Military BAH: The Good, The Bad, and the GREAT!

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Military BAH: The Good, The Bad, and The GREAT!Military BAH

Military Basic Allowance for Housing Rates for 2020 (Just in case I break the button above)

Basic allowance for housing (BAH) is one of the greatest benefits available to service members. Yet it is surprising to me how little I understood about the way it was calculated.

Hell, I didn’t even know there was BAH rate protection to ensure your allowance never went down while at a duty station!

I did a lot more research for you, and wanted to share some of the knowledge to help you better understand this incredible, untaxed, benefit!

Military BAH Rate Protection

The DoD Policies for BAH have a “grandfather clause” that ensures you don’t lose money just because military BAH has gone down. Your BAH won’t drop unless you change duty stations!

Basic Allowance for Housing is based on the higher of:

  • The rate you were receiving on 31 December of the previous year, or
  • The new BAH rate that went into effect on 1 January.

For example, if the 2020 BAH rate is lower than what you were receiving in 2019, you will continue to receive the 2019 rate.

The reason behind this is to ensure service members are still able to pay any leases they are locked into.

The only situations in which your Basic Allowance for Housing can go down are when the service member gets demoted or has a change in your dependency status.

The obvious caveat to this when you execute permanent change of station (PCS) orders to another location.

How Does Promotion Affect Military BAH

If you get promoted during the year, then your BAH will be the higher of:

  • The rate in effect for your new rank
  • The protected rate you were receiving at your old rank

Your housing allowance will never drop to a lower rate because of a promotion.

House Size

Have you ever heard somebody complaining about how their basic allowance for housing doesn’t cover the cost of their home?

I hear these complaints all the time, and the answer is to live within your means.

You need to understand that BAH is based on the size of home your rank rates. For example, an E-4 will receive much less in BAH than a Colonel, because it is (reasonably) assumed that he requires less space for his family.

The problem isn’t the amount of money you receive, as this is extremely data-driven. Rather, the problem is (usually) the amount of house you want to occupy. Sorry, an E-4 doesn’t receive enough BAH to own a castle…that is a want, not a NEED!

PAYGRADEHOUSING TYPEBAH CALCULATION
E-12br apartmenthalfway between 2br apartment, and 2br townhouse
E-22br apartmenthalfway between 2br apartment, and 2br townhouse
E-32br apartmenthalfway between 2br apartment, and 2br townhouse
E-42br apartmenthalfway between 2br apartment, and 2br townhouse
E-52br townhousecalculated amount for a two bedroom townhouse
E-63br townhousecalculated amount for a three bedroom townhouse
E-73br townhouse3br townhouse plus 36% of difference toward a 3br single family home
E-83br townhouse3br townhouse plus 75% of difference toward a 3br single family home
E-93br single family homecalculated amount for a three bedroom house
W-13br townhouse3br townhouse plus 1% of difference toward a 3br single family home
CWO-23br townhouse3br townhouse plus 52% of difference toward a 3br single family home
CWO-33br single family homecalculated amount for a three bedroom single family home
CWO-43br single family home3br single family home plus 22% toward 4br single family home
CWO-53br single family home3br single family home plus 48% toward 4br single family home
O-12br townhouse2br townhouse plus 11% of difference toward a 3br townhouse
0-22br townhouse2br townhouse plus 98% of difference toward a 3br townhouse
0-33br single family home3br townhouse plus 98% of difference toward a 3br single family home
0-43br single family home3br single family home plus 58% toward 4br single family home
0-54br single family homecalculated amount for a four bedroom single family home
O-6+4br single family homePROBABLY NOT READING THIS

No, the size of your family doesn’t play into the size of the house you rate. That algorithm would be a nightmare for the military to track.

How is the Basic Allowance for Housing Calculated?

“Robert D. Niehaus, Inc. (RDN) is employed to collect the nation-wide housing cost data that are used to compute BAH. Established in 1983, RDN is a professional economic and public policy consulting firm located in Santa Barbara, California. The firm specializes in the applied analysis of military housing, water resources, environmental resources, industry economics, and community socioeconomic issues. RDN possesses many years of experience with DoD military housing projects and housing market research.” (source)

This company does not calculate the military BAH allocations. They do, however, provide data from over 400 markets across the United States, in order to determine the cost of living in each market.

What does BAH cover?

Basic allowance for housing is designed to compensate military members for 95% of the expenses of maintaining a home. This untaxed housing benefit is to cover you when not living in military housing and will ensure you can afford to live in a house, the size your rank is entitled to.

Both rent and utility expenses are included in this BAH calculation. The above table is cross-referenced with the data from RDN, and that is what decides your military BAH for the next year.

They survey housing costs during the summer, while there is a high turnover of tenants. That ensures a more up to date sample of gross market rents to pull data from.

Information on utility costs is collected using rates from local utility providers.

As you can see, there is a LOT of data utilized to determine what BAH rates need to be. That is great because it means you will inevitably be able to live in solid, affordable housing, in your market!

Again, please note that if you choose to live in a larger home (which is totally fine), that is your decision. Don’t go around complaining that BAH is too low, you chose to live there!

I hope you found this information as useful as I did, especially the grandfather clause I didn’t know existed!

Here is the 2020 Military Pay Chart

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David Pere

David Pere

David is an active duty Marine, who devotes his free time to teaching personal finance and real estate investing for service members, and the working class!

Leave a comment trooper!

3 Responses

  1. The following may be a slight tangent from the topic presented, however it may be worth noting.

    Generally, at some point in a service member’s career they will have the option to live on the installation (and not receive BAH), or to live off installation (and therefore receive BAH).

    Contrasting the two scenarios, a service member who lives on installation until being forced off by separation or retirement will have accumulated zero equity that can then be used to secure housing in the next chapter of their life.

    Meanwhile, the service member who purchased a house, made payments, and paid down principal, would have spent years building equity. At the 20 year mark, this service member would have far more resources available as they begin the next phase of their life. This would be even more significant if they lived in an area with a high cost of living (and proportional BAH).

    There are other benefits as well; appreciation and lower taxable income (via mortgage interest and other deductions) are just a couple.

    There will likely be costs associated with ownership along the way (closing costs to sell and purchase elsewhere if you PCS, maintenance, etc), but the benefits should be far greater.

    Something to consider…

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