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About two-thirds of the married and one-third of the single servicemembers in the United States live in private housing in the communities surrounding military bases. These members are given a cash allowance to help defray the cost of renting or buying housing. In fiscal year 2000, housing allowances totaled about $6 billion and covered about 81 percent of the typical member's housing and utility costs, with the member paying the remaining costs out-of-pocket. The National Defense Authorization Act for Fiscal Year 1998 required the Department of Defense (DOD) to better match the allowance rates with actual housing costs in various parts of the country. It was expected that the changes would cause some rates to rise and others to decline. As of January 2000, however, rate decreases outnumbered the increases. In some cases, these rate decreases were substantial. DOD quickly took steps to address the concerns about the new housing rates and to improve the process used to set allowance rates for 2001. However, because DOD does not routinely provide detailed feedback to installation officials explaining the basis for the rates for their areas, these officials lack confidence that the process is accurate and cannot adequately answer members' questions about how their allowance rates were determined. Without a clear understanding of the basis for their allowance rates, servicemembers can lose trust in the rate development process.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. To ensure that the process for developing allowance rates is open and understandable at the installation level, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to provide housing officials at each major installation detailed information showing that basis for their established annual housing allowance rates. The information should include the number of rental rate samples taken, the average local rental cost used for each housing standard, the estimates used for utility costs and renter's insurance, and an explanation of any adjustments made to the final rates.
Closed - Implemented
The Department agrees that the installation commanders need to be provided with additional information as to the housing market survey results and the basis for determination of the BAH rates. This will not only provide them with direct feedback to their data gathering efforts but will also make the BAH process more understandable. The Department currently provides this information to each of the services. The Department provides a summary report on the performance of each of the installations' housing offices data gathering efforts. It also provides to each service a summary of the local median housing costs for each military housing area after additional quality checks and adjustments have been made with the Department. This summary table includes the number of rental samples, the median local rental costs for each standard, the utility cost and the amount for renters insurance. The Department would encourage each service to share this data with each installation.

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