AHRN.com knows that the still evolving store on BAH raises concern for both military renters and homeowners. We reached out to Elizabeth Colegrove – military spouse, rental property owner, and writer at Reluctant Landlord.com – for her take on the impact of the latest BAH change.
As an investor, when I heard that the military could be going back to the 80’s military housing policy I began to get nervous! I grew up hearing my mother and other vets talk about those days when living off base was prohibitively expensive. If living on base incurred no out of pocket costs and BAH only covered 80% of the expenses of living off base, there was potential for a serious impact on my rental properties. In the back of my mind, I wondered if this policy change would keep the bases at higher occupancy rates. There has been speculation that foreign bases would begin requiring people to live on base and I was concerned about this happening stateside.
But when the most recent announcement came that military families would have to pay out of pocket over BAH to live on base, I relaxed!
How many people do you know who live on base/post because it is convenient to have all the bills covered by BAH except for cable/internet?
That’s changing! Now, with the utility bill and newly announced out-of-pocket EXTRA coverage, base housing is no longer a “one and done” bill. The kicker is that living on base was already a premium price for what you receive. Base housing assignment is traditionally determined by the number of dependents and rank. With privatization, many bases have switched to a less neighborhood-based assignment structure so that very different BAH tiers may find themselves in the same homes. While they are paying very different amounts for base housing, they are getting the same product. This already was a contentious issue for many military families.
In many areas, base housing is getting:
- Less convenient: At many bases it is no longer inside the gates so one still has to deal with the traffic.
- Older: Much of the base housing is older and offers less square footage. Newer houses off base are often a better deal (more for your money).
- Expensive: Because of the difference in square footage and amenities, on base housing is often more expensive per square foot.
What does that mean for you, the small investor/single property owner?
You now have a disillusioned group of people who will be looking to buy and rent! I expect prices to increase because there will be more people looking to live off base. While this won’t be true of every area, it will occur in many of the highest occupancy military communities. There are some bases where people were paying $200-$400 more than market value to only have one bill and live close to work and amenities. I predict that areas with older base houses will see an increase in off base living worthy of notice over the next year.
Home owners looking to rent will see:
- More people wanting to rent
- More people wanting to buy
- Fewer people “breaking the lease to move on base”
- Quicker turnover between tenants
- Higher prices to purchase
What do I see happening to the market long term?
For the small landlord who specializes in personal properties that they rent out when they PCS, there will be several ripples felt from this change. Perhaps the first will be an increased demand from higher BAH tiers – those are the people who were already paying above market value on base for convenience or community amenities. I anticipate a few thing could happen:
- Housing Prices Increasing – As more people move out in town there is going to be more of a demand of houses. This will push housing prices up and will continue to grow the area around bases.
- BAH increasing – BAH is based on rent in the 60 mile radius surrounding a base or multiple bases. So while they are covering less of a “percentage” they are basing it on rents. When an exodus happens and prices in community go up so will BAH, when they evaluate the area for the next year.
- Area Growth – As bases are growing and people are moving out in the community, I have seen several towns continue to grow with more and more outside shopping activity. This is continuing to put pressure on communities outside the gate to add more amenities.
- Schools – In some areas, the “schools” were the reason people were on base. As more and more people move off base and continue to put their energy into the community, I see the community schools becoming better – and excelling. Good schools increases the value of homes and will continue to raise them,
Over the past five (5) years, there have been many comments about how expensive base housing has become: utilities are no longer being covered, homes are comparably smaller than what is available off base, etc. While there are exceptions, I have seen more and more people recommend living off base. While many people were burned in the housing crisis, there were plenty of us “younger” military who did amazingly well investing in housing during 2010-2012.
While the implementation of these changes will set the tone for years to come, there is undeniable opportunity for those looking to build a nest egg through rental property ownership.
We want to know:
How have the changes to BAH impacted your thoughts on rental property ownership?