THE A B C’S OF BASIC ALLOWANCE FOR HOUSING (BAH)

RTTUZYUW RUEWMCS0000 0890034-UUUU--RUCRNAD
ZNR UUUUU
R 290034Z MAR 08
FM CNO WASHINGTON DC/N1//
TO NAVADMIN
INFO CNO WASHINGTON DC/N1//
BT
UNCLAS //N07220//
NAVADMIN 083/08
MSGID/GENADMIN/CNO WASHINGTON DC/N1//


REF/A/DOC/TITLE 37 USC SEC 403//
REF/B/DOC/JFTR CH.10//
REF/C/DOC/OPNAVINST 7220.12/24 DEC 2005// NARR/REF A IS U.S. LAW FOR 
BASIC ALLOWANCE FOR HOUSING.  REF B IS DOD POLICY FOR BASIC ALLOWANCE 
FOR HOUSING.  REF C IS NAVY POLICY FOR BASIC ALLOWANCE FOR HOUSING.// 
SUBJ/THE A B C'S OF BASIC ALLOWANCE FOR HOUSING (BAH)// 
RMKS/1.  BACKGROUND.  BAH IS A FUNDAMENTAL ELEMENT OF MILITARY PAY, AND 
FOR MANY SAILORS REPRESENTS A SIGNIFICANT PORTION OF THEIR MONTHLY 
INCOME.  THIS NAVADMIN OFFERS SAILORS AN EXPLANATION OF THEIR BAH 
ENTITLEMENT, AND SPECIFICALLY, EXPLAINS THE DETAILS OF THE PROCESS BY 
WHICH RATES ARE ADJUSTED EACH YEAR.  
2.  BAH BASICS.  IN ITS SIMPLEST TERMS, BAH IS PAID TO SAILORS ASSIGNED 
TO PERMANENT DUTY IN THE 50 UNITED STATES AND THE DISTRICT OF COLUMBIA 
WHO ARE NOT FURNISHED WITH GOVERNMENT HOUSING APPROPRIATE TO THEIR 
DEPENDENCY (FAMILY) STATUS.  BY LAW AND DOD- WIDE REGULATION (REFS A 
AND B), THE AMOUNT OF BAH SAILORS RECEIVE IS BASED ON THEIR PAY GRADES, 
THEIR DEPENDENCY STATUS, AND, AS A STARTING PREMISE, THE GEOGRAPHIC 
LOCATION OF THEIR PERMANENT DUTY STATIONS (PDS) OR HOME PORT (NOT THE 
ACTUAL LOCATION OF THEIR RESIDENCE).  THE BAH PROGRAM IS MEANT TO 
ENABLE SAILORS TO AFFORD SUITABLE RENTAL HOUSING WITHIN A REASONABLE 
DISTANCE OF THEIR DUTY LOCATION/HOME PORT.  REF A MANDATES THAT DOD SET 
SPECIFIC BAH RATES BASED ON THE COSTS OF ADEQUATE HOUSING FOR CIVILIANS 
OF COMPARABLE INCOME LEVELS (OF COURSE SAILORS ARE GENERALLY FREE TO 
CHOOSE WHERE TO LIVE AND IN WHAT TYPE OF DWELLING).  DUE TO THE 
DIFFICULTY IN MEASURING FACTORS RELATED TO HOME LOANS (EXPECTED HOME 
APPRECIATION, AMOUNT OF DOWN PAYMENT, TAX SAVINGS DUE TO INTEREST 
PAYMENTS, OPPORTUNITY COSTS OF INTEREST FROM DOWN PAYMENTS, ETC.), BAH 
IS ONLY CALCULATED FOR RENTAL HOUSING.  HOME OWNERSHIP COSTS ARE NOT 
CONSIDERED IN SETTING BAH RATES.  GEOGRAPHIC LOCATION OF THE DUTY 
STATION/HOME PORT PLAYS A SIGNIFICANT ROLE IN BAH RATES ACROSS THE 
COUNTRY; THIS IS THE MAIN REASON WHY BAH RATES CAN VARY SO DRAMATICALLY 
FROM ONE DUTY STATION TO THE NEXT.
