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BAH Rate Protection (or The Grandfather Clause)

5 December 2022

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military housing allowance rate protectionAs the Department of Defense (DoD) gets ready to release the 2023 Basic Allowance for Housing rates, this is a perfect time to review BAH rate protection, or “the grandfather clause.” (Rates are usually announced on or around the 15th of December.)

Each year, the DoD calculates the 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, or
  • 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 complex 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. What may be inappropriate is the housing standards upon which the rates are calculated, but that’s a different fight.

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.

More reading on BAH:

Five Things You To Know About The New BAH Rates

How Much Should Military BAH Pay For?

Housing Want vs. Housing Needs: What’s Really Important?

2021 Military Basic Allowance for Housing Rates

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9 Comments
Filed Under: Housing

Comments

  1. Justin says

    12 July 2019 at 1:12 pm

    What about separating from Active Duty and joining the local Reserve unit at the same location? Finance is telling me they will have to reprocess me at the 2019 rates, which will be $312 lower per month. I’m not moving, just transferring to the Reserves. Seems like a bad deal to me.

    Reply
    • Kate Horrell says

      21 July 2019 at 1:26 am

      While I’m not familiar with this exact situation, I can see why it is unfolding that way. You won’t get BAH as a reservist except for when you’re activated, so each activation would be at the current rate.

      Reply
  2. David says

    16 December 2020 at 9:45 am

    How close to the New Year can I check into my new command to receive the precious years rate?

    Reply
    • Kate Horrell says

      17 December 2020 at 3:09 pm

      David, you should receive the rate in effect on the day that you check in. However, without knowing how your unit, installation or branch manages paperwork, I would be a little wary of checking in on the last day of the year, or even the second to last, and I’d maybe check in earlier if that is an option.

      Reply
  3. Chris says

    22 January 2021 at 3:38 pm

    What if they assign you the big city bah on check in, but then try to lower it to the area they want to send you to, and create an indebtedness to recoup the diff?

    BAH 32**.00 on check in
    but then
    TOTAL DEBT 1020.16 BALANCE 935.14
    BAH BASED ON W/DEP, ZIP ******
    START INDEBTEDNESS 210107(007)
    RATE CHG BASIC PAY 210101(001)
    RATE CHG BAH 210101(001)
    RATE CHG BAS 210101(001)

    Reply
    • Kate Horrell says

      23 January 2021 at 1:38 pm

      I’m not sure what you mean by “the area they want to send you to.” Regardless of what that means, there are some sort of orders involved in that. Are they TDY? TAD? PCA? Was there a movement of household goods involved? In most cases, your BAH is pegged to your assigned duty station.

      If your assigned duty station changed, then yet, your BAH will (probably) change, and you’ll be responsible for repaying any amount you were overpaid. The biggest exception is if you change duty stations within the same military housing area (i.e. DC, or San Diego.)

      Reply
  4. Jake Smith says

    29 April 2021 at 12:40 am

    referring to:

    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

    Does this mean that when I promote and the BAH I am grandfathered into is the same as my new rank I don’t get an increase?

    Thank you.

    Reply
    • Kate Horrell says

      29 April 2021 at 2:45 pm

      If the new rate for your new rank is lower than the old rank, then no, you would not get an increase or a decrease.

      Reply
  5. steven says

    5 May 2021 at 1:59 pm

    getting a promotion and not being grandfathered into the old BAH is extremely unfair for those who have gotten housing on the anticipation of getting promoted if he/she was promotable and gotten housing based on the anticipation of the promotion and the old BAH at the promoted rank. People don’t move during an assignment and plan forward not backwards.

    Reply

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WELCOME!

Hi! I'm Kate! Accredited Financial Counselor®, Navy spouse, and mom of four.

Here at the blog, I talk about the financial issues that affect military families - pay, allowances, and benefits. Plus college stuff, landlording, moving, taxes. We cover a little bit of everything.

My goal is to give you the tools to make the best decisions right now, so you'll be confidently prepared for whatever comes next - whether that's a PCS move, transition to civilian life, or retirement.

So grab a cup of coffee, tea, or whatever makes you happy, and let's get to know each other.

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