The increase comes to average of around $37 per month for the more than 900,000 servicemembers expected to draw the basic allowance for housing in 2010. Some areas will see a higher increase, while others will see less, Cheryl Anne Woehr said.
The 2010 raise is down from 2009's 6.5 percent average, and is the smallest percentage increase since the inception of the BAH program in 2000. This is due the past year's recession and declining housing market, she said.
"Rates are set based on actual housing data, so as the economy has declined, vacancy rates have increased [and] rental prices have declined, which results directly to lower BAH rates in various areas," Woehr said.
Those who do notice the BAH rates lower in their area than last year shouldn't worry, she said, because an individual rate protection law is in place. The policy protects those who already are under a rental agreement. So if BAH rates in their area are lower Jan. 1 than on Dec. 31, the previous, higher rate applies.
"Servicemembers are able to take advantage of the increase in rates, but are not affected by decreasing rates," she said. But servicemembers who change duty stations, change dependency status or get promoted on or after Jan. 1 will be affected by the new rates, she added.
Woehr stressed that it isn't necessarily bad news for the servicemember in areas that see a decrease in rates. "Servicemembers who are newly reporting to an area get to take advantage of the lower market when they arrive," she said.
The BAH program is designed to benefit the servicemember, but it's not designed to pay 100 percent of housing expenses, Woehr said. The rate is intended to cover rent, renter's insurance and utilities based on pay grade and dependency status.
The local market economy determines annual BAH changes and sets the next year's BAH rates. Military housing offices from each installation begin collecting data on the local rental market as early as January each year. The offices research the current rates for two-bedroom houses, townhouses, single-family homes and the different standards and profiles for homes, Woehr explained.
Typically, rates are higher in larger, more heavily populated metropolitan areas, such as New York City, Chicago and Washington, D.C. Rates in rural areas usually are more stable, and although they may increase to some degree, the rise doesn't have the same impact as in larger cities, she said.
An estimated $19 billion in BAH will be paid to nearly 1 million servicemembers in 2010, Woehr said.