The average Basic Allowance for Housing, or BAH, rates across the nation will fall slightly in 2011 for the first time in the past two decades. Effective January 1st, 2011, BAH rates will drop by an average of 0.6%. The military is adjusting the rates it provides for members living off of the nation’s bases, and in most cases, the BAH rates are falling across the country. The adjustments reflect the nationwide housing market as it continues to suffer after the past recession and housing slump. See Official DoD BAH calculator for your BAH rates.
Military Basic Allowance for Housing (BAH) Drops in 2011
Some Military Communities Are Hit More Than Most With BAH Drop
Like the country as a whole, military communities in the hardest hit areas of the United States have always been the ones to see the largest reduction in Basic Allowance for Housing. The major military area showing the biggest decrease in BAH is Fort Bragg and Pope Air Force Base in North Carolina which dropped by an average of 7.5%. For example, an O-4 with dependents previously received $1,707 per month in BAH, but new Majors at Ft. Bragg will only receive $1,548 in 2011 which is a 9.3% decrease. Other areas hardest hit by the BAH drop are Nellis Air Force Base, Nevada, Seymour Johnson Air Force Base and Marine Corps Air Station Cherry Point in North Carolina, and Whiteman Air Force Base, Missouri.
The BAH Drop Could Hurt Those Already Struggling
The military has quickly reduced the BAH rates in response to falling home prices and the subsequent reduction in rent being charged Soldier, Sailors, Airmen, and Marines who live off post or off base. But, those members of the military who still own those houses, many with the same mortgage rates reflected in the previous BAH rates, are the ones stuck holding the bag. Reduction in the BAH rate will most likely result in a reduction in rental income which make hamper some homeowners from covering their mortgage payment requirements.
BAH Drop Will Not Affect Service Members Until They PCS
There is a policy in effect called the individual rate protection policy. Members of the military who are currently on assignment at a duty station will not see their BAH rates decrease until they PCS or move to a new assignment. The problem with this measure is that it does not take into account the many Troops who cannot sell their homes when the time to move on to the next assignment comes along and are then subsequently turned into reluctant landlords. Many members of the military will still be stuck holding mortgages at a higher payment than what they will be able to receive renting the home for because the new service member will be only qualify for the lower BAH. Thanks to the laws of supply and demand, the new landlord will in turn eventually be require to match the new BAH rate and reduce the rent to keep up.
For once, the military finance officials have moved very fast to keep pace with the changes in the financial landscape and the tough housing market that still faces America. While the new BAH rates will reflect the true cost of new homeownership and new rental agreements near American military bases, the previous owners who cannot sell their homes to cover their mortgages will be left with tenants requiring a lower rent thanks to changes in the Basic Allowance for Housing.