Base commanders need more information on how the Pentagon sets annual housing allowance rates in order to dispute allegations of unfairness by service members, according to a new General Accounting Office report. In January 2000, the Defense Department changed the way it calculated housing allowance rates, resulting in significant rate discrepancies in some areas. Some service members received considerably lower rates than their colleagues in the same pay grade at the same installation last year, sparking questions of fairness, the report, "DoD Personnel: Improvements Made to Housing Allowance Rate-Setting Process," (GAO-01-508) said. "Compared to 1999 levels, rates declined by more than $200 a month for some service members, and DoD decreased rates in some areas in which housing costs were rapidly increasing," said the report. More than half of the local housing allowance rates for members with dependents dropped last year from 1999 levels. The rapid move to a new rate-setting system triggered the substantial differences, GAO concluded. Congress mandated the rate-setting changes in the fiscal 1998 Defense Authorization Act. Each year, a Defense contractor calculates the cost of living in 350 locations in the United States. Those calculations are used to determine housing allowances, which go into effect Jan. 1. Under the former system, housing allowance rates were based primarily on service members' expenditures for housing in geographic areas. The new housing allowance system bases allowances on local costs for the housing standard set for each service member. The standard is based on an individual's rank, number of dependents and geographic location. Under the new system, the Defense Department established six housing standards, ranging from a one-bedroom apartment to a four-bedroom, single-family detached house, and applied a standard to each pay grade. The goal of the new rate-setting system was to ensure that service members in a particular pay grade could obtain the same type of housing and pay similar out-of-pocket costs, regardless of geographic location. The housing data collected by the Defense contractor was accurate and did not cause the disputed rate discrepancies, GAO found. Defense had planned to implement the new system over a six-year period, ending in 2003. However, to benefit those service members living in high-cost areas, Congress authorized additional funding in 2000 for Defense to accelerate implementation of the new program. The accelerated time frame, coupled with a rate protection provision, were chiefly responsible for wide discrepancies in rates, according to GAO. Under rate protection, service members already living in an area with declining housing allowances got the old allowance rate, while the new lower allowances applied only to those who were new to the affected areas. Rate protection resulted in service members in the same pay grade at the same installation receiving different allowances depending on when they moved there. GAO said part of the problem was a lack of communication and recommended that Defense share the specifics on how housing allowance rates are calculated with installation commanders. Defense said it will encourage the military services to provide their installations with more information to help answer service members' questions. Defense officials said the department had corrected errors in the new rate-setting process and assured GAO the January 2001 rates are fair and accurate in all areas of the country.
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