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Frequently Asked Questions

  1. What would cause my housing allowance to fall?
  2. What advantage does BAH offer over the old VHA/BAQ system?
  3. How do you compute BAH?
  4. What is the median?
  5. The BAH for my grade doesn't begin to cover my mortgage payment!
  6. How do you know the new method of measuring housing cost will be more accurate?
  7. What steps do you take to ensure reliability and accuracy of the data?
  8. Why do you base BAH on my duty location? Why not use my residence location?
  9. What method do you use to calculate BAH in places without Runzheimer cost data?

Q.1: What could cause my housing allowance to fall?

A: Three separate circumstances may lead to a reduction in your housing allowance; each involves a change in your status that interrupts your eligibility for the allowance, and then, only if the published allowance for your grade and location is less than what you are getting now.

First, and most common, a decrease will occur when you PCS to a location where the cost of housing is less than your current duty station. At the new duty station you will get a lower housing allowance, but you should be no worse off, because housing will cost less there.

Second, if you are demoted, your housing allowance will revert to the current published table of allowances for your lower grade. Promotions will not lower your housing allowance.

Third, if you have a change in your dependency status (from with dependents to without dependents), your housing allowance will be determined by your new dependency status and the current published table of allowances for your grade.

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Q.2: What advantage does BAH offer over the old VHA/BAQ system?

A: DoD and the Services developed BAH to improve and enhance housing allowances for all members, taking into account complaints with the old VHA program.

Basic Allowance for Housing Compared to VHA/BAQ

Problem: VHA/BAQ 

Remedy: BAH

Member gets less money when new published rates are lower

Rate Protection -- When new rates are published, (Jan 1) no individual will see a decrease in the BAH they are receiving.

Creeping growth in out-of-pocket costs

We delinked growth in housing allowances from the pay raise, which historically lagged behind housing inflation. Instead BAH is linked to housing cost growth, putting an end to out-of-pocket creep.

The so-called Death Spiral: When low allowances force members into inadequate housing, and they report low costs on the VHA survey, which, in turn, drives the allowances further down

Fairer, more accurate measurement of housing costs, based on housing costs in each area--not what the member is spending.

VHA OFFSET

BAH is a flat rate. Members spending less than their housing allowance no longer have their allowance reduced.

Geographic/ pay grade inequity

Same dollar amount out-of-pocket for a pay grade at all geographic locations. Same percent* out-of-pocket for every grade

*relative to the nation-wide (NOT local) median cost of housing by pay grade

Burdensome annual recertification of actual housing cost

No need to furnish copies of leases or mortgage documents

Pay grade rate inversions

Published BAH rates will not decrease with pay grade (after transition)

Burdensome annual member survey of housing costs

No VHA survey

Drastic changes in any year

Multi-year transition

Slow response to housing cost inflation

BAH based entirely on current housing market data

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Q.3: How do you compute BAH?

A: The legislation authorizing BAH specifies that the amount of the BAH for a given pay grade and dependency status in a specific geographic location is equal to the local median monthly cost of rental housing in that area occupied by civilians with similar incomes.

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Q.4: What is the median?

A: The median is the 50th percentile and is calculated by finding the "middle" value when the values are sorted from low to high. Unlike a mean, the median is not strongly influenced by very large or very low values in the set. By definition, half the values will be higher than the median and half will be lower. The median is the customary scientific measure for describing housing costs.

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Q.5: The BAH for my grade doesn't begin to cover my mortgage payment!

A: BAH is based on rental data. Homeowners' monthly mortgage payments do not necessarily have a direct relationship to rent and are not used in the calculation. Homeowners' monthly mortgage payments reflect the expected appreciation in the value of the residence, the amount of down payment, the opportunity costs of interest from down payments, settlement costs, and the tax savings due to the deduction of interest payments. Therefore, BAH reflects the current rental market conditions not the historical circumstances surrounding various mortgage loans.

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Q.6: How do you know the new method of measuring housing cost is more accurate?

