Reduced Basic Allowance for Housing (BAH) – What’s Happening in 2016

Welcome to Corvias Military Living Communities

Note: BAH reductions only impact those who are new to an area or who start receiving a new BAH rate based on change in family status or promotion. If you do not fall in these categories, and are in an area where the BAH rate drops, you will be grandfathered in and continue to receive the old, higher rate. When you do move or graduate to a new pay grade, however, your BAH rate will reflect the new calculation.

The 2015 National Defense Authorization Act (NDAA) designated a reduction in Basic Allowance for Housing (BAH) to cover 99 percent of average rental costs for a service member’s pay grade and duty location. This was the first time since 2005 that BAH has not been funded to cover 100 percent of average housing costs. The 2016 NDAA calls for a further reduction in BAH coverage, meaning service members will receive BAH amounts to cover 98 percent of their average housing costs.

Here’s what it looks like. As the 2016 BAH rates were calculated, the DoD reduced the final numbers by 2 percent. So, even if the rate increased in your area, what you receive will still be 2 percent less than what you would have received if BAH was funded to cover 100 percent of housing costs. What does this 2 percent reduction look like? Currently, the 2016 weighted average, national out-of-pocket expense rate ranges from $24-$57 per month – depending on rank and dependent status.

The 2016 act also lays out the intent to reduce BAH to cover only 95 percent of housing costs over the next three years.

Bottom line: Eventually, BAH will cover less housing costs and military families may come out of pocket to cover the difference between the average actual rent in the local community and their BAH.

What does this mean for housing on base?
Privatized housing projects were originally structured on the assumption that BAH would be equal to 100 percent of market rental rates. Reduced BAH equates to less income available to reinvest in housing projects for the next 35+ years of the partnerships.

Due to reduced BAH funding, the Department of Army has authorized privatized housing projects to raise rents above current BAH by the national monthly out-of-pocket rate. For 2016, this equates to 2 percent of BAH. The Army has also directed private housing partners to look for ways to trim the cost of operating their projects.

These changes were made in order to ensure on-base housing programs are able to maintain the enhanced quality of housing achieved since privatization.

To see how your BAH dollars spent, check out How BAH dollars are Used.

What this means for military members and families?
The reduced BAH rate and change in policy for on-base housing means that families, living on and off base, may at some point pay out of pocket to cover the difference between the average actual rent in the local community and their BAH.

While on-base housing projects have been given authority to raise rents to the national out-of-pocket average, no changes to rent are planned at this time at Corvias-partnered locations. It is extremely important to Corvias to maintain a quality living experience for our residents.

Corvias is working hard to identify areas where adjustments can be made without large impacts to our residents. In some locations, Corvias is tailoring or reducing select services to find cost savings.  Examples of tailored service changes may include reduced landscaping days in common areas of neighborhoods and reduced pool hours during non-peak times at community centers.

Potential changes will differ at each location as partners across the Military Housing Privatization Initiative (MHPI) portfolio are considering current operations and ways to find savings and cost efficiencies.

Please know we are taking a look at every part of the business to find efficiencies and creative solutions to increase savings that will not impact resident quality of life.

For more on the 2016 Act and what it means, you can check out this SpouseBuzz article on How the New 2016 Defense Bill Impacts Families.