They’re out! Go see!
The Department of Defense has announced the 2021 military basic allowance for housing rates any day now! As usual, there will be some big winners and some big losers. (If you are on an iPhone, you may need to open this page using the three dots instead of clicking through from Facebook. If you are not on an iPhone, you may want to right-click, select “copy link address,” and put it into a new tab. I wish I could fix it but it seems to be either a Facebook issue or a DoD issue…)
BAH Rate Protection
The most important thing up front: Thanks to BAH rate protection, or the “grandfather clause,” the only way you lose money is if you are demoted or have a change in dependency status.
If BAH rates fall in your area, you are grandfathered into the higher rate as long as you remain in the same geographic area. We’ve been getting the same BAH since 2015!
Where Do These Rates Come From?
BAH is designed to partially compensate military members for the expenses of maintaining a home in lieu of living in military housing. Under the current formula, BAH is designed to cover 95% of rental costs for a house size tied to your rank, and average utility costs for that house.
The rates are calculated through a data- and math-intensive process. A private company first works with local installation housing offices to figure out where people can reasonably live, not too far, and not in unsafe areas. Then they pull together rental information, and use government data to calculate the cost of utilities.
Sometimes, the numbers that the data produces seem to make no sense, and seem either way too high or way too low for what it costs to live in that area. There are a couple of different reasons how that happens. Sometimes, the market is changing rapidly, and the process of determining BAH rates can’t keep up. Certainly, a geographic area may have widely varying housing costs. I’m sure sometimes there are just errors. And keep in mind that BAH rates are based on renting, not buying.
In digging down, though, what I typically find is that many families are choosing to live in a house of a larger or different style than the house that their BAH is based upon. Heck, we do…we almost always have. Our current house is 1 bedroom larger than the housing size linked to my husband’s rank. And there’s nothing wrong with that – the beauty of BAH is that you get to choose your housing – but it often the reason for the discrepancy between the BAH rate and the actual cost of housing.
I’ll have some analysis on these new rates once I’ve had a chance to dig into the data, but I wanted to get this link, grandfather clause rules, and the BAH formula up as soon as possible because we’ve all been waiting for this!
Please leave me a comment telling me whether your BAH went up (or the rate went down but you’ll get the old rate) and whether that seems fair for the area in which you live, based upon the size house you have chosen. I’m really curious to hear folks’ experiences.
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