As we all wait for the 2015 Basic Allowance for Housing (BAH) rates to be released, it is a good time to review the Department of Defense (DOD) policy on BAH rate protection.
Each year, the DoD uses a huge range of information to calculate the BAH rates for the upcoming calendar year. Because BAH is based on market rates, BAH may go up or down in any location and for any ranks within that location. In addition, the 2015 National Defense Authorization Act directs that BAH be calculated at 99% of the market rates, down from 100% in recent years. (Prior to 2005, BAH rates covered as little as 80% of housing expenses.)
Department of Defense policies ensure that no service member experiences a decline in BAH while they remain stationed within the same military housing area. Come January, when the new BAH rates are implemented, service members who have not PCSed will receive the larger of the old rate or the new rate. While service members are protected from rate decreases, they receive rate increases when they occur.
There are a few exceptions to this rule: If a person is demoted, or experiences a change in dependency status, their new BAH will be calculated at the current levels. However, if you are promoted, you are still guaranteed to get the higher of your old protected rate or the new, higher ranking rate.
The new rates only apply to people who move, have a change in dependency status, or are demoted. For people who are residing in an area that has a decrease in the BAH rates, it rarely actually affects you.
You can read more at the BAH Frequently Asked Questions page.
There are always lots of questions...ask away!