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Pick Your Own Cuts: Housing Allowance

While many of the major benefits cuts like those that look at Tricare and the commissary are (at least for the most part) still in the debate stage, one benefit has already been somewhat downsized without most people realizing it was on the table -- Basic Allowance for Housing or BAH.

But is it too late?

Here's what already happened:

Over the last year the Defense Department made a few, shall we say, administrative changes to how the rate is calculated. That sounds fine and dandy until you realize that how it's calculated directly impacts the amount of money that ends up in your bank account.

Once a year the DoD rolls out a survey process where they calculate the value of specific types of homes and utilities in areas across the country. They then match the cost of those things for 39 different rates (one rate for each rank with dependents and one for each without). They figure the rate based off an assumption of the type of quarters people with certain pay grades are expected to occupy. For example, the rate for an E-1 with dependents is the midpoint between the cost of a two bedroom apartment and a two bedroom townhouse in any given location. (This explains why your BAH may not cover the cost of the size of home you want -- it's not meant to). You can read more about the "how" behind the formula over here.

First the DoD decided to stop including the cost of renters insurance in the rate they give you -- and the amount privatized housing companies on bases receive when you live in their homes. That means if renters insurance is somewhere around $15 a month, your BAH rate will, in theory, be $15 less a month than it used to be.

(Note: Like all BAH changes, they only apply to those new to the rate area. That means if you are already living there and the calculated rate goes down, you will continue to receive the old rate until you move or are promoted into a new rate bracket).

The second change made last year was to reduce the amount of other housing costs covered from 100 percent to 99 percent. That means, in theory, that if your housing costs $1,000 a month, your BAH is only meant to cover $990 of it.

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Here is where you get to pick your BAH cuts.

OK, so the DoD probably isn't reading this post (and if they are -- hi DoD!) but that doesn't mean you can't speak up anyway.

Even though the whole no-more-covered-renters-insurance thing is a done deal, as is reducing the rate by 1 percent, there are still MORE changes on the table. Here are the options:

Cut the rate even further. In their current cash request to Congress, the DoD has asked cut even more from your allowance. Instead of receiving 99 percent of your cost like you do now, they want you to only get 95 percent. That means for that $1,000 home you'd only receive $950. Over a year of living there you'd be out an extra $600. That seems uncool. The DoD says they just want to go back to the way things used to be. In days of yore (aka when the vast majority of us had never even dreamed of being military families) the rate only covered a portion of housing costs. To the DoD, on this issue, there is no school like the old school.

Cut the rate only a little bit more. So far this is what Congress wants to do. Rather than accept the DoD's proposal, lawmakers have so far only said "OK" to reducing the rate by another one percent. If that passes that means you could be paying $240 out of pocket every year for that $1,000 house (plus, of course, your rental insurance).

Stop cutting the rate. While this isn't an option being floated anywhere that could actually make it happen, it does seem like a good idea to stop the bleeding from the BAH rate. OK, so you cut it one percent and got rid of renters insurance. That's enough, folks.

Restore the rate and give back renters insurance. Like the "stop cutting" option, no one is discussing this seriously. However, I suspect this is what almost all of you will pick.

Now, start voting!

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Photo courtesy U.S. Army.

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