Secretary of Defense William S. Cohen announced today that many soldiers, sailors, airmen and Marines will get an unexpected increase in their Basic Allowance for Housing (BAH) rates as a result of his decision to restore the allowance to 1999 rates in areas where the 2000 BAH rates had been decreased.
"This action will result in greater equity among all people assigned to the same duty location, and will also allow the Department to pause and examine how we survey and determine the average cost of housing," said Cohen. "It is extremely important that in every area, nationwide, we are providing an allowance which allows our men and women to live in quality housing.
"We have heard two things: first, that the difference between the old and new rates in areas where the rates decreased is simply too much, and second, that the allowance is not enough to rent the type of housing our people are actually occupying. As a result, I have decided to return areas in which rates decreased to their 1999 rates."
The intent of the new housing allowance system is to set the allowances based on the local cost of adequate housing. The new system also equalizes the out-of-pocket costs for members of the same grade across the country. Over the years, average out-of-pocket costs in higher cost areas had become significantly larger than in lower cost areas.
This year the out-of-pocket costs were set at an equal dollar value for every area based on 18.8 percent of the national median housing cost for each grade. The new system resulted in significant increases in allowances for members serving in very high-cost areas, but it also led to rate reductions in many other areas.
"In response to concerns from the field, I directed my staff to look at the quality of housing for which we are paying allowances; they concluded we need to do further research into how we establish the areas within a metropolitan region," said Cohen. "Given our initiative to eliminate average out-of-pocket expenses borne by our members by FY05, it does not make sense to lower rates for some of our people until we are absolutely sure we have it right."
Servicemembers, whether single or married, are provided either government housing or a monthly stipend known as Basic Allowance for Housing to procure commercially-owned housing in civilian communities around military bases in the United States. The rates paid for BAH are computed using a statutory formula that is based on the actual cost of adequate housing in the areas where the people live. The Department uses a contractor to determine what the actual cost of adequate housing is in those areas.
The Department will propose to Congress the necessary legislative changes to accomplish two actions: (1) provide authority to restore the allowance in areas where they decreased, retroactively, to January 1, 2000, and (2) eliminate the current legislation that requires service members to absorb at least 15 percent of their housing costs.