The recent surge in the cost of rental units across the country reinforces the need for the Basic Allowance for Housing (BAH) to accurately reflect local market rates and cover 100% of housing costs. With a competitive housing market and rising rental costs, it has become harder and more expensive for service members to find adequate housing outside of Military Housing Privatization Initiative (MHPI) communities.
Historic rental market price increases limit affordable housing options for some service members
Service members are struggling to find affordable housing in some regions of the country as the median-existing home price reached a record high earlier this year. Airman 1st Class Jason W. Cochran reports, “BAH no longer matches the cost of living in Northern California due to the nation-wide rise in housing prices”.
Some local rental markets are also becoming incredibly competitive, resulting in limited housing options that often do not meet the needs of service members and their families. In July 2021, Apartment List found rental prices had grown more than 9% since January – the fastest increase recorded since they began collecting data. Apartment List reported rent increases of 20-30% since the start of the pandemic in some local markets.
Rising construction material prices impact MHPI project development plans, renovations and maintenance costs
The costs to build, renovate, and maintain MHPI projects have also increased rapidly in 2021. Construction materials used to build and maintain homes – like concrete, lumber, plywood, masonry products, and PVC and PEX products – have experienced “extreme price increases” over the past three months, according to the Federal Reserve Bank of Minneapolis.
These price hikes immediately increase the cost of maintenance for MHPI projects and can directly impact development plans if rental market rates continue to dramatically outpace BAH rates in some parts of the country.
Approximately one-third of active-duty military families choose to apply their BAH to live in a MHPI community. The financial stability and long-term viability of each MHPI project is largely dependent on the local BAH rate established by the DoD, and by housing occupancy rates.
BAH rate increases can strengthen service member purchasing power and MHPI project financial viability
Ensuring that BAH accurately reflects local market rates has become even more important in a market experiencing a significant increase in demand and a relative shortage of supply. Adjusting local BAH rates to reflect market prices will strengthen the purchasing power of service members and provide them with more options, while also better positioning privatized military housing providers to meet the long-term needs of vital MHPI projects.