Answering FAQs on Housing America’s Military Families

The BAH is designed to cover 95% of average costs for an off-base housing unit and utilities. From 2005 to 2014, it covered 100% of local average housing costs. However, DoD requested Congress reduce the percentage to slow the growth of BAH costs. In response, the 2015 and 2016 National Defense Authorization Acts authorized DoD to lower BAH rates and eliminate renter’s insurance costs from the housing allowance calculation.

The BAH is excluded from income for federal tax purposes—though it does count as income when calculating a service member’s eligibility for the Supplemental Nutrition Assistance Program (SNAP) and other federal nutrition assistance benefits.

How is the BAH calculated?

Each year, DoD sets the BAH rate for approximately 300 Military Housing Areas (MHAs), which are made up of zip codes near military bases. By law, BAH rates are based on the average cost of adequate housing for civilians with comparable income levels in the same areas. DoD employs contractors to collect data on housing and utility costs in neighborhoods near bases, perform on-site evaluations, and estimate the amount that service members can expect to pay. This BAH calculation process aims to attain a 95% statistical confidence that the estimated median rent is within 10% of the true median rent in the local market.

This is a time-intensive process, with DoD contractors collecting and verifying rental cost information in each MHA for multiple housing types by consulting housing offices, real estate property management companies, listing services, subscription-based commercial rental housing datasets, landlords, and other local sources.

However, despite the rigorous research to set BAH, some argue it fails to cover the basic housing costs of military families across many MHAs.

Why is the BAH not covering housing costs?

Recent polls of military service members and their families show housing costs are among their top concerns. Reports of families paying significantly above BAH to secure rental housing, as well as bidding beyond their means to buy properties near bases, are also increasingly common. According to a 2021 Blue Star Families survey, 76% of households living off-base who report paying out of pocket to secure housing were paying more than $200 above BAH a month.

The record increase in housing prices across the country is inextricably linked to the housing challenges military families face. Though the BAH is meant to cover up to 95% of costs, the yearly updating process makes it a lagging indicator of housing costs at a time of significant market volatility and fast-declining affordability. A 2022 analysis of the five most populous military bases in the country showed that, while housing allowances across all ranks have risen an average of 18.7% since January 2018, rent costs had gone up by an average of 43.9%.

How have supply constraints impacted off-base affordability?

Much like the rest of the country, communities near military bases experienced significant housing shocks as a result of the pandemic. Concerns about housing affordability began to surface after DoD limited military travel and moves to new bases during the height of the pandemic, which generated a backlog of military family moves once the restrictions were lifted. The higher than usual number of families engaging in Permanent Change of Station moves in the summer of 2020 increased the demand for off-base housing. Since then, the increasingly acute housing shortage has generated significant competition for homes in off-base communities, driving up prices and making it difficult for military families to find affordable housing options within reasonable commuting distances.

Why not live on-base instead?

While service members who are single or traveling without their families often live in dormitory-style barracks, families have the option to live in military installation housing within their base. Some of these homes are directly owned and maintained by DoD, while others are owned by private companies who finance, build, and manage housing on bases via the Military Housing Privatization Initiative (MHPI).

Service members living in government-owned housing do not have to pay rent and therefore do not receive a BAH. Those living in privatized housing on base do receive the BAH. Unlike landlords in the civilian housing market, privatized housing developers cannot charge rents above the BAH rate.

However, families trying to procure on-base housing must contend with long waitlists, as well as concerns over the quality of some of the housing options. Multiple reports highlight unhealthy living conditions and difficulties in ensuring landlord accountability. The Government Accountability Office reports that DoD is working to address these issues, though there are ongoing challenges to ensuring that all on-base housing options are safe and suitable for families.

Given the difficulties involved in adding on-base housing supply, along with concerns regarding the quality of current military installation housing options, off-base housing markets will continue to host a majority of service members and military families.

What can be done?

The solutions to the problem of housing unaffordability for military families can be broadly divided into two buckets: reforming the housing allowance and boosting the supply of affordable housing options.

Fortunately, DoD has started to address concerns about rapidly rising housing costs in its adjustments to the BAH for 2023. The new rates, which took effect on January 1, 2023, increased by an average of 12.1% over the previous year’s rates, with DoD recognizing that, “the significant increase in average BAH rates is reflective of the unique market conditions experienced across many locations nationwide over the past year.”

In the short term, DoD can also prescribe temporary increases in BAH rates. Typically, this authority was used in major disaster areas or bases that experienced sudden increases in the number of assigned service members. However, in the last two years it has been expanded to provide support in response to historic increases in housing costs.

In 2021 DoD issued a temporary BAH increase for 56 MHAs and did so again in October 2022 for 28 MHAs that saw average rent increases of 20% or more. The 2021 increase was application-based, with service members having to apply for increased BAHs and prove that they were incurring higher costs, but the more recent increase applied automatically to households in eligible MHAs. While the 2022 temporary BAH rate increases were replaced by the new 2023 BAH rates, these actions create a precedent for quick adjustments to respond to unforeseen fluctuations in the off-base housing market.

Other adjustments, such as staggering the dates for Permanent Change of Station (PCS) moves and providing greater flexibility in using BAH funds to cover temporary lodging expenses, can help resolve temporary bottlenecks such as the ones that formed once DoD relaxed its pandemic restrictions.

In the long term, additional changes to the BAH and policies to expand the off-base housing supply can help address concerns about affordability. Recently proposed policies include:

1) Restore the 100% Basic Allowance for Housing

Multiple military family support organizations have called for the DoD to restore the BAH to a level that covers 100% of housing costs. Survey data adds weight to the argument that the current 95% cost-sharing agreement creates additional financial stress at a time when military base pay increases are failing to keep up with inflation. Increasing the BAH would allow military families to use their base pay and savings to meet other financial needs.

2) Reform the BAH Calculation Process

In 2021, the Government Accountability Office (GAO) found inconsistencies and a lack of transparency in DoD’s process for collecting rent data to calculate its BAH rates. GAO has recommended tweaks—many of which DoD has already started implementing. Congress has also directed DoD via the FY 2023 National Defense Authorization Act to examine the efficiency and efficacy of the current calculation process and determine if the BAH should be calculated more often to address housing market volatility.

These developments are encouraging and should be followed up with concrete actions from Congress and DoD to ensure that the process of setting the BAH more closely follows housing market trends.

3) Build More Housing in Off-Base Communities

The federal government can provide incentives to build more housing for service members. Members of Congress have already proposed legislation to address the housing shortage for members of the Armed Forces. Though currently cosponsored by only Democrats, the Building More Housing for Servicemembers Act would create a tenant assurance program to help developers secure financing and establish a joint HUD-DoD program to provide financial incentives for developing low-income housing near bases. These and other proposals can be further developed in future bipartisan legislation, such as the annual NDAA bill.

Conclusion

Providing greater housing stability to America’s men and women in uniform and their families is a pressing need requiring the attention of policymakers and stakeholders across the political spectrum. Despite recent DoD attempts at addressing concerns about housing affordability, many military households continue to face significant challenges in finding an affordable home. The current housing crisis presents an opportunity to reevaluate DoD’s housing allowance rates and marshal bipartisan support for policies that address the housing supply constraints impacting off-base communities and the country at large.