Military Housing

A Brief Guide to Basic Allowance for Housing (BAH)

July 14, 2023

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Basic Allowance For Housing

Basic Allowance for Housing provides a housing stiped (or allowance) for service members.  

Although this definition makes the concept seem simple, it can get a bit complex. 

So, in this article, we’re going to take a closer look at what BAH is and what it means. 

BAH Purpose 

The idea behind BAH is to help military members pay rent when government housing isn’t available. This military compensation package provides about $25.6 billion in tax-free housing allowances every year to around one million military members across the nation. This program tries to compensate members for the local median rental costs and average cost of utilities for civilians with incomes comparable to each military pay grade. Geographic location, pay grade, and dependency status are all factors that help determine distinct BAH rates . 

Kinds of BAH 

First, it’s important to know that there isn’t just one type of BAH. Here are the different kinds: 

  • BAH: This allowance helps military members offset the cost of housing when they don’t receive government-provided housing. 
  • Partial BAH: This version helps military members without dependents who live in government quarters with a partial allowance. 
  • BAH-Diff: This allowance is for members who are assigned to single quarters but receive BAH to pay child support. Military members aren’t entitled to this allowance if the monthly rate of child support is less than the BAH-Diff amount. 
  • BAH Reserve Component/Transit / BAH Type II: This allowance applies to members of the Reserve or Guard who are active for fewer than 30 days. It also extends to members who are in transit from a duty location with no former BAH rate (I.e., overseas). BAH II is a fixed rate based on the national average for housing and doesn’t differ by location. 
  • Overseas Housing Allowance: This allowance is only available to members stationed out of the country or in United States protectorates. 

In addition to the kinds of BAH listed above, BAH rates also vary based on if someone has dependents or not. The dependent rate is constant no matter how many dependents someone has.  

Dual-military couples without dependents get the without-dependents rate. If a dual-military couple has dependents, then one of them gets the with-dependents rate, and the other gets the without-dependents rate. 

BAH Eligibility 

BAH eligibility is relatively straightforward. Any service member assigned to permanent duty within the 50 United States, who is not furnished government housing, is eligible for a BAH. The amount is based on the member’s rank, dependency status, and permanent duty station ZIP Code. A member stationed overseas (excluding Hawaii and Alaska), including U.S. territories and possessions, who is not furnished government housing, is eligible for an Overseas Housing Allowance (OHA) based on the member’s dependency status.  

If a member with dependents (excluding a member paying child support) is serving an unaccompanied overseas tour, the member is eligible for BAH at the with-dependent rate, based on the dependent’s U.S. residence ZIP Code (plus FSH at the OCONUS PDS, if the member is not provided government housing overseas). 

Common Misconceptions 

A common misconception surrounding BAH is that it always covers 100% of a service member’s housing costs. In its original state, WAH law never covered more than 80% of local housing costs. Thus, BAH rates accounted for service members to pay at least 20% of housing costs out-of-pocket (e.g., from Basic Pay).  

In 2022, that value has been reduced to 5%. The government made a concerted effort to lower this value starting in 2000 to balance the growth in military compensation costs for all BAH stakeholders. The value then went back and forth a little bit over the years. Now, in 2023, BAH typically covers about 95% of an active-duty service member’s housing costs. 

Another common misconception is that BAH rates consider mortgage or homeownership costs in BAH determination. BAH rates factor in rental housing costs. 

Mortgage payments and homeownership costs typically include factors like expected appreciation, amount of down payments, settlement costs, and more. These aren’t factors that influence BAH rates.  

Thus, it’s not wise to assume BAH rates will reflect mortgage costs because of current rental market conditions, not the specific factors influencing mortgage loans. 

Determining BAH Rates 

The Defense Travel Management Office (DTMO) manages BAH for the Department of Defense.  

The DTMO calculates BAH through data collection on housing costs like rent and utilities from military housing locations across the U.S. After the data collection, the DTMO organizes it into profiles for apartments, townhouses, and single-family rental units of different sizes and types. 

The table below outlines the six standard housing profiles for BAH: 

Size Military Pay Grade (With Dependents) Military Pay Grade (Without Dependents) 
One Bedroom Apartment  E-4 
Two Bedroom Apartment  O-1 
Two Bed Townhouse or Duplex E-5 O-1E 
Three Bedroom Townhouse or Duplex E-6 O-3E 
Three Bedroom Single Family Detached House W-3 O-6 
Four Bedroom Single Family Detached House O-5  

The DTMO then figures out the total housing costs (median rent plus average utilities) for each profile in a military housing area. These rates change, so the DTMO revisits them on a yearly basis. 

It’s important to know that this is a simplification of the determination process. The DTMO shares a BAH Primer that provides more detail on formulas.  

Changes to BAH Rates 

Typically, the BAH rate can only increase, which improves a service member’s benefit amount. 

If the rate is going to drop, it won’t impact a service member who is already living somewhere. The BAH Rate Protection Policy makes sure of this fact. 

Every active service member is entitled to the BAH rates listed on January 1st or the amount of housing allowance they received on December 31st. The determination is whichever amount is greater. 

That said, a permanent change of station, a reduction in pay grade, or a change in dependent status can lead to decreases. 

Conclusion 

While this isn’t an exhaustive article on BAH, it’s a great foundational tool. If you absorb the information in this article, you will have a great understanding of some key components of this benefit. 

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