3.  INDIVIDUAL RATE PROTECTION.  BASED ON ANNUAL DATA COLLECTION, 
EXPLAINED IN GREATER DETAIL BELOW, BAH RATES MAY GO UP OR DOWN EACH 
YEAR.  THESE ADJUSTMENTS ARE BASED ON CHANGES WITHIN THE LOCAL RENTAL 
MARKET WITHIN EACH MILITARY HOUSING AREA (MHA).  FOR EXAMPLE, A RENTAL 
UNIT SURPLUS MIGHT LEAD TO LOWER AVERAGE RENTS IN A SPECIFIC REGION.  
DOD GUARANTEES THAT AN INDIVIDUAL'S BAH ENTITLEMENT WILL NOT DECREASE 
WHILE ASSIGNED TO THAT MHA, EVEN IF BAH RATES DECREASE.  
EVEN MORE BENEFICIAL, AN INCREASE IN THE BAH RATE APPLIES TO ALL 
PERSONNEL WITHIN THAT MHA.  FOR EXAMPLE, IF A SAILOR'S MONTHLY BAH RATE 
WITHIN AN MHA FOR 2008 IS $1,000 AND THE 2009 RATE IS REDUCED TO $900, 
THE SAILOR WILL CONTINUE TO RECEIVE $1,000 WHILE HE OR SHE IS ASSIGNED 
TO THAT MHA.  ON THE OTHER HAND, IF THE 2009 RATE GOES UP TO $1,100, 
THE SAILOR WILL RECEIVE THE NEW RATE OF $1,100.  
FINALLY, RATE PROTECTION MAY ALSO APPLY TO MHA'S WHERE DEPENDENTS ARE 
LOCATED; IF, BASED ON REFS A THROUGH C, A SAILOR IS AUTHORIZED TO 
RECEIVE BAH BASED ON DEPENDENT LOCATION, THE RATE WHERE THE FAMILY IS 
RESIDING IS ALSO PROTECTED.
4.  DATA COLLECTION PROCESS.  BAH RATES FOR 370 MHA'S IN THE UNITED 
STATES, INCLUDING ALASKA AND HAWAII, ARE CALCULATED AND ADJUSTED BY DOD 
THROUGH AN ANNUAL DATA COLLECTION PROCESS.  THIS PROCESS IS MANAGED BY 
THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE (PDTATAC) 
WITHIN THE OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR PERSONNEL AND 
READINESS (OUSD(P-R)), WHICH CONTRACTS WITH RUNZHEIMER INTERNATIONAL 
(RZI), A RECOGNIZED INDUSTRY EXPERT IN THE FIELD OF HOUSING COST 
ANALYSIS, TO CONDUCT THE ANNUAL DATA COLLECTION.  BAH RATES ARE 
ADJUSTED EACH YEAR BASED ON THREE HOUSING-RELATED COSTS:  
- RENTAL HOUSING COSTS,
- UTILITIES (INCLUDING ELECTRICITY, HEAT, WATER AND SEWER), AND
- RENTER'S INSURANCE.  
    A.  RENTAL HOUSING.  WITHIN THE RENTAL MARKET, THE RENT ITSELF 
TENDS TO ACCOUNT FOR THE LARGEST SINGLE ELEMENT OF AN INDIVIDUAL'S 
TOTAL HOUSING COSTS, AND THUS MAKES UP THE LARGEST PORTION OF A BAH 
RATE.  COLLECTION OF OBJECTIVE LOCAL MARKET COSTS ON APARTMENTS, 
TOWNHOUSES/DUPLEXES, AND SINGLE-FAMILY RENTAL UNITS OF VARIOUS NUMBERS 
OF BEDROOMS OCCURS IN THE SPRING AND SUMMER WHEN HOUSING MARKETS ARE 
MOST ACTIVE.  CURRENT, VALID RENTAL COSTS ARE CRUCIAL TO ACCURATE BAH 
RATES.  RZI USES DATA FROM MULTIPLE SOURCES TO PROVIDE A "CHECKS AND 
BALANCES" APPROACH.  FIRST, RENTAL PROPERTY DATA IS COLLECTED FROM 
MILITARY HOUSING OFFICERS (MHO'S), LOCAL DOD REPRESENTATIVES WHO SUBMIT 
CURRENT DATA DURING THREE CYCLES IN MAY, JUNE, AND JULY EACH YEAR. 
