Basic housing allowance rates will rise by an average of 7 percent Jan. 1 for 820,000 service members living off-base in the United States.
The increases for 2004 continue a string of annual hikes that exceed the reported rise in rental costs nationwide — 2.9 percent this year — and therefore lower out-of-pocket costs for military renters.
Military home buyers benefit identically from housing rates, which are based on local rents rather than the cost of home mortgages.
The new housing allowances are set to cover, on average, all but 3.5 percent of off-base rental costs in stateside areas. The next adjustment, in 2005, should close the gap entirely, a goal set by the Department of Defense and Congress in the final years of the Clinton administration.
Housing increases back then were tied not to rising rents but to basic pay raises, which in turn were linked to private-sector wage growth. As a result, housing allowances failed to keep pace with rental costs. At one point in the late 1990s, service members paid out-of-pocket 22 percent of what it cost to rent adequate housing for their pay grade.
That 22 percent "absorption" expense is just about gone, falling by another four points with the new rates. The Defense Department in 2004 will spend $9.8 billion on stateside housing allowances, an increase of $785 million from 2003. Once again, individual raises will vary by pay grade, family status (with or without dependents) and military housing area .
The average raise for a typical enlisted member — E-5 with one or more dependents — will be $31 a month. No service member will see monthly rates fall, thanks to rate protection.
Changes in the housing allowance have no immediate effect on service members overseas. They draw a separate allowance that is adjusted twice a year based on the value of the dollar.
The stateside rates are designed so service members in the same grade and with the same number of dependents have the same monthly out-of-pocket cost regardless of where they live.
Rate protection ensures that members, once settled at a duty station, receive annual increases but no decreases.
Rental cost data for each military housing area is gathered by a defense contractor, Runzheimer International, from military housing offices and through thousands of phone calls to local real estate agents, renters, landlords and Chambers of Commerce. Runzheimer also reviews local classified ads for rental costs.
Although rents nationally climbed an average of 2.9 percent in 2003, there was wide disparity across military housing areas. For instance, rents rose 6.3 percent in Norfolk, Va., and 1.2 percent in Tacoma.
The chart at right shows 2004 rates for this area. New housing allowances for all stateside areas can be viewed at: www.dtic.mil/perdiem/bahform.html .
Those seeking more information on how the allowances are set can read a 16-page primer at www.dod.mil/militarypay/pay/bah/bah_primer.pdf.
Comments are welcomed. Write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, e-mail milupdate@aol.com or go to www.militaryupdate.com.
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