Basic Allowance for Housing – What You Need to Know

  • Published
  • By Senior Airman Carl Wheaton
  • 78th Comptroller Squadron Financial Services representative
The thrills of finding a new home during a PCS or a simple upgrade to your current living situation as a military member usually depends on what the Continental United States Basic Allowance for Housing rate is at the new or current duty station, respectively. 

While some prefer to find a home with a price range of their full BAH, others prefer to find a decent home a little under the cap for expenses like utilities, called the member's cost-sharing element or out-of-pocket expenses. 

The members cost-sharing element was incorporated early in the BAH program to limit rates to a defined budget. Those out-of-pocket costs were reduced from nearly 20 percent in 2000 to elimination in 2005. 

As part of the changes in the BAH program for 2015, out-of-pocket expenses are back. 

Two major things happened this year; first a legislation was approved in the fiscal 2015 National Defense Authorization Act allowing the Defense Department to reintroduce out-of-pocket costs, not to exceed one percent of national average housing costs by grade. Second, renter's insurance was eliminated from the 2015 BAH rate computation.

How will that impact service members? 
Again, the actual impact of the changes will vary depending on where the member decides to live. Members who choose to economize in their housing choices may have all their housing expenses covered. 

Members who rent median-priced property will have to pay a small amount above their BAH rate. Some members, renting properties above the median-price for the area, have already been paying some out- of-pocket expenses. 

This minor change might not be felt for most, due to rate protection. Rate protection means members currently receiving the BAH for a location will be rate protected at the previous year's BAH rate (if higher) as long as the member does not have a reduction in pay grade or change in dependency status. In other words, the incorporation of out-of-pocket expenses, removal of renter's insurance, declining rental/utility prices, etc., members receiving the BAH for the previous year will be protected. On the other hand, there are three separate circumstances where a member can lose their rate protection status. The first and most common, a decrease occurs when you PCS to a location at which the housing cost is less than at your current duty station, second, a demotion and third, your dependency status changes. 

Now that you know the basics about the new changes to the BAH and rate protection, here's the bottom line to the actual impact on the removal of renters insurance. On average, the cost of renters insurance contributed about $20 per month to the BAH rates, actual amounts will vary depending on grade and location. This expense will now need to be budgeted separately outside of the BAH rate. Renters insurance is still highly encouraged.