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IMMEDIATE RELEASE

Release No: 1290-04
December 14, 2004

2005 Basic Allowances For Housing Rates Announced

The Department of Defense released the 2005 Basic Allowance for Housing (BHA)rates today, continuing the department's initiative of reducing military members' out-of-pocket housing costs. In total, the planned increase in housing allowance funds for fiscal 2005 above the fiscal 2004 amount is about $2.5 billion. The 2005 rates represent the final phase of the planned buy down in out-of-pocket housing expenses. Other components of the increase are geographic rate protection and housing cost inflation.

Out-of-pocket expense, the portion of the typical member's housing cost that the member is responsible for, has been reduced from 3.5 percent last year to zero this year. The 2005 rates represent the final phase in a series of steps taken to bring the average member's out-of-pocket expense to zero by 2005. However, the actual expense for an individual may be higher or lower than that average, based on his/her actual choice of housing.

Three components are included in the BAH computation:

Median current market rent

Average utilities (including electricity, heat, and water/sewer)

Average renter's insurance

Total housing costs are calculated for six housing profiles (based on dwelling type and number of bedrooms) in each Military Housing Area (MHA). BAH rates are then calculated for each pay grade, both with and without dependents. An estimated $12.3 billion will be paid to more than 910,000 service members in 2005.

Data are collected annually for approximately 400 MHAs in the United States, including Alaska and Hawaii. An important part of the BAH process is the cooperation from the services and local military housing offices in the data collection effort. Input from local commands is used to determine in what neighborhoods data is collected and to direct the data collection effort towards adequate apartment complexes and individual housing units.

For members with dependents, average increases in the BAH are approximately 8 percent. A typical E-4 with dependents, for example, will find his/her BAH about $47 per month higher than last year. An E-8 with dependents will have about $60 more in his/her paycheck.

An integral part of the BAH program is the provision of individual rate protection to all members. No matter what happens to measured housing costs, an individual member in a given location will never see his/her BAH rate decrease. This policy assures that members who have made long-term commitments in the form of a lease or contract will not be penalized if the area's housing costs decrease.

Geographic rate protection has also been provided to members. Geographic rate protection maintains a BAH rate at last year's level while the planned buy down in out-of-pocket expense is phased in. Geographic rate protection means that newly arrived members to an area will not see BAH rates that are substantially less than current members' rates.

The continual improvement in housing allowances represent the Defense Departments commitment to the preservation of a compensation and benefit structure which will provide members with a suitable and secure standard of living, that will sustain a trained, experienced, and ready force in the future.

 

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