How Much House Do You Rate?

With all the conversation about Basic Allowance for Housing (BAH), a lot of people have been asking about housing size.  The BAH formula is based around the concept that there is a size and type of housing that make sense for the average family of each rank.  (There is a second list for people without dependents.)

In this list, there are four housing size and type that are consider “anchor” points.  People in the designated rank receive the BAH calculated for that housing classification.  People between two anchor points receive a proportional amount between the two anchor rates. So, what does the Department of Defense think that you should be living in?

E-1 through E-4:  BAH is halfway between the calculated amounts for a 2 bedroom apartment and a 2 bedroom townhouse.  For example, if the calculated amount for a two bedroom apartment is $800 and the calculated amount for a two bedroom townhouse is $900, BAH would be set at $850.

E-5:  BAH is the calculated amount for a two bedroom townhouse.

E-6:  BAH is the calculated amount for a three bedroom townhouse

E-7:  BAH is between the calculated amounts for a three bedroom townhouse and a three bedroom single family home, with the rate being at the amount that is 36% of the way between the two rates.  For example, if the calculated amount for a three bedroom townhouse is $1100, and the calculated amount for a three bedroom single family house is $1200, BAH would be set at $1136.

E-8:  BAH is between the calculated amounts for a three bedroom townhouse and a three bedroom single family home, with the rate being at the amount that is 75% of the way between the two rates.

E-9:  BAH is between the calculated amounts for a three bedroom single family home and a four bedroom single family home, with the rate being at the amount that is 16% of the way between the two rates.

O-1:  BAH is between the calculated amounts for a two bedroom townhouse and three bedroom townhouse, with the rate being at the amount that is 11% of the way between the two rates.

O-2:  BAH is between the calculated amounts for a two bedroom townhouse and three bedroom townhouse, with the rate being at the amount that is 98% of the way between the two rates.

O-3:  BAH is between the calculated amounts for a three bedroom townhouse and three bedroom single family home, with the rate being at the amount that is 98% of the way between the two rates.

O-4:  BAH is between the calculated amounts for a three bedroom single family home and four bedroom single family home, with the rate being at the amount that is 58% of the way between the two rates.

O-5:  BAH is the calculated amount for a four bedroom single family home.

Obviously, the Department of Defense isn’t saying that you need to live in whatever sized house they’re using for the calculations.  They have to have some criteria for determining housing allowances, and these are the criteria that have been used for years.  Each individual family decides for themselves what housing they would like to choose.  If you choose less expensive housing, you can use the savings for another purpose.  If you choose more expensive housing, then you will need to pay a portion of your costs out-of-pockets.

BAH is an amazing benefit of military service and it often represents a significant portion of a military member’s total compensation package.  Understanding the system can help you make better decisions and evaluate your housing options more clearly. Everything you could ever want to know about BAH is included in the Department of Defense BAH Primer document.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.