What Is a Basic Allowance for Housing (BAH)?
Definition and Examples of the Basic Allowance for Housing (BAH)
The Basic Allowance for Housing (BAH) provides active U.S. servicemembers with housing compensation when government quarters aren't provided to them. BAH pays 100% of the average housing costs and is based on the type of quarters authorized for that specific military rank.
Dependency status and the local civilian housing market factor in as well. BAH employs a civilian-based method of measuring comparable housing costs that's superior to previous models that once measured members’ spending on housing.
What Is the Basic Allowance for Housing?
BAH replaced the Variable Housing Allowance (VHA) and the Basic Allowance for Quarters (BAQ) programs in January 1998. Members were surveyed annually to determine how much they were paying for housing costs under the VHA/BAQ system. The Department of Defense (DOD) surveys housing costs in military areas to determine rates under the BAH system.
Many members chose to live in substandard quarters when the VHA/BAQ system was in place, so those surveys indicated that they were paying less, affecting the rates that were authorized.
Like the BAQ and VHA programs, BAH distinguishes between servicemembers with dependents and those without dependents, but it doesn't take the number of dependents into consideration. BAH rates are computed as whole dollar amounts, rounding to the nearest dollar.
BAH eliminates the so-called "death spiral." Members who scrimped on housing and then reported low housing expenditures drove down already low allowances under VHA/BAQ. This mainly occurred among the most junior members whose limited after-tax incomes forced them to accept inadequate housing, then they reported those low costs on the member survey.
The military also recognized that the VHA/BAQ system created a similar but opposite bias for some senior officer/enlisted grades. The previous system tended to inflate reported costs and thus allowances when a servicemember opted to use a greater share of their disposable income for bigger or more expensive housing, then reported this expenditure on the VHA survey.
BAH eliminates both the low-end and high-end biases. Published BAH rates increase for many junior members and decrease for some senior members accordingly. Individuals are protected from rate decreases, but newly-arriving members are paid based on a more accurate and measurement of housing costs.
- Acronym: BAH
How Does BAH Work?
The DOD includes local price data of rentals, average utilities, and insurance when computing BAH. It collects this data annually, in the spring and summer when housing markets are most active. The data includes apartments, townhomes, duplexes, and single-family rental units with various numbers of bedrooms.
The DOD employs a multi-tiered screening process to ensure that the units and the neighborhoods selected for measurement are appropriate.
The multi-screening process begins by considering reasonable commuting criteria, generally defined as 20 miles or one hour during rush hour. It eliminates units that fall outside these limits.
The process next checks to see that the selected unit is in a neighborhood where military members would want to reside. Using the Defense Enrollment Eligibility Reporting System (DEERS) data, the DOD focuses on neighborhoods in which the top 80% of military members reside. The idea is to avoid sampling slum, high-crime, or undesirable neighborhoods that servicemembers have already avoided.
Finally, the DOD uses an income screening process to identify appropriate neighborhoods. Servicemember income in senior enlisted/officer grades is between $65,000 and $92,000, so the DOD selects single-family units in neighborhoods where the typical civilian income is in this range in pricing three- and four-bedroom single-family units.
The DOD focuses on neighborhoods where the typical civilian income is consistent with the $20,000 to $30,000 income level when pricing one-bedroom units for single junior enlisted members.
Civilian salary equals the sum of basic military pay, average BAH, and the Basic Allowance for Subsistence (BAS), plus tax advantage.
Where the DOD Gathers Data
The DOD obtains data from multiple sources to ensure reliability and accuracy. It designed the sampling process to obtain a statistical confidence level of 95% or higher.
Residential vacancies identified in local newspapers and real estate rental listings are an important source of data. Vacancies are selected at random and are subjected to the screening process.
Telephone interviews establish the availability and exact location of each unit sampled. The DOD also contacts apartment and real estate management companies to identify units for rental pricing. It's not uncommon for the DOD to consult real estate professionals in a locality to obtain confirmation and additional sources of data.
The DOD contacts fort/post/base housing referral offices, when available, to tap local military expertise and gain insights into the local concerns of assigned servicemembers. Finally, the DOD conducts on-site evaluations at various locations to confirm and ensure the reliability and accuracy of the data.
Future enhancements include examining potential uses of the internet as well as housing data available from other government agencies.
Advantages of BAH
The old VHA/BAQ housing allowance system was unable to keep up with housing costs, and members were being forced to pay larger out-of-pocket costs than originally intended. Increases are indexed to housing cost growth under BAH, thus protecting servicemembers from any further erosion of housing benefits over time.
BAH is designed to be inherently fair because the typical servicemember of a given grade and dependency status who is arriving at a new duty station will have the same monthly out-of-pocket dollar amount regardless of the location.
Rate protection applies after the servicemember arrives, and they'll receive any published increase. There's no decrease in housing allowances.
Rate protection guarantees that typical out-of-pocket costs might be less, but never more, than when servicemembers arrive at a given duty station and BAH rates take effect.
Servicemembers can retain some control over their actual out-of-pocket expenses. A servicemember who chooses a bigger or more expensive residence than the median will have more out-of-pocket expenses, while the opposite would be true for someone who chooses to occupy a smaller or less expensive residence.
How Much of an Allowance Will You Receive?
All these calculations and factors can be a lot to take in, but the DOD provides an online calculator. It's a simple matter of entering your duty zip code and your pay grade. The calculator will give you a pretty good idea of what you can expect.
Rates were expected to increase by about 2.8% in 2020.
- The Basic Allowance for Housing (BAH) provides income to cover rental, utility, and insurance expenses when government quarters aren’t provided to servicemembers.
- BAH replaced less reliable calculation processes in 1998.
- The Department of Defense gathers data from a wide variety of sources to determine applicable rates.
- Different BAH rates can apply depending on whether a servicemember has any dependents.