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Living at the extremes: BAH can buy dream home

March 15, 2013 (Photo Credit: image Credit)

Highest & lowest

An E-4 with dependents can wind up with a little more than $700 a month to spend, or more than four times that, depending on where he lives: Some of the highest BAH cities … New York City: $3,072 San Francisco: $2,784 Santa Clara County, Calif.: $2,412 Boston: $2,355 New Haven/Fairfield, Conn.: $2,103 Nantucket, Mass.: $2,223 Honolulu County, Hawaii: $2,172 Los Angeles: $2,061 Washington, D.C.: $2,034 Northern New Jersey: $1,956 Key West, Fla.: $1,929 Juneau, Alaska: $1,908 Kodiak Island, Alaska: $1,899 … and some of the lowest Alpena, Mich.: $717 Owensboro, Ky.: $747 Mansfield, Ohio: $756 Manchester/Tullahoma, Tenn.: $774 Fort Chaffee/Fort Smith, Ark.: $768 Klamath Falls, Ore.: $777 Sault Ste. Marie, Mich.: $783 Stevens Point, Wis.: $786 Sturgeon Bay, Wis.: $786 KI Sawyer Air Force Base, Mich.: $795 Whiteman Air Force Base, Mo.: $795 Caribou/Limestone, Maine: $795

You've just found out where your next duty station is, and your first order of business is checking out where you stand in the BAH lottery.

OK, so it's not a lottery. And the Pentagon insists no one "wins" or "loses."

But it sure can feel that way. Or not, depending on where you're going.

When it comes to compensation, your monthly, tax-free Basic Allowance for Housing is one of your biggest benefits. Depending on your rank and where you live, it can eclipse your basic pay.

But, wow, the extremes are extreme. From the 363 cities and towns across the 50 states that have designated BAH rates, payments range roughly from $500 to $4,500.

How much you get, of course, depends on three things: your rank, where you're stationed and whether you have dependents.

Big Apple, big rents

It's no surprise that New York City sits atop the BAH scale. But you might be surprised at just how high it is.

A married E-1 — the lowest enlisted rank — stationed in the Big Apple brings in nearly $3,072 extra per month in BAH. That's more than generals and admirals usually get in most other areas. A married brigadier general at Fort Benning, Ga., draws $1,959.

Most of the cities among Forbes' "Top Ten Worst Places to Rent" — San Francisco, Washington, D.C., and Boston, among them — also merit the highest BAH rates.

On the other end of the spectrum are 16 locations that rate less than $800 per month in BAH for junior enlisted members. At the very bottom of the heap: Alpena County, Mich., home to the Alpena Combat Readiness Training Center near the northern edge of lower Michigan. A married E-1 assigned there takes in $717 per month for off-base housing; singles get just $537.

Working the angles

Of course, your assignment location is only part of the calculus. Equally important is how you use your housing cash, whatever amount it might be.

Coast Guard Lt. Michael Koehler thought the more than $2,000 a month in BAH he would draw while based in Honolulu was huge.

Then the C-130 pilot saw the big-time waves off Waikiki's Diamond Head. As far as he was concerned, the tiny old two-bedroom shack of a house he found two blocks from the beach was perfect.

But rent was going to run about $3,000 a month. Even while sharing living expenses with another pilot, he barely broke even after paying for the utilities.

"Utilities could get crazy, and we didn't even have central air conditioning," he says.

But it didn't matter. He could throw his favorite longboard over his shoulder, "walk out my front door and be in the water within three minutes."

"By the time I left Hawaii, I was surfing seven days a week, sometimes twice a day. The house wasn't pretty, but for two single guys, it was perfect."

These days he's living in another house just off the water, but his surfboard is in storage. Since June, Koehler has been assigned to Kodiak Island, Alaska — a small town with a single stoplight, a single Wal-Mart and about half a dozen bars.

He still draws more than $2,000 in monthly BAH, but that money goes a lot further. He and two other pilots are sharing a sprawling, five-bedroom A-frame fronting a lake with a wraparound deck where they can watch bald eagles.

Koehler ends up with several hundred dollars to spare each month after paying his share of rent and utilities.

"This place is awesome," he says.

One downside: When he goes fishing, he has to pack a .45 pistol for insurance against ever-present bears. "But as long as you don't freak out, they don't freak out. If they go after your fish, just let them have it," he says.

Personal choices

The Pentagon's BAH program has moving parts most service members probably aren't familiar with.

BAH is designed to let troops live comfortably and comparably to their civilian counterparts in any given area. Every year, a contractor collects rental data on a variety of housing types in hundreds of locations.

Number crunchers then sort through mountains of data — everything from rental prices and utility costs to crime and income statistics — for each city on the BAH list.

