If you’re in the military, you (and your bank account) are well aware of the Basic Allowance for Housing (BAH) benefit. How much do you really know about the history of BAH though and how it became what it is today?
Surprisingly, BAH didn’t even exist until 1998, when the DoD consolidated several housing allowances for service members into one benefit.
The Basic Allowance for Housing (BAH) is a fundamental benefit for members of the U.S. Armed Forces and the Department of Defense (DoD). This non-taxable allowance is meant to help military personnel afford adequate housing without having to live on base. The history of BAH reflects vast changes in military compensation policies and fluctuating housing costs–two things which dramatically impact enlisted and officers who frequently PCS.
Origins: Military Housing Allowances Pre-BAH
The beginnings of military housing allowances can be traced back to the post-World War II era. In the early years, military housing was more standardized. Service members were expected to live on base.
While this setup was convenient for most, it often led to housing shortages, and as the military grew and diversified, housing all personnel on base became challenging. Recognizing this issue, the government developed housing programs to assist service members who needed to live outside the gates.
Before BAH, a benefit called Basic Allowance for Quarters (BAQ) was in place, providing a small stipend for personnel who lived off base. However, BAQ rates were standardized across the country and did not adjust for local housing costs. As a result, many service members were left covering the difference between the fixed BAQ and their actual rent costs, particularly in high-cost areas.
Transition to the BAH Program in the 1990s
Congress approved a comprehensive reform of military housing allowances in the 1990s after recognizing the downfalls of BAQ. The intent was to make the military housing allowance system more responsive to the actual cost of living and more competitive with civilian housing standards.
In 1997, Congress mandated a change, and by January 1, 1998, BAQ was replaced with the Basic Allowance for Housing (BAH) program. The new BAH was designed to provide a fair and realistic reflection of housing costs based on geographic location, rank, and whether the service member had dependents.
The BAH computation includes local price data for median local rental housing costs and average utility costs, including electricity, heating fuel, water, and sewer. The DoD links rental housing costs collected with different levels of service members’ regular military pay. The six standard housing profiles are below:
| Housing Profile | Grade with Dependents | Grade Without Dependents |
|---|---|---|
| 1 Bedroom Apartment | E-4 | |
| 2 Bedroom Apartment | 0-1 | |
| 2 Bedroom Townhouse/Duplex | E-5 | 0-1E |
| 3 Bedroom Townhouse/Duplex | E-6 | 0-3E |
| 3 Bedroom Single Family Detached House | W-3 | 0-6 |
| 4 Bedroom Single Family Detached House | 0-5 |
*Source: https://media.defense.gov/2022/Jun/23/2003023204/-1/-1/0/BAH-PRIMER.PDF
Key Features and Improvements of BAH
The BAH program was revolutionary in several ways:
Location Variance: BAH rates were no longer standardized. Instead, they were adjusted based on the local housing market in over 300 Military Housing Areas (MHAs). This change made BAH much more responsive to real housing costs faced by Airmen and other service members across the country.
Dependent Rate Variance: BAH rates also began to consider whether a service member had dependents. Those with dependents received a higher rate, recognizing the additional space needed and expenses often associated with housing a family.
Annual Adjustments: BAH rates were set to be adjusted annually, ensuring that they reflected up-to-date housing costs and inflation. A team from the DoD began conducting surveys to track changes in rental prices, utilities, and other housing expenses to keep the rates as accurate as possible.
The “Out-of-Pocket” Era and Subsequent Reforms
Originally, the BAH law stated that the housing allowance could cover no more than 80% of local housing costs. However, in 2000, Congress mandated an overhaul of the BAH system to reduce this additional 20% expense to zero, fully covering housing costs by 2005.
The DoD reevaluated this policy in the mid-2010s. To address budget concerns, BAH was modified in 2015 to reintroduce a small out-of-pocket expense. The goal was to keep BAH sustainable without fully burdening military personnel. Today, BAH generally covers 95-97% of housing expenses for service members.
Another large reform was the introduction of Individual Rate Protection. IRP allows members to receive any new published BAH increase, and prevents a member from receiving a lower BAH rate than the previous year, as long as their BAH eligibility status remains the same.
So, what has BAH looked like over the years? It has varied drastically… and so has the cost of living.
BAH Chart [O-3 with Dependents]
*These charts are based off historical data and are rough estimates*
Arlington, Virginia
| Year | BAH | 2-Bed Apartment Monthly Rent | 3-Bed, 2-Bath Home |
|---|---|---|---|
| 2005 | $2,012 | $2,455 | $550,000 |
| 2020 | $2,859 | $2,900 | $737,000 |
| 2025 (Projected) | $3,985 | $3,100 | $890,000 |
Joint Base Lewis-McChord, Washington
| Year | BAH | 2-Bed Apartment Monthly Rent | 3-Bed, 2-Bath Home |
|---|---|---|---|
| 2005 | $1,485 | $930 | $270,000 |
| 2020 | $2,250 | $1,700 | $410,000 |
| 2025 (Projected) | $3,079 | $2,100 | $480,000 |
Minot, North Dakota
| Year | BAH | 2-Bed Apartment Monthly Rent | 3-Bed, 2-Bath Home |
|---|---|---|---|
| 2005 | $877 | $465 | $140,000 |
| 2020 | $1,686 | $1,000 | $290,000 |
| 2025 (Projected) | $1,937 | $1,350 | $302,000 |
Future of BAH in the Armed Forces
What’s next? What is that direct deposit going to look like next year?
Well for 2025, BAH rates are projected to increase by 3.9%! To see what that means for you (or to compare the last few years’ rates), visit our BAH calculator here.
BAH is expected to remain a core part of military compensation, with potential reforms aimed at keeping it sustainable. Some have proposed more flexible or regionalized approaches to BAH, considering the dramatic shifts in rental costs in recent years.
Did you know there’s an annual BAH rate determination timeline every single year for new rates? Check out this timeline from the DoD.
If you’re wondering what your BAH covers in your housing area, reach out to one of our WeVett Team who specialize in VA Home Loans and Military PCSes!
