[Editor's Note: This article is one in a series covering various PCS-related topics. Please see the Resources section below for the other articles in the series.]
One of the entitlements that active duty military members receive is basic allowance for housing (BAH). This allowance is meant to offset the cost of housing when you live on the economy – or in non-government provided housing. This allowance is based on your pay grade, the location of your permanent duty station, and whether you have dependents.
BAH isn't meant to cover all your housing expenses
BAH is not intended to meet all the costs of rental housing – and it’s not intended for home purchase. Its stated purpose is to defray the cost of procuring private sector quarters when adequate government housing is not available for members and their dependents, if with dependents.
The 2015 National Defense Authorization Act introduced a member cost‐sharing element (out‐of‐pocket expense) of 1%. This out‐of‐pocket expense increased by 1% annually, capping at 5%. Thus, you are now expected to cover 5% of your housing expenses.
The out‐of‐pocket expense is administered using an absorption rate, which is computed to ensure members of a similar pay grade/dependent status pay the same amount out‐of‐pocket regardless of their location.
However, depending on your actual housing choices, you may or may not actually have to pay out of pocket for your housing.
Here's how the DoD sets BAH rates
BAH rates are based upon local median rental costs for six housing types (of which only two are single-family dwellings) – which are correlated with members’ military incomes. BAH also only attempts to set rates for adequate median rental housing, if such housing is available.
The BAH program makes no assumptions or assertions about availability of private sector housing when PCSing members are seeking adequate housing of any type.
By law, DoD can only temporarily increase a locality’s BAH rates (at times other than basic pay adjustments) up to 20% if the locality is struck by a natural disaster (like a hurricane or wildfire) and the president has declared the locality a disaster area under the Stafford Act.