SECOND, RZI COLLECTS DATA FROM LOCAL SOURCES WITHIN EACH MHA.  THIS 
CONSISTS OF:  
- CONSULTING WITH REAL ESTATE PROFESSIONALS IN EACH MHA TO CONFIRM 
MARKET RENTAL PRICES AND OBTAINING ADDITIONAL DATA,
- OBTAINING CURRENT RESIDENTIAL VACANCIES FROM LOCAL NEWSPAPERS AND 
REAL ESTATE RENTAL LISTINGS, AND
- CONTACTING APARTMENT AND REAL ESTATE MANAGEMENT COMPANIES TO IDENTIFY 
UNITS FOR RENTAL PRICING WITHIN EACH MHA.  
FINALLY, RZI CONSULTS LOCAL HOUSING OFFICES TO GAIN INSIGHT INTO THE 
CONCERNS OF SERVICE MEMBERS.  CERTAIN TYPES OF HOUSING (MOBILE HOMES, 
LOW-INCOME SUBSIDIZED HOUSING UNITS, AGE-RESTRICTIVE DWELLINGS,
ETC.) ARE EXCLUDED FROM THE DATA COLLECTION.  UNSUITABLE NEIGHBORHOODS 
(THOSE BEYOND A REASONABLE COMMUTING DISTANCE, THOSE WITH SUB-STANDARD 
HOUSING OR HIGH CRIME, ETC.) ARE ALSO EXCLUDED.  
    B.  DOD HOUSING STANDARDS ARE CALCULATED TO ENSURE SERVICE MEMBERS 
RECEIVE BAH THAT WILL PAY FOR HOUSING THAT IS COMPARABLE TO CIVILIANS 
WHO EARN A SIMILAR INCOME; IN OTHER WORDS, HOUSING ALLOWANCES INCREASE 
AS SAILORS REACH HIGHER PAY GRADES.  DATA IS COLLECTED ON SIX HOUSING 
PROFILES RANGING FROM ONE-BEDROOM APARTMENTS TO FOUR-BEDROOM SINGLE-
FAMILY DETACHED HOUSES.  THE PROCESS LINKS HOUSING COSTS FOR EACH TYPE 
OF HOUSE TO A PARTICULAR PAY GRADE TO FORM "ANCHOR POINTS" TO WHICH ALL 
OTHER PAYGRADES ARE BASED ON (SEE TABLE BELOW).  THE "X" INDICATES AN 
E-4 WITH DEPENDENTS WILL RECEIVE BAH CLOSE TO A 2-BEDROOM TOWNHOUSE.
DOD PROFILE                PAY GRADE                  PAY GRADE
                          W/DEPENDENTS              W/OUT DEPENDENTS
1-BEDROOM APARTMENT            X                         E-4
2-BEDROOM APARTMENT            X                         O-1
2-BEDROOM TOWNHOUSE           E-5                        O-1E
3-BEDROOM TOWNHOUSE           E-6                        O-3E
3-BEDROOM SINGLE FAMILY
    DETACHED HOUSE            W-3                        O-6
4-BEDROOM SINGLE FAMILY
    DETACHED HOUSE            O-5
ONCE DATA IS COLLECTED, BAH FOR OTHER PAY GRADES IS DETERMINED BY 
INTERPOLATING (OR "FILLING IN") BETWEEN ANCHOR POINTS.  FOR EXAMPLE,
E-7 IS NOT AN ANCHOR POINT, AND WOULD THEREFORE RECEIVE BAH BETWEEN
E-6 AND W-3.  THE ANCHOR POINT FOR E-4 (WITH AND WITHOUT DEPENDENTS) 
REPRESENTS THE MINIMUM STANDARD AND APPLIES TO PAY GRADES E-1 THROUGH 
E-3.
