(Click here to view a table showing BAH rates for various stateside localities.)

Basic Allowance for Housing rates will rise by an average of 7 percent, effective Jan. 1, 2004, for 820,000 servicemembers living off base in the United States.

Changes in BAH have no immediate impact on servicemembers living off base overseas. They draw a separate Overseas Housing Allowance which is adjusted twice a year, in the spring and fall, based on the value of the dollar and to stay even with out-of-pocket costs for stateside peers.

The BAH rate increases for 2004 continue a string of annual allowance hikes that exceed the reported rise in rental costs nationwide — 2.9 percent this year — and therefore lowers out-of-pocket costs for military renters.

Military home buyers benefit identically from BAH rates but they are set based on local rents rather than the cost of home mortgages, which not only provide tax breaks but often capital gains when homes are sold.

New BAH rates will be set to cover, on average, all but 3.5 percent of off-base rental costs in stateside areas. The next BAH adjustment, in 2005, should close the gap entirely, a goal set by the Department of Defense and Congress in the final years of the Clinton administration.

Housing allowance increases back then were tied not to rising rents but to basic pay raises which, in turn, were linked to private sector wage growth. As a result, housing allowances failed to keep pace with rental costs. At one point in the late 1990s, servicemembers paid out of pocket 22 percent of what it cost to rent adequate housing for their pay grade.

That 22 percent “absorption” expense is just about gone, falling by another four points with the new BAH rates. DOD in 2004 will spend $9.8 billion on stateside housing allowances, an increase of $785 million from the previous year. Once again, individual raises will vary by pay grade, family status (with or without dependents) and Military Housing Area (MHA).

The average BAH raise for a typical enlisted member — E-5 with one or more dependents — will be $31 a month. No servicemember will see monthly BAH fall, thanks to a rate protection feature adopted a few years ago. Some will see their BAH unchanged, however, because local rents actually have declined.

BAH is designed so that servicemembers in the same grade and with the same dependency status have the same monthly out-of-pocket cost regardless of location. For example, if the out-of-pocket cost for a newly arrived E-5 with dependents is $70 a month in Honolulu, it should also be $70 for a newly arrived E-5 with dependents in Montgomery, Ala.

Rate protection ensures that members, once settled at a duty station, receive yearly BAH increases but no decreases. Besides this “individual” rate protection, BAH rates also have “geographic” protection. That is, no BAH rates have gone down in any area of the country for several years.

This geographic rate protection ends in 2005. Rates will begin moving up and down again with market rental costs. Individual rate protection will remain.

Rental cost data for each military housing area is gathered throughout the year by a Defense contractor, Runzheimer International, from military housing offices and through thousands of phone calls to local Realtors, renters, landlords and local Chambers of Commerce. Runzheimer also reviews local classified ads for rental property costs.

Though rents nationally climbed an average of 2.9 percent, there was wide disparity across military housing areas. For instance, rents rose in 2003 by 6.3 percent in Norfolk, Va., 4.2 percent in both San Diego and Camp Lejeune, N.C., and by 1.2 percent in Tacoma, Wash. The average increase was 17.4 percent around Robbins AFB, Ga., one of the highest reported.

Rents fell by an average of 6.3 percent in Colorado Springs, Colo., and by 2.9 percent in Washington, D.C., and Fort Hood, Texas.

Increases also varied within housing areas. At Edwards AFB, Calif., for example, only E-9s among enlisted members with dependents will see an increase this year, just $11 a month. Among officers there having no dependents, only the most senior, O-6 and above, will see BAH rise.

New BAH rates for all stateside areas can be viewed at:

Those seeking more information on how BAH rates are set can read a 16-page primer at:

Comments are welcomed. Write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, e-mail or visit Web site at:

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