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