    C.  DEPENDENTS.  EFFECTIVE 1 JANUARY 2008, BAH RATES FOR MEMBERS 
WITHOUT DEPENDENTS ARE SET AT AN AMOUNT THAT IS AT LEAST 75% OF THE 
"WITH DEPENDENT" RATE.  THE ACTUAL DIFFERENCE CHANGES SLIGHTLY BY PAY 
GRADE.
    D.  UTILITIES.  WHILE UTILITIES REPRESENT A PORTION OF TOTAL 
HOUSING COSTS AND THEREFORE ARE INCLUDED IN CALCULATING BAH, THERE IS 
NO STANDARD PERCENTAGE ACROSS THE COUNTRY.  RZI UTILIZES DATA COLLECTED 
BY THE BUREAU OF THE CENSUS IN ITS ANNUAL AMERICAN COMMUNITY SURVEY TO 
DETERMINE AVERAGE EXPENDITURES FOR UTILITIES SPECIFIC TO EACH DWELLING 
TYPE IN EACH AREA.  FOR THE 2007 SURVEY, DATA WAS COLLECTED FROM MORE 
THAN THREE MILLION ADDRESSES IN OVER 3,100 COUNTIES.  THE SURVEY ASKS 
FOR PREVIOUS MONTH?S ELECTRICITY AND GAS COSTS AND THE 12 MONTH AVERAGE 
FOR OTHER FUEL, WATER AND SEWER COSTS.  SOME BAH RATES IN SOME 
LOCATIONS ARE REDUCED OR INCREASED SLIGHTLY BASED ON UPDATED UTILITY 
COST DATA.
    E.  RENTER'S INSURANCE.  THE RENTER'S INSURANCE PORTION OF BAH 
COVERS THE VALUE OF HOUSEHOLD CONTENTS.  IT IS BASED ON THE AVERAGE 
COST TO INSURE PERSONAL PROPERTY SPECIFIC TO EACH PROFILE AND TO EACH 
MHA.  NOTE THAT HOMEOWNER'S INSURANCE IS NOT A PART OF BAH CALCULATION.
    F.  DATA QUALITY ASSURANCE.  DOD AND RZI RECOGNIZE THE IMPORTANCE 
OF ACCURATE RATES AND MAKE EVERY EFFORT TO OBTAIN MAXIMUM RELIABILITY.  
AT EACH STEP IN THE PROCESS, THEY EMPLOY NUMEROUS LEVELS OF QUALITY 
ASSURANCE, ANALYZE STATISTICS TO SPOT PROBLEMS AND APPLY COMMON SENSE 
TESTS TO THE DATA. THEY ENSURE THAT THE UNITS ARE ACCEPTABLE, AND THAT 
THEY ARE LOCATED IN NEIGHBORHOODS WHERE MEMBERS WOULD TYPICALLY CHOOSE 
TO RESIDE.  THEY OBTAIN INPUT ON SUITABLE HOUSING AND UNACCEPTABLE 
AREAS FROM HOUSING OFFICES AND INSTALLATION LEADERSHIP.  AS ANOTHER 
QUALITY ASSURANCE STEP, DOD AND THE SERVICES CONDUCT ON-SITE 
EVALUATIONS AT SELECTED LOCATIONS.  THESE REVIEWS CONFIRM THE 
RELIABILITY AND ACCURACY OF THE RENTAL DATA.  DURING THESE VISITS, THEY 
ALSO EVALUATE THE CRITERIA USED FOR SCREENING NEIGHBORHOODS AND OTHER 
EXCLUDED AREAS.
