Drop in BAH may hurt Knox area

[Hannibal]

When officials from Fort Knox’s Residential Communities Initiative submitted data to the Department of the Army for the 2006 Basic Allowance for Housing review, they expected small increases for Soldiers of all ranks.

After all, the BAH in this region shot up nearly 23 percent for 2005.
But those officials were stunned to learn in December that captains, sergeants major, master and first sergeants, and warrant officers 3 and 4 arriving on post in 2006 would see their BAH drop in excess of $100.
The rates for E-8 and E9 dropped from $947 to $861 and $1,035 to $940, respectively. The rates for warrant officers 3 and 4 dropped from $1,013 to 896 and $1,044 to $957. Captains saw their BAH drop from $1,008 to $893.

“This year, when we submitted our materials, we were careful to include properties that would at least keep us even, if not increase the rate,” said J.R. Cardin, the post’s RCI program manager. “We were surprised to see ranks that went down a significant amount.”

Cardin said he didn’t know why some rates had been slashed. DA officials use several factors when determining BAH rates for military facilities, such as rental rates in the area, the cost of utilities, and renter’s insurance. The information is collected through surveys and submitted to DA.
Properties in areas with high crime rates, landlord discrimination, risky environmental factors such as flood plains, and properties with substandard conditions, aren’t considered in the assessment. Mobile homes also aren’t included. Excluding such properties keeps the median number— and ultimately the BAH rate— higher.

As rent, utilities, and insurance rise in an area, BAH follows, Cardin said. A drop in rates for utilities would cause BAH to drop, but there is no evidence that’s the case for Fort Knox. He also said that the drop in BAH doesn’t accurately reflect the healthy housing market in the area, a factor that increases property values and taxes, stimulating BAH factors.
Evelyn Lacey, the principal real estate broker at Century 21 First Choice in Radcliff, said the current housing market in the Knox area for new homes, “is very healthy. It’s the most improvement we’ve seen since the downsizing on post, when the 194th Armored Brigade left. We expect this (market) to improve even more over the next several years.”
Lacey said most of the rental units her office works with are full. Such a tight market would support stable rents, or at least not deflated rates, which could drive down the BAH.

Soldiers in the affected ranks who arrive at Fort Knox will have to make quality of life sacrifices. They’ll either have to pick a smaller dwelling or make up the cost difference out of their own pockets, giving them less disposable income to spend in the local economy. Whatever the choice may be, Cardin said it’s a shot to the standard of living of a Soldier and his family.

Soldiers stationed at Fort Knox prior to Jan. 1 will not be affected. They’ll continue to receive the 2005 amount.

But the effect of the BAH drop doesn’t end with the Soldier trying to make ends meet off post. The decrease will have a severe impact on Knox’s RCI project by cutting the number of new homes built on post, as well as the renovation of existing homes in a timely manner. The post Housing Office is scheduled to transfer housing operations to the contracted developer in January 2007.

“There have been calculations that state it’s a $22.3 million impact on the RCI project over the first eight years of the contract,” Cardin said. “Twenty-two million dollars would build a lot of new homes that we’re not going to be able to do.”

When the 2006 BAH rates were released, the RCI officials were in the middle of negotiating the first eight years of a housing expansion and improvement contract with builders and lenders. Because builders and lenders are ultimately paid by BAH, a decrease of any amount is cause for concern.

“We were in the middle of our planning process… …We base that plan on the number of dollars we have,” Cardin said. “Well, the dollars have gone down $22 million. Plus, lenders are right now looking into the project to tell us how much money they’re going to let us borrow. When they see the BAH rate going down, they say, ‘What’s wrong? The area must be depressed.’ ”

As if the rate cut wasn’t bad timing enough, Cardin said the RCI project is still suffering from the spike in construction material costs due to last summer’s hurricanes. Builders across the nation were rationed so that more materials could reach the affected areas from the east coast of Florida to south Texas. The absorption of those costs will further limit RCI’s building and renovation abilities on Knox.

The post RCI team has asked DA officials to review their calculations. They’ve also asked DA to provide an explanation as to why the rates dropped. Unfortunately, Cardin said, the rate will not likely be changed, even if errors were made.

“Our hope is it will be corrected next year,” he said. “We’ve got to make sure this doesn’t happen again. We have to keep up with the improvements off post, because if we don’t, Soldiers will not want to live on post. The developer is not guaranteed Soldiers will live on post. They have to improve the homes enough so the Soldier will want to live here rather than off post.”

The Fort Knox BAH region includes the counties of Breckinridge, Meade, and Hardin. Ninety-five percent of properties included in the submissions to DA are in Hardin County. The Louisville metro area isn’t included.