The Department of Defense (DoD) sets the BAH rates each year based on several factors, including the service member’s rank, location, and whether they have dependents. The U.S. Department of Defense determines the benefit structure based on an annual survey of housing costs in each military housing area and also takes into consideration factors like rental markets, housing profiles, rental housing cost data, equitable housing compensation, current market rent, civilian housing markets, service without dependents, active service periods, rental payments, availability of quarters and so on. The BAH rates are set to cover roughly 95% of the average housing costs in each area, based on the type of housing that service members typically rent or purchase. They are also supposed to cover the cost of utilities.