As the Department of Defense (DoD) gets ready to release the 2021 Basic Allowance for Housing rates, this is a perfect time to review BAH rate protection, or “the grandfather clause.”
Each year, the DoD does a thorough study of the actual costs to rent a house in each military housing area. They use that information to adjust BAH, with some areas and/or ranks increasing or decreasing each year.
Thankfully, the DoD has a rate protection policy that means that (almost) no one will see their housing allowance decrease when the BAH rates decrease for their area and rank.
What Is BAH Rate Protection?
The DoD policies for BAH ensure that you don’t lose money because BAH has gone down for your rank at your location. Your BAH won’t go down as long as you remain at the same duty station, unless you fit one of the two exceptions listed below. Your BAH is based on the higher of:
- the rate you were receiving on 31 December of the previous year, or
- the new BAH rate in effect on 1 January.
This helps folks so that they aren’t stuck in a lease that they can no longer afford, and provides some consistency for budgeting.
The only situation in which someone is not covered by rate protection is if they are demoted or have a change in dependency status.
What Happens If I Promote?
If you promote during the year, 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
You won’t ever receive a lower BAH if you promote.
How Do They Come Up With These Rates, Anyway?
It’s a pretty complicated formula. Each year, the DoD (through a contractor) gathers thousands of costs for six different sizes of rental properties, and utilities, for over 400 markets across the United States. They apply this information to the BAH formula to figure out how much housing it should cover for each rank at each location, then adjust it so that it covers the designated percentage of housing costs (95% for 2021.) While a lot of people think it isn’t fair, you can’t argue that it isn’t based in data and math, because it is ALL data and math.
Understanding rate protection is important so that you’re not freaking out if your area’s rates go down for next year. In almost all cases, you will not lose any money thanks to the rate protection rules.
Do you want to know more about your military pay and benefits?
Things change fast around here! Keep up-to-date with email alerts about the topics that are important to you!