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BAH Levels and Increases

Out-of-pocket costs reflect the difference between BAH rates and the national median cost of housing. While housing costs and BAH rates vary by location in the United States, average out-of-pocket costs are the same for the typical member of each military rank at every location in the United States. For example, a typical married E-6 currently has an out-of-pocket cost of $41 dollars per month, regardless of location, which is 3.5 percent of the $1,168 national median housing cost for that rank.

The Secretary of Defense announced a major FY2001 Budget initiative to eliminate out-of-pocket costs for off-base housing in the United States. This action reduced service members' out-of-pocket costs for housing from an average of 18.8 percent of monthly housing costs in 2000 to 15 percent in 2001, with continued reductions each year thereafter, eliminating those out-of-pocket costs entirely by 2005. In 2004, the out-of-pocket costs are 3.5 percent and will be reduced to 0% in 2005.

Average rental costs in particular locations fluctuate, both up and down. Until 2005 when the transition from the old Basic Allowance for Quarters and Variable Housing Allowance (BAQ/VHA) to BAH is complete, BAH rates will not decrease at any location. After that BAH rates may follow both the increases and decreases of average rental costs.


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