A: The BAH employs a civilian-based method of measuring comparable housing costs that is superior to the old VHA housing survey that measured members' spending on housing. BAH eliminates the so-called, "Death Spiral." Under VHA/BAQ, members who scrimped on housing, and then reported low housing expenditures, only reinforced, or drove down, already low allowances. This mainly occurred among the most junior members, whose limited disposable (after-tax) income may have forced them to accept inadequate housing and then report low costs on the member survey. The Services also recognized that the VHA/BAQ created a similar, but opposite, bias for some senior officer/enlisted grades. Under the old system, if a member opted to use a greater share of disposable income for bigger or more expensive housing, relative to the local market, and reported this expenditure on the VHA survey, it tended to "inflate" reported costs and thus allowances. Basic Allowance for Housing eliminates both these low-end and high-end biases.

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Q.7: What steps do you take to ensure reliability and accuracy of the data?

A: In selecting specific units to measure, we rely first on the local military housing office and then supplement this information with a multi-tiered screening process to ensure that the units and neighborhoods are appropriate. The first screen considers reasonable commuting criteria, generally defined as 20 miles or 1 hour during rush hour, eliminating units that fall outside these limits. Next we check to see that the selected unit is in a neighborhood in which our members would choose reside. We ask the military housing office in your area to point out the undesirable neighborhoods. We also use the Defense Enrollment Eligibility Reporting System (DEERS) data, as a key to where members live, to focus on those neighborhoods in which the top 80% of our members live. The idea here is to avoid sampling slum, high-crime, or undesirable neighborhoods that members have already avoided. Finally, we use an income screening process, to identify appropriate neighborhoods. For example, in pricing 3 and 4 bedroom single-family units, (senior enlisted/officers) we know that member income in these grades is between $60 and $100 thousand, so we select 3 and 4 bedroom single family units in neighborhoods where the typical civilian income is in this range. When we price 1 bedroom apartments (junior single enlisted) we focus on neighborhoods where the typical civilian income is consistent with the $20 to $30 thousand income level that is typical for these grades. For comparison purposes, civilian salary equals the sum of military basic pay, average BAH, BAS plus tax advantage.

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Q.8: Why do you base BAH on my duty location? Why not use my residence location?

A: The policy decision to use duty location as a basis for entitlement to BAH is based on the desire to compensate members for the typical housing cost within a "reasonable commuting distance" from the member's duty location. Once the duty station is known, the BAH compensation is fixed, regardless of where the member lives. Were we to use the member's residence location as a basis for the entitlement, there is the concern that this would cause members to choose their residence location based on BAH. In some cases, this would lead to the perverse result of members choosing to live further from their duty station, simply to incur higher BAH. In other cases, when members commute to lower cost hinterlands, members would find their BAH to be lower, even though their commuting expenses are higher. The Services decided to base the entitlement on the duty location, with the full knowledge that members would still be free to live where they choose, but that this decision would not affect their BAH entitlement.

In certain circumstances, with specific approval of the secretary of the Service concerned, a member may be granted an exception to receive BAH based on the dependent's location. For example, if a member has a sick child that requires medical attention only available in a certain location (say Walter Reed Clinic in Washington DC), and the member receives PCS orders, the member might leave his family in Washington and request BAH eligibility for that location. Such exceptions do not ordinarily apply to "finishing out the school year" or spousal employment.

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Q.9:What method do you use to calculate BAH in places without Runzheimer cost data?

A: BAH is defined for every location in the United States, even though some locations may have no military population. This is because we must be prepared with BAH rates should a member or dependent ever establish eligibility in that location. It is not cost effective to collect Runzheimer data for all such locations. To handle this situation, we combine these areas with other areas of similar cost for which we have Runzheimer cost data. Pooling the data in this manner gives us sufficient data necessary to attain statistically reliable housing costs and BAH rates. We determine comparable housing costs using Fair Market Rents (FMRs) published annually for all counties by the Department of Housing and Urban Development. After grouping or pooling the data, the result is a set of counties with comparable housing costs and BAH rates called a County Cost Group (CCG). There are approximately 30 separate CCGs, each with similar housing cost. Each group includes a statistically sufficient quantity of Runzheimer cost data to calculate average housing costs by size and type of dwelling for that group of counties. Although half the US counties (about 1500) are in County Cost Groups, these counties contain less than two percent of the Uniformed Services' population eligible to receive BAH.

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