It’s that time of year again – the Defense Department yesterday released the magical list of who will getting more and less Basic Allowance for Housing (BAH) in 2013.
Overall, the news is good – an average increase of 3.8 percent across the board — almost double what we got last year! Some areas saw even bigger gains (like New York City) and some places will see sizable decreases (like Monterey, Calif.) — but overall, the rates are going up, according to this story.
Before we go any further, here’s a little reminder of how BAH rates work:
If you already live in a place with a rate set to increase such as, say, Fort Campbell, Ky., your paycheck will reflect the increase. If you’re set to move there next year, you will also receive the higher rate.
If you live in a place with a rate about to go down, don’t worry – you won’t experience the decrease. If you’re moving in 2013 to a new area whose rate just went down, however, you will get the lower rate.
So who were the big losers and winners this year?
Well, sadly for those of you who are about to PCS to Monterey, Calif., the rate there is going to drop an average of 7.5 percent. That’s a drop of $39 a month for an E-4 with dependents and a drop of almost $290 a month for a 0-3 with dependents … no small potatoes.
Other places to see less sizable decreases include Portsmouth, N.H./Kittery, Me., (average 5.6 percent drop), Fort Stewart, Ga. (average 3.4 percent drop) and Twentynine Palms, Calif. (average 5 percent drop).
The people this really hurts, of course, are military homeowners attempting to cover their mortgage (which is likely more in step with the old rates) by renting to new-to-the-area military families, who are receiving the new rate. The renter isn’t going to want to pay more than his BAH (and likely less than it in an attempt to cover his utilities). And you can’t rent you home out for anything below your mortgage payment, if even that low. Someone is going to get hurt here – and I don’t really see a good solution to the problem.
And now for the fun part: who is going to score more money? I am happy to report that this household will be banking a $103 increase (w00t! … because you care). But the folks who are really lucking out, especially if they are locked into a rental price tied to the current rate, are those in New York City, at Shaw Air Force Base, S.C. and at Altus Air Force Base, Okla. with average bumps of 14.1, 12 and 14 percent respectively.
So you’re probably wondering a few things. First, what makes the rates go up, or down for that matter? Well, the DoD BAH folks say they calculate rates based on an annual survey of prices in a certain area surrounding each base. The decision to raise or lower the rates is based on how the cost of living in that area has risen or fallen in the last year. If the area experiences a housing shortage because of a flood, population growth the rates will increase accordingly. If there is a housing surplus – well, you get the idea. T
hat is exactly what happened last year at Minot Air Force Base where rates jumped almost 40 percent. A major flood combined with a big oil boom left the town in desperate need of more housing. Demand went up, supply went down, and value of the product increased – the principles of basic economics before our very eyes.
Second question: why is it that some ranks receive a greater increase or decrease than others. For example, an 0-3 at Fort Benning, Ga. will receive an increase next year of about $100, while an E-4 will receive an increase of $114 … yet at Monterey, Calif., the E-4 is only losing $39, while the 0-3 is losing $270.
The answer lies, again, in the surveys. A portion of that data used by the DoD to determine the rates is made-up of survey responses from military members living around the base. Family size and how much they are currently paying in rent are some of the factors taken into consideration. If you are really curious about the complete breakdown, our pal Kate over at Paycheck Chronicles explains it really well. Judging by the results, 0-3s in Monterey indicated that they were paying well below the current BAH levels, while E-4s indicated that they were paying, on average, only slightly below.
How did you come out in this year’s BAH release?