing monthly mortgage payments or long-term leases from an allowance squeeze.

Geographic rate protection, on the other hand, was intended to be temporary. It ensured members newly arrived in an area that they would receive no less in BAH than members of the same rank and family status already there. It was a tool to stabilize BAH rates until the gap between allowances and average local rental costs was closed, which has occurred.

With this protection ending Jan. 1, BAH for new arrivals will fall in areas where rental costs have slipped over the last year or more. In many of the affected areas, only rents for certain types of housing have fallen so only certain pay grades will be affected. For example, officers with dependents in the rank of captain (O-3) or above who move to Fort Bragg or Pope Air Force Base in North Carolina in 2006 will draw less BAH than counterparts already assigned there. A major (O-4) with dependents at Bragg or Pope now draws BAH of $1,248 a month. That amount won’t change Jan. 1 but any O-4 “with dependents” who is assigned there in 2006 will draw $25 a month less in BAH.

Enlisted members in grades E-6 or E-7 moving to San Diego likewise will draw less in BAH than peers already there. An E-6 with dependents now receives BAH of $2,001 a month. The rate for new arrivals in the same pay grade will be $1,900.

Tim Fowlkes, director of BAH for the Defense Department, said almost 40,000 more service members will qualify for BAH in 2006. Some of that growth is tied to on-going service programs to “privatization” military housing by having contractors build units the military needs and, in return, receiving guaranteed occupancy rates and monthly rent set at the BAH rate.

The chart here shows 2006 rates for this area. Rates for all areas can be found online at:

https://secureapp2.hqda.pentagon.mil/perdiem/bah.html

Rates are set nationwide so that service members of equal rank and the same dependency status have equal purchasing power to rent housing, regardless of where they are assigned. The tax-free allowance is to cover not only median rental costs locally but average utility expenses — electricity, heat and water — and renter’s insurance.

The Defense Department expects to spend $13.5 billion on BAH payments in 2006, which would be $1.2 billion more than in 2005.

The 2006 BAH rates have no direct affect on service members living off base overseas. Their Overseas Housing Allowance is adjusted each spring and fall to reflect changes in out-of-pocket costs for stateside peers and also changes in the dollar’s value relative to local currency.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:
milupdate@aol.com