DoD Slicing Out-of-Pocket Housing Costs Starting January 1

By Rudi Williams
American Forces Press Service

WASHINGTON, Dec. 19, 2002 -- Jan. 1 will be a special day for service members and their families. That's when they'll start seeing more Basic Allowance for Housing money in their paychecks, according to DoD's director of compensation.

Navy Capt. Chris Kopang said the allowance is aimed at reducing out-of- pocket housing expenses. For service members with dependents, increases in the allowance range from 1 percent to 27 percent by grade with a typical increase of about 8 percent.

Two forms of protection are built into the system -- individual and geographic, Kopang noted. "Individual rate protection means that even though housing costs may go down in a particular area, no one is going to receive a lower BAH (than before)," he said. "So this protects the member who has a long-term lease or contract and is assigned to an area where housing costs go down."

The geographic rate protection prevents new members who come into an area from getting a lower or higher rate than those already there.

"We don't want to create a morale problem," Kopang said.

"DoD started a five-year plan in 2000 to reduce out-of-pocket expenses to zero by 2005," Kopang explained. "We're on track with that. For January 2003, the average member will have out-of-pocket expenses of around 7.5 percent. Next year, they'll go down to about 3.5 percent."

When then-Defense Secretary William Cohen announced DoD's plan in January 2000, he noted that service members living off base were required by law to pay at least 15 percent of their housing costs out of pocket.

"On one hand, if you're on base, your housing and your utilities are all paid for," Cohen said. "On the other hand, if you're off base, you pick up 15 percent at a minimum, and as much as 19 percent currently. We've got a real disparity there."

BAH will not cover all of all members housing expenses, he said. Kopang explained that DoD hired a contractor who surveys more than 350 military housing areas across the country looking at six different housing profiles. This includes one- and two-bedroom apartments, two- and three-bedroom town homes, three- and four-bedroom single-family homes. The contractor surveys the median prices to rent those types of dwellings throughout the country.

Members then receive a housing allowance appropriate to the housing profile that comes with their particular pay grade. For example, Kopang said, a private doesn't get a four-bedroom single-family house. Married privates are assumed to rent two-bedroom apartments. E-5s can get two- or three-bedroom town homes, depending on the size of their families.

Not everyone would always have his or her housing expenses paid for completely. That depends on what and where a member actually chooses to rent.

BAH is based on members' duty stations, with some exceptions, he noted. "For example, I have two O-5s who work in my office," he said. "One chooses to rent an apartment in town and the other drives to Stafford, Va., about 40 miles south of Washington. Both of them get the same amount of housing allowance. Obviously, one person decided to purchase a home and has taken on the commute."

BAH is based on a calendar year, so paychecks will show a big pay increase on Jan. 15. "Not only reflecting the increase in basic pay, but also the increase in BAH," Kopang noted.

The computations include rent and the cost of utilities, which include electricity, water, sewage, gas and renters insurance. Rent is the driving factor in the computations. "Interest rates are fairly low across the country, so a lot of members choose to buy a home, but that doesn't mean they get more BAH," he said. "The BAH is based on the pay grade and the location where the member works."

Kopang pointed out that the methodology for determining overseas housing allowance, or OHA, is a little different from BAH. Instead of using a contractor, the computations are made by DoD's Per Diem, Travel and Transportation Allowance Committee. The committee surveys service members twice a year to find out what type of housing they're renting and the costs.

OHA is paid to service members who live in privately leased housing at their overseas duty station. Residents of government-leased housing don't receive OHA. The allowance consists of two parts, the rent portion and the utility and recurring maintenance portion.

The rent portion is computed on the actual rent up to a ceiling based on the service member's rank and whether accompanied or unaccompanied. The ceiling for unaccompanied members is 90 percent of the accompanied amount.

OHA covers 100 percent of rental expenses for 80 percent of service members within each pay grade. However, if the rent ceiling is $750 and the service member's rent is $800, the member's out-of-pocket cost is $50.

The BAH for service members who go on unaccompanied tours and leave their family behind is based on where the family lives.
Kopang noted that a targeted pay raise goes into effect Jan. 1.

"Minimum pay raise for all members is at least 4.1 percent," he emphasized. "However, mid-grade and senior NCOs, as well as O-3s and O- 4s, will receive between 5 and 6.5 percent, depending upon their particular grade and years of service. The senior NCOS get a little bit better than that -- E-9s get between 6 and 6.5 percent. Overall, the average pay raise for fiscal 2003 is around 4.7 percent.

"We've made a significant improvement in fiscal 2002 and 2003 pay raises, but we still have some to go for our mid-grade and senior NCOs," he said.

The Navy captain pointed out the fiscal 2003 defense budget includes the new "assignment incentive pay," a Navy brainchild.

"The services are allowed to pay up to $1,500 per month to individuals to go to selected duty assignments that are hard to fill -- undesirable," Kopang said. "The Navy is the only service to put any money against this right now. But the Army and Air Force are also looking at it, too.

"This is the newest thing in compensation, but the services have yet to determine where they're going to pay this," he concluded.
For more information, visit the military compensation Web site at militarypay.dtic.mil.