"It's a very arduous process," says Anthony Mercante, a retired Army sergeant major who works as the housing division chief for Fort Hamilton, N.Y., and helps with his share of the annual BAH survey.

"It's really a yearlong effort. I start in January; we submit data in May, June and July; and by December, the agency tasked with determining the new BAH rate does their magic with some whiz-bang algorithms that they plug it all into," Mercante said.

High-crime areas, noisy neighborhoods — near airports, for example — and other outliers are scratched out of the computations, he says.

In the end, whatever you are paid is designed to cover 100 percent of average off-base rental costs, plus utilities and renter's insurance. But in fact, BAH rates reflect a number of "averages" for different types of housing — apartments, town homes, duplexes, single-family homes, all in a variety of bedroom configurations.

The Pentagon assigns a type of housing — such as an apartment or town house, for example — based on paygrade and whether you have dependents.

A junior single member, for example, is paid enough BAH in any given area to cover average rent on a one-bedroom apartment in a decent neighborhood. An E-6 with dependents or a single O-3 should make enough to cover the costs of a three-bedroom town house. The most senior ranks should get enough for a detached single-family home.

It seems like a neatly designed system, although some critics say the housing standards assigned to each paygrade are outdated and need an overhaul.

But then the human factor comes into play. What if you're an unmarried E-1 with a huge "Star Wars" action figure collection for which you need a whole extra bedroom? If you want two bedrooms, your BAH probably won't go far enough, and you'll have to cover the rest from your basic pay.

Average rental costs are a function of geography as much as anything else. That's why rural, isolated areas tend to get less BAH than dense, urban areas.

Army Sgt. 1st Class Jeff Orlowski had never even heard of Owensboro, Ky., when he got orders to a reserve center there.

The first thing he said after looking up the BAH rate: Wow. And not in a good way.

"I was stunned. When I saw how little it was, I wondered if we were going to be able to afford anything," he says.

He's not surprised the town rates the second-lowest BAH in the country. He has been pleasantly surprised, however, at just how far his BAH has gone.

"We were able to buy a home that in a lot of other areas I'm told would sell for about $1 million."

His 2,300-square-foot, three-bedroom home with a sprawling great room and two-car garage sits on a one-acre plot next to a lake.

"It's a great house in a perfect location," he says. Best yet, the Army is buying his home for him. His BAH allowance of $1,143, as an E-7 with dependents, more than covers his $775 mortgage. After utilities, he still pays about $150 out of pocket, but that's fine, he says.

Even better, he loves the town.

"Really, this is one of the best-kept secrets in the Army, as far as locations go. It's a wonderful small town with low crime and friendly people. And the big city thing is not far — it's only about an hour and half to Nashville or Louisville," he says.

Plus, he says you can't go wrong in a town that unabashedly claims it's the "BBQ Capital of the World."

"And it really is," he says.

Playing catch-up

The vagaries of the rental housing market are not as well-understood as the market for buying and selling.

This year, for example, New York City saw an average increase in local BAH rates of about 14 percent, Mercante says — a huge swing in one year.

That was a much-needed catch-up for a city that largely escaped the impact of the economic downturn, at least in its housing market. But a big spike like that can give people a false sense of opportunity.

"The perception is, ‘Wow, I can move off post and put some money in my pocket,'" Mercante says. But in a city where a parking space can rent for $300 a month, "invariably, they realize it wasn't the bargain they had hoped for."

Coast Guard Cmdr. Stacey Mersel is living in exactly the kind of home and neighborhood she had hoped to live in when she got orders to New York.

Based in Staten Island, as the chief of the sector command center for the Port of New York, her duty station is just outside the city limits.

She wasn't thrilled with the suburban landscape of Staten Island but fell in love with the multicultural vibe and easy access to Manhattan that she found in a neighborhood in Brooklyn.

She lives in a brownstone built in the 1800s, split into five apartments. "I have a downstairs with a spiraling staircase that goes up into my living room with a little patio," she says.

She pays $2,500 a month for the two-bedroom, 1,000-square-foot home. With utilities, her housing costs slightly exceed her BAH of $2,790 a month, the without-dependents rate for Staten Island, where she is assigned.

If she drew BAH based on where she lives in Brooklyn, she would get $3,441 per month.

It's a price she's happy to pay.

"It never even went on the market," she says of her apartment, noting her good fortune in snatching it up — after a week of house-hunting 12 hours a day.

Her neighborhood is safe and friendly, her commute quick. A weekly farmers market is nearby.

She may be dipping into her own pocket to underwrite her living arrangement, but she wouldn't change a thing.

"I can literally walk from my apartment across the Brooklyn Bridge into Manhattan. It's wonderful," she says.

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