5.  THE FINAL STEP.  RZI CONSOLIDATES THE RESULTS OF THE DATA 
COLLECTION DURING THE LATE SUMMER.  DURING THE FALL, AFTER RENTAL, 
UTILITY, AND INSURANCE DATA ARE COLLECTED AND MEDIAN HOUSING COSTS 
CALCULATED, THE PDTATAC (WITH REPRESENTATIVES FROM EACH OF THE 
UNIFORMED SERVICES) REVIEWS THE LOCAL MEDIAN HOUSING COSTS FOR EACH MHA, 
APPRAISES MHA AND PROFILE-SPECIFIC UTILITY AND RENTER'S INSURANCE DATA, 
AND PROPOSES BAH RATES FOR BOTH MEMBERS WITH AND WITHOUT DEPENDENTS IN 
EACH OF THE 24 PAY GRADES.  IT IS AT THIS POINT THAT DOD ESTABLISHES 
THE FINAL ADJUSTED RATES TO BE IMPLEMENTED ON 1 JANUARY OF THE 
FOLLOWING YEAR.
6.  BOTTOM LINE:  FOR ANY GIVEN SAILOR, WHETHER OR NOT THEY INCUR OUT-
OF-POCKET EXPENSES WILL BE DEPENDENT ON THEIR HOUSING CHOICE.  
SAILORS WHO RENT HOMES ABOVE THE MEDIAN RATE FOR THEIR PAY GRADE/ 
PROFILE WILL SEE THAT BAH WILL NOT COVER ALL OF THEIR HOUSING COSTS.  
THE OPPOSITE IS TRUE FOR SAILORS WHO CHOOSE TO RENT LESS EXPENSIVE
RESIDENCES- THOSE SAILORS MAY ACTUALLY EXPERIENCE A BAH SURPLUS AND 
KEEP THAT EXTRA MONEY TO USE AS THEY CHOOSE.
7.  A FINAL WORD TO SAILORS.  THIS NAVADMIN IS INTENDED TO EXPLAIN THE 
BASICS OF HOW BAH RATES ARE DETERMINED; TO PROVIDE THE "ABC'S" OF BAH.  
IT IS WRITTEN TO A BROAD AUDIENCE AND, WHILE IT CAN NOT ADDRESS ALL THE 
INDIVIDUAL CIRCUMSTANCES THAT MIGHT AFFECT ANY GIVEN SAILOR?S BAH 
ENTITLEMENT, IT DOES CONTAIN VALUABLE INFORMATION THAT SHOULD BE GIVEN 
THE WIDEST DISSEMINATION.  I ENCOURAGE EVERY SAILOR TO "LEARN MORE 
ABOUT IT" BY VISITING THE PDTATAC WEBSITE (SEE BELOW); ACTIVELY SEEKING 
OUT THE EXPERTISE OF THEIR PAY, PERSONNEL, AND HOUSING PROFESSIONALS; 
AND ADDRESSING ISSUES THROUGH THEIR CHAIN OF COMMAND.
8.  MORE DETAILED INFORMATION ON BAH AND THE RATE SETTING PROCESS CAN 
BE FOUND AT HTTP://PERDIEM.HQDA.PENTAGON.MIL/PERDIEM.  THIS WEBSITE IS 
A VERY GOOD PLACE TO LOOK UP INDIVIDUAL RATES, READ/ DOWNLOAD A BAH 
"PRIMER", AND REVIEW FREQUENTLY ASKED QUESTIONS (FAQ'S).  
9.  POINT OF CONTACT:  LT MIKE BOWER (OPNAV N130C) AT (703) 695-3304 OR 
BY EMAIL AT MICHAEL.L.BOWER(AT)NAVY.MIL OR NXAG_N130C4(AT)NAVY.MIL.
10.  RELEASED BY VADM J. C. HARVEY, JR., N1.// 
BT 
#0000 
NNN


%d bloggers like this: