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TO NAVADMIN
INFO CNO WASHINGTON DC/N1//
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UNCLAS //N07220//
NAVADMIN 083/08
MSGID/GENADMIN/CNO WASHINGTON DC/N1//
REF/A/DOC/TITLE 37 USC SEC 403//
REF/B/DOC/JFTR CH.10//
REF/C/DOC/OPNAVINST 7220.12/24 DEC 2005// NARR/REF A IS U.S. LAW FOR
BASIC ALLOWANCE FOR HOUSING. REF B IS DOD POLICY FOR BASIC ALLOWANCE
FOR HOUSING. REF C IS NAVY POLICY FOR BASIC ALLOWANCE FOR HOUSING.//
SUBJ/THE A B C'S OF BASIC ALLOWANCE FOR HOUSING (BAH)//
RMKS/1. BACKGROUND. BAH IS A FUNDAMENTAL ELEMENT OF MILITARY PAY, AND
FOR MANY SAILORS REPRESENTS A SIGNIFICANT PORTION OF THEIR MONTHLY
INCOME. THIS NAVADMIN OFFERS SAILORS AN EXPLANATION OF THEIR BAH
ENTITLEMENT, AND SPECIFICALLY, EXPLAINS THE DETAILS OF THE PROCESS BY
WHICH RATES ARE ADJUSTED EACH YEAR.
2. BAH BASICS. IN ITS SIMPLEST TERMS, BAH IS PAID TO SAILORS ASSIGNED
TO PERMANENT DUTY IN THE 50 UNITED STATES AND THE DISTRICT OF COLUMBIA
WHO ARE NOT FURNISHED WITH GOVERNMENT HOUSING APPROPRIATE TO THEIR
DEPENDENCY (FAMILY) STATUS. BY LAW AND DOD- WIDE REGULATION (REFS A
AND B), THE AMOUNT OF BAH SAILORS RECEIVE IS BASED ON THEIR PAY GRADES,
THEIR DEPENDENCY STATUS, AND, AS A STARTING PREMISE, THE GEOGRAPHIC
LOCATION OF THEIR PERMANENT DUTY STATIONS (PDS) OR HOME PORT (NOT THE
ACTUAL LOCATION OF THEIR RESIDENCE). THE BAH PROGRAM IS MEANT TO
ENABLE SAILORS TO AFFORD SUITABLE RENTAL HOUSING WITHIN A REASONABLE
DISTANCE OF THEIR DUTY LOCATION/HOME PORT. REF A MANDATES THAT DOD SET
SPECIFIC BAH RATES BASED ON THE COSTS OF ADEQUATE HOUSING FOR CIVILIANS
OF COMPARABLE INCOME LEVELS (OF COURSE SAILORS ARE GENERALLY FREE TO
CHOOSE WHERE TO LIVE AND IN WHAT TYPE OF DWELLING). DUE TO THE
DIFFICULTY IN MEASURING FACTORS RELATED TO HOME LOANS (EXPECTED HOME
APPRECIATION, AMOUNT OF DOWN PAYMENT, TAX SAVINGS DUE TO INTEREST
PAYMENTS, OPPORTUNITY COSTS OF INTEREST FROM DOWN PAYMENTS, ETC.), BAH
IS ONLY CALCULATED FOR RENTAL HOUSING. HOME OWNERSHIP COSTS ARE NOT
CONSIDERED IN SETTING BAH RATES. GEOGRAPHIC LOCATION OF THE DUTY
STATION/HOME PORT PLAYS A SIGNIFICANT ROLE IN BAH RATES ACROSS THE
COUNTRY; THIS IS THE MAIN REASON WHY BAH RATES CAN VARY SO DRAMATICALLY
FROM ONE DUTY STATION TO THE NEXT.
3. INDIVIDUAL RATE PROTECTION. BASED ON ANNUAL DATA COLLECTION,
EXPLAINED IN GREATER DETAIL BELOW, BAH RATES MAY GO UP OR DOWN EACH
YEAR. THESE ADJUSTMENTS ARE BASED ON CHANGES WITHIN THE LOCAL RENTAL
MARKET WITHIN EACH MILITARY HOUSING AREA (MHA). FOR EXAMPLE, A RENTAL
UNIT SURPLUS MIGHT LEAD TO LOWER AVERAGE RENTS IN A SPECIFIC REGION.
DOD GUARANTEES THAT AN INDIVIDUAL'S BAH ENTITLEMENT WILL NOT DECREASE
WHILE ASSIGNED TO THAT MHA, EVEN IF BAH RATES DECREASE.
EVEN MORE BENEFICIAL, AN INCREASE IN THE BAH RATE APPLIES TO ALL
PERSONNEL WITHIN THAT MHA. FOR EXAMPLE, IF A SAILOR'S MONTHLY BAH RATE
WITHIN AN MHA FOR 2008 IS $1,000 AND THE 2009 RATE IS REDUCED TO $900,
THE SAILOR WILL CONTINUE TO RECEIVE $1,000 WHILE HE OR SHE IS ASSIGNED
TO THAT MHA. ON THE OTHER HAND, IF THE 2009 RATE GOES UP TO $1,100,
THE SAILOR WILL RECEIVE THE NEW RATE OF $1,100.
FINALLY, RATE PROTECTION MAY ALSO APPLY TO MHA'S WHERE DEPENDENTS ARE
LOCATED; IF, BASED ON REFS A THROUGH C, A SAILOR IS AUTHORIZED TO
RECEIVE BAH BASED ON DEPENDENT LOCATION, THE RATE WHERE THE FAMILY IS
RESIDING IS ALSO PROTECTED.
4. DATA COLLECTION PROCESS. BAH RATES FOR 370 MHA'S IN THE UNITED
STATES, INCLUDING ALASKA AND HAWAII, ARE CALCULATED AND ADJUSTED BY DOD
THROUGH AN ANNUAL DATA COLLECTION PROCESS. THIS PROCESS IS MANAGED BY
THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE (PDTATAC)
WITHIN THE OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR PERSONNEL AND
READINESS (OUSD(P-R)), WHICH CONTRACTS WITH RUNZHEIMER INTERNATIONAL
(RZI), A RECOGNIZED INDUSTRY EXPERT IN THE FIELD OF HOUSING COST
ANALYSIS, TO CONDUCT THE ANNUAL DATA COLLECTION. BAH RATES ARE
ADJUSTED EACH YEAR BASED ON THREE HOUSING-RELATED COSTS:
- RENTAL HOUSING COSTS,
- UTILITIES (INCLUDING ELECTRICITY, HEAT, WATER AND SEWER), AND
- RENTER'S INSURANCE.
A. RENTAL HOUSING. WITHIN THE RENTAL MARKET, THE RENT ITSELF
TENDS TO ACCOUNT FOR THE LARGEST SINGLE ELEMENT OF AN INDIVIDUAL'S
TOTAL HOUSING COSTS, AND THUS MAKES UP THE LARGEST PORTION OF A BAH
RATE. COLLECTION OF OBJECTIVE LOCAL MARKET COSTS ON APARTMENTS,
TOWNHOUSES/DUPLEXES, AND SINGLE-FAMILY RENTAL UNITS OF VARIOUS NUMBERS
OF BEDROOMS OCCURS IN THE SPRING AND SUMMER WHEN HOUSING MARKETS ARE
MOST ACTIVE. CURRENT, VALID RENTAL COSTS ARE CRUCIAL TO ACCURATE BAH
RATES. RZI USES DATA FROM MULTIPLE SOURCES TO PROVIDE A "CHECKS AND
BALANCES" APPROACH. FIRST, RENTAL PROPERTY DATA IS COLLECTED FROM
MILITARY HOUSING OFFICERS (MHO'S), LOCAL DOD REPRESENTATIVES WHO SUBMIT
CURRENT DATA DURING THREE CYCLES IN MAY, JUNE, AND JULY EACH YEAR.
SECOND, RZI COLLECTS DATA FROM LOCAL SOURCES WITHIN EACH MHA. THIS
CONSISTS OF:
- CONSULTING WITH REAL ESTATE PROFESSIONALS IN EACH MHA TO CONFIRM
MARKET RENTAL PRICES AND OBTAINING ADDITIONAL DATA,
- OBTAINING CURRENT RESIDENTIAL VACANCIES FROM LOCAL NEWSPAPERS AND
REAL ESTATE RENTAL LISTINGS, AND
- CONTACTING APARTMENT AND REAL ESTATE MANAGEMENT COMPANIES TO IDENTIFY
UNITS FOR RENTAL PRICING WITHIN EACH MHA.
FINALLY, RZI CONSULTS LOCAL HOUSING OFFICES TO GAIN INSIGHT INTO THE
CONCERNS OF SERVICE MEMBERS. CERTAIN TYPES OF HOUSING (MOBILE HOMES,
LOW-INCOME SUBSIDIZED HOUSING UNITS, AGE-RESTRICTIVE DWELLINGS,
ETC.) ARE EXCLUDED FROM THE DATA COLLECTION. UNSUITABLE NEIGHBORHOODS
(THOSE BEYOND A REASONABLE COMMUTING DISTANCE, THOSE WITH SUB-STANDARD
HOUSING OR HIGH CRIME, ETC.) ARE ALSO EXCLUDED.
B. DOD HOUSING STANDARDS ARE CALCULATED TO ENSURE SERVICE MEMBERS
RECEIVE BAH THAT WILL PAY FOR HOUSING THAT IS COMPARABLE TO CIVILIANS
WHO EARN A SIMILAR INCOME; IN OTHER WORDS, HOUSING ALLOWANCES INCREASE
AS SAILORS REACH HIGHER PAY GRADES. DATA IS COLLECTED ON SIX HOUSING
PROFILES RANGING FROM ONE-BEDROOM APARTMENTS TO FOUR-BEDROOM SINGLE-
FAMILY DETACHED HOUSES. THE PROCESS LINKS HOUSING COSTS FOR EACH TYPE
OF HOUSE TO A PARTICULAR PAY GRADE TO FORM "ANCHOR POINTS" TO WHICH ALL
OTHER PAYGRADES ARE BASED ON (SEE TABLE BELOW). THE "X" INDICATES AN
E-4 WITH DEPENDENTS WILL RECEIVE BAH CLOSE TO A 2-BEDROOM TOWNHOUSE.
DOD PROFILE PAY GRADE PAY GRADE
W/DEPENDENTS W/OUT DEPENDENTS
1-BEDROOM APARTMENT X E-4
2-BEDROOM APARTMENT X O-1
2-BEDROOM TOWNHOUSE E-5 O-1E
3-BEDROOM TOWNHOUSE E-6 O-3E
3-BEDROOM SINGLE FAMILY
DETACHED HOUSE W-3 O-6
4-BEDROOM SINGLE FAMILY
DETACHED HOUSE O-5
ONCE DATA IS COLLECTED, BAH FOR OTHER PAY GRADES IS DETERMINED BY
INTERPOLATING (OR "FILLING IN") BETWEEN ANCHOR POINTS. FOR EXAMPLE,
E-7 IS NOT AN ANCHOR POINT, AND WOULD THEREFORE RECEIVE BAH BETWEEN
E-6 AND W-3. THE ANCHOR POINT FOR E-4 (WITH AND WITHOUT DEPENDENTS)
REPRESENTS THE MINIMUM STANDARD AND APPLIES TO PAY GRADES E-1 THROUGH
E-3.
C. DEPENDENTS. EFFECTIVE 1 JANUARY 2008, BAH RATES FOR MEMBERS
WITHOUT DEPENDENTS ARE SET AT AN AMOUNT THAT IS AT LEAST 75% OF THE
"WITH DEPENDENT" RATE. THE ACTUAL DIFFERENCE CHANGES SLIGHTLY BY PAY
GRADE.
D. UTILITIES. WHILE UTILITIES REPRESENT A PORTION OF TOTAL
HOUSING COSTS AND THEREFORE ARE INCLUDED IN CALCULATING BAH, THERE IS
NO STANDARD PERCENTAGE ACROSS THE COUNTRY. RZI UTILIZES DATA COLLECTED
BY THE BUREAU OF THE CENSUS IN ITS ANNUAL AMERICAN COMMUNITY SURVEY TO
DETERMINE AVERAGE EXPENDITURES FOR UTILITIES SPECIFIC TO EACH DWELLING
TYPE IN EACH AREA. FOR THE 2007 SURVEY, DATA WAS COLLECTED FROM MORE
THAN THREE MILLION ADDRESSES IN OVER 3,100 COUNTIES. THE SURVEY ASKS
FOR PREVIOUS MONTH?S ELECTRICITY AND GAS COSTS AND THE 12 MONTH AVERAGE
FOR OTHER FUEL, WATER AND SEWER COSTS. SOME BAH RATES IN SOME
LOCATIONS ARE REDUCED OR INCREASED SLIGHTLY BASED ON UPDATED UTILITY
COST DATA.
E. RENTER'S INSURANCE. THE RENTER'S INSURANCE PORTION OF BAH
COVERS THE VALUE OF HOUSEHOLD CONTENTS. IT IS BASED ON THE AVERAGE
COST TO INSURE PERSONAL PROPERTY SPECIFIC TO EACH PROFILE AND TO EACH
MHA. NOTE THAT HOMEOWNER'S INSURANCE IS NOT A PART OF BAH CALCULATION.
F. DATA QUALITY ASSURANCE. DOD AND RZI RECOGNIZE THE IMPORTANCE
OF ACCURATE RATES AND MAKE EVERY EFFORT TO OBTAIN MAXIMUM RELIABILITY.
