BAH Rate Differences Explained

Most service members understand the differences in BAH (Basic Allowance for Housing) rates based on different geographic regions and grades but what is less commonly known is why increase (or decrease) percentages vary by grade within the same zip code or housing area.

See 2025 Basic Allowance for Housing (BAH) rates here.

To put it simply, BAH rates are determined by three components sourced from experts and statistical data:

• Median current market rent (BAH is based on rental properties, not home ownership costs)
• Average utilities (including electricity, heat, and water/sewer)
• Average renter’s insurance.

Rental costs are collected on 6 BAH Standard Housing Profiles and applied to a grade:

BAH Six Standard Housing Profiles
Profile	Grade With Dependents	Grade Without Dependents
1 Bedroom Apartment		E-1, E-2, E-3, E-4
2 Bedroom Apartment		O-1
2 Bedroom Townhouse	E-5	O-1E
3 Bedroom Townhouse	E-6	O-3E
3 Bedroom Single Family Detached House	W-3	O-6
4 Bedroom Single Family Detached House	O-5

BAH Doesn’t Cover All Housing Costs

BAH is designed to cover 95% of a service member’s housing costs. Changes to the BAH rules over time have had the coverage a low as 80% and as high as 100% BAH coverage.

The latest change was The Fiscal Year 2015 National Defense Authorization Act which reduced BAH rates in two ways:

• 5% Removed from BAH – Reduced housing rates on average one percent for service members.
• Renter’s Insurance – Contributed an average of one percent to rates, was eliminated

The actual out‐of‐pocket expense for a service member may be higher or lower, based on his/her actual choice of housing. For example, if a service member chooses a bigger or more costly residence than the median, he or she will have larger out‐of‐pocket expenses. The opposite is true if a service member chooses to occupy a smaller or less costly residence.

BAH Individual Rate Protection

A service member’s BAH Rate cannot be less than the previous year, provided that the service member’s duty location, rank and dependency status stays the same. This ensures that members who have made long-term commitments in the form of a lease or contract are not penalized if the area’s housing costs decrease.

Rate protection continues unless the status of a service member changes due to:

• Permanent Change of Station (PCS)
• Reduction in paygrade
• Change in dependent status