The beginning of 2017 saw the basic allowance for housing (BAH) rate increase by about 2.4 percent or approximately $41 per month, according to a DOD news release. Service members will see their first increase on their Jan. 15 pay.
Rising rent costs
This increase in BAH rates generally coincides with a surge in rent prices as service members can afford to pay more. Therefore, if you are renewing a lease after an increase, you should closely evaluate the market. Typically rents will increase; therefore, there is usually less of a protest if property owners raise rents. If there is a protest and tenants move out, the ability for landlords to receive a higher rate is still possible.
On the other hand, if the Defense Department decreases housing allowance rates, it’s ideal for landlords and property managers to sign tenants at the current rates, locking them in at that rate while also preventing turnover costs.
Rates won’t increase for everyone
In 2017, rates will fall in 82 housing areas or more than a quarter of the total. A rate protection provision, however, won’t allow BAH payments to fall for members already assigned to an area unless their pay grade is lowered or their dependency status changed. Rate protection recognizes that members commit to multiyear leases and need a stable allowance until they move.
But those newly assigned to areas with falling rental costs in 2017 will receive lower housing allowance than currently paid to settled peers. Of course their rental costs also should be lower, officials noted.
When recalculating rates, DOD officials review rental cost data from across the United States, but local military housing offices direct such data collection away from apartment complexes and individual housing units deemed unsuitable for the military.
Some areas will see large BAH hikes, such as an average 12 percent pop in Everett, Washington, and others see sharp declines such as an average 11 percent drop in Minot, North Dakota.
Slow growth plans in place
While the BAH rates will be increasing for many service members this year, the BAH program also includes a plan to slow growth, which achieves a 5 percent out-of-pocket cost for living expenses by 2019. For 2017, the rate will cover 97 percent of service members’ housing costs, a 1 percent drop from the previous year.
The 3 percent member “cost share” in 2017 will leave rates short of covering average rent and utility costs by about $37 to $85 a month, depending on individual circumstances, officials explained.
The effect on individuals will vary depending on housing choices. Those who rent a median-priced property will pay a small amount above their BAH rate, officials explained. “Members who choose to economize in their housing choices may have all their housing expenses covered.”
BAH rates meant to cover majority of living costs, not all
Many years ago, when BAH was first established for setting stateside housing allowances, rates covered only 80 percent of members’ rental costs. Congress gradually phased out that 20 percent cost-sharing formula. From 2005 until 2014, BAH was sustained high enough to cover full rental costs.
“Even with these modest adjustments to the computation method for setting basic allowance for housing rates, members will still have sufficient means to obtain suitable housing,” DOD pay officials said in statement on the new rates.
Members can find their individual rate online here. Did rates increase where you live? How do you handle the fluctuation of BAH?