AT EACH STEP IN THE PROCESS, THEY EMPLOY NUMEROUS LEVELS OF QUALITY
ASSURANCE, ANALYZE STATISTICS TO SPOT PROBLEMS AND APPLY COMMON SENSE
TESTS TO THE DATA. THEY ENSURE THAT THE UNITS ARE ACCEPTABLE, AND THAT
THEY ARE LOCATED IN NEIGHBORHOODS WHERE MEMBERS WOULD TYPICALLY CHOOSE
TO RESIDE. THEY OBTAIN INPUT ON SUITABLE HOUSING AND UNACCEPTABLE
AREAS FROM HOUSING OFFICES AND INSTALLATION LEADERSHIP. AS ANOTHER
QUALITY ASSURANCE STEP, DOD AND THE SERVICES CONDUCT ON-SITE
EVALUATIONS AT SELECTED LOCATIONS. THESE REVIEWS CONFIRM THE
RELIABILITY AND ACCURACY OF THE RENTAL DATA. DURING THESE VISITS, THEY
ALSO EVALUATE THE CRITERIA USED FOR SCREENING NEIGHBORHOODS AND OTHER
EXCLUDED AREAS.
5. THE FINAL STEP. RZI CONSOLIDATES THE RESULTS OF THE DATA
COLLECTION DURING THE LATE SUMMER. DURING THE FALL, AFTER RENTAL,
UTILITY, AND INSURANCE DATA ARE COLLECTED AND MEDIAN HOUSING COSTS
CALCULATED, THE PDTATAC (WITH REPRESENTATIVES FROM EACH OF THE
UNIFORMED SERVICES) REVIEWS THE LOCAL MEDIAN HOUSING COSTS FOR EACH MHA,
APPRAISES MHA AND PROFILE-SPECIFIC UTILITY AND RENTER'S INSURANCE DATA,
AND PROPOSES BAH RATES FOR BOTH MEMBERS WITH AND WITHOUT DEPENDENTS IN
EACH OF THE 24 PAY GRADES. IT IS AT THIS POINT THAT DOD ESTABLISHES
THE FINAL ADJUSTED RATES TO BE IMPLEMENTED ON 1 JANUARY OF THE
FOLLOWING YEAR.
6. BOTTOM LINE: FOR ANY GIVEN SAILOR, WHETHER OR NOT THEY INCUR OUT-
OF-POCKET EXPENSES WILL BE DEPENDENT ON THEIR HOUSING CHOICE.
SAILORS WHO RENT HOMES ABOVE THE MEDIAN RATE FOR THEIR PAY GRADE/
PROFILE WILL SEE THAT BAH WILL NOT COVER ALL OF THEIR HOUSING COSTS.
THE OPPOSITE IS TRUE FOR SAILORS WHO CHOOSE TO RENT LESS EXPENSIVE
RESIDENCES- THOSE SAILORS MAY ACTUALLY EXPERIENCE A BAH SURPLUS AND
KEEP THAT EXTRA MONEY TO USE AS THEY CHOOSE.
7. A FINAL WORD TO SAILORS. THIS NAVADMIN IS INTENDED TO EXPLAIN THE
BASICS OF HOW BAH RATES ARE DETERMINED; TO PROVIDE THE "ABC'S" OF BAH.
IT IS WRITTEN TO A BROAD AUDIENCE AND, WHILE IT CAN NOT ADDRESS ALL THE
INDIVIDUAL CIRCUMSTANCES THAT MIGHT AFFECT ANY GIVEN SAILOR?S BAH
ENTITLEMENT, IT DOES CONTAIN VALUABLE INFORMATION THAT SHOULD BE GIVEN
THE WIDEST DISSEMINATION. I ENCOURAGE EVERY SAILOR TO "LEARN MORE
ABOUT IT" BY VISITING THE PDTATAC WEBSITE (SEE BELOW); ACTIVELY SEEKING
OUT THE EXPERTISE OF THEIR PAY, PERSONNEL, AND HOUSING PROFESSIONALS;
AND ADDRESSING ISSUES THROUGH THEIR CHAIN OF COMMAND.
8. MORE DETAILED INFORMATION ON BAH AND THE RATE SETTING PROCESS CAN
BE FOUND AT HTTP://PERDIEM.HQDA.PENTAGON.MIL/PERDIEM. THIS WEBSITE IS
A VERY GOOD PLACE TO LOOK UP INDIVIDUAL RATES, READ/ DOWNLOAD A BAH
"PRIMER", AND REVIEW FREQUENTLY ASKED QUESTIONS (FAQ'S).
9. POINT OF CONTACT: LT MIKE BOWER (OPNAV N130C) AT (703) 695-3304 OR
BY EMAIL AT michael.l.bower@navy.mil OR nxag_n130c4@navy.mil.
10. RELEASED BY VADM J. C. HARVEY, JR., N1.//
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