Pentagon decreasing the subsidy for isle rent

The military housing allowance rate for Oahu in calendar year 2016 is dropping 8.6 percent — the biggest dip in the country — even with rising rent and a housing shortage here.

Ricky Cassiday, a housing market researcher, finds the 2016 “basic allowance for housing” rate drop somewhat baffling. The average rent on Oahu rose 6.27 percent from 2014 to 2015 for apartments, condos, single-family homes and townhouses, Cassiday said.

Across the country, meanwhile, BAH rates are rising an average of 3.4 percent, with military communities such as Vallejo/Travis Air Force Base in California seeing a 13.5 percent increase; Boston, a 13.9 percent increase; Everett, Wash., a 12.2 percent increase; Atlanta, an 11.7 percent increase; and Camp Pendleton, Calif., an 8 percent rise.

The biggest rate drops behind Honolulu fell to locations including Minot Air Force Base, N.D., and Newport News, Va., both at 6.5 percent; Indianapolis at 5.3 percent; and Twentynine Palms, Calif., at 4.9 percent.

“The researcher in me has to say that like HUD (Housing and Urban Development), DOD (Defense Department) has a hard time getting a handle — an objective handle — on rental trends (here),” Cassiday said. “And that’s because we’re a small market made up mostly of independent landlords.”

Most of the big companies that track rental rates in the country exclude Honolulu. “Again, we’re in the middle of the Pacific, we’re a very local market and there’s not a lot of people that want to know this stuff,” he said.

“As I’ve seen this happen before with HUD in similar circumstances, when most local indications of rental rates show appreciation and the mainland methodology, when applied to Hawaii, results in the opposite, I am not surprised,” Cassiday said.

HUD each year calculates fair market rent for the counties that’s used by local housing authorities, he said.

Matthew Allen, a DOD spokesman, said in an email that BAH rates “are based on measured actual rental costs and utilities for various housing types in the local area. Any fluctuation of one or more of those factors will affect BAH rates for a given location. We cannot speculate why housing costs may have changed from one year to the next.”

The Pentagon said Friday it could look into the methodology used for the new Honolulu rate, but that the information was not immediately available.

The rate change means that an Army sergeant first class with dependents who is new to Oahu in 2016 would receive $3,075 a month, while an Army major would get $3,786. The 2015 rates were $3,312 and $4,062, respectively.

Those rates have generally been marching upward in recent years — until now. That same sergeant first class with dependents would have received $2,553 in 2010, $2,580 in 2011, $2,637 in 2012, $2,835 in 2013 and $3,189 in 2014.

A caveat to the changes is that rate protection is in place for at least one year to prevent decreases in housing allowance from interfering with existing leases or contracts.

“Service members are entitled to the BAH rates published 1 January or the amount of housing allowance they received on 31 December — whichever is larger,” the Defense Travel Management Office said. Rate protection continues unless the status of a service member changes for reasons including permanent change of station.

An estimated $21 billion will be paid to approximately 1 million service members, the Defense Department said. Median current market and average utilities comprise the housing costs that are considered in determining BAH.

A frequent lament is that the military drives up rent on Oahu.

“The military and the visitor industry do absorb a large share of the rental housing stock on mainly Oahu,” Cassiday said in a 2014 Honolulu rental market study. “But they pay market rates for those units, put good money into the local business community, and very good money (into) the landlord community.”

Cassiday also said that the market rents paid by the military far exceed that paid by low-income households, so there is no direct overlap and displacement of low-income rentals.

One of the biggest landlords on the island, Lend Lease, which manages more than 10,000 service members’ homes, collects service members’ housing allowances as rent. But it says it’s not fretting the 2016 BAH rate drop too much.

“The BAH rate for service members who currently reside in our communities will not change,” noted Ann Choo Wharton, a senior marketing manager with Lend Lease. The lower 2016 BAH rate applies only to service members who move to Hawaii after Jan. 1, and there will be an impact to revenue there, she said in an email.

“Also, if there is an increase in the 2017 BAH rate, then the increase will be applicable to all service members,” she said. Historically, the BAH fluctuates yearly, she added. “Changes to the BAH is something we anticipate and plan for, and we make necessary adjustments to ensure it won’t affect our day-to-day operations. Moreover, our project companies are 50-year partnerships, working off a 50-year pro forma,” Wharton said.