Basic Allowance for Housing (BAH) will increase an average of 3.5 percent Jan. 1 for the nearly 950,000 service members who live off base stateside.

Some BAH recipients will see their housing allowance rise two to three times the average percentage increase while others will see no BAH raise in the new year because local rental costs actually have declined.

"Over the past few years, rising home market values, coupled with attractive mortgage interest rates, have definitely impacted the rental market. Rental rates in many areas dropped significantly as property managers were forced to offer competitive lease rates and incentives to attract renters," said Cynthia Smith, a Defense Department spokeswoman.

The average dollar increase in BAH for members with dependents will be $44 a month, officials said. An overall average for single members wasn't provided.

The services expect to spend $16.9 billion on BAH in 2007. Individual BAH will vary by pay grade, family status and assignment area.

Housing allowances are set higher, and often are raised substantially more each year, in high-cost areas like Honolulu and San Francisco. At the same time, BAH won't be raised at all in some areas, or for some pay grades in certain areas, because of stagnant rental markets locally.

For example, a married E-4 assigned to Honolulu will see BAH raised to $1925 a month in January. That will be $157 a month (8.9 percent) higher than BAH in 2006. A married E-4 at Fort Sill, Okla., on the other hand, will see no BAH increase. His allowance will stay at $717 a month. Yet a married E-4 who transfers into Fort Sill on or after Jan. 1 will receive only $709 a month in BAH.

The Fort Sill area of Lawton, Okla., is one of those housing markets where rents have declined over the past year. Service members already assigned there when 2007 rates take effect receive individual BAH rate protection, which means allowances won't decline as long as they don't move. This ensures that members who have signed leases or bought homes aren't penalized if local rental costs drop.

Rate adjustments are based on changes in rental cost data for different types of housing deemed appropriate for particular pay grades, and across 370 military housing areas. Data are collected by base housing offices from local real estate professionals, renters and classified advertising.

To ensure the overall accuracy of data gathered, Runzheimer International, a defense contractor, conducts rental surveys nationwide and compares its results to what military commands provide.

Defense officials said it was "impractical" to try to calculate how many BAH recipients will see allowance increases in 2007 or, for that matter, how many won't. But without too much trouble they did determine that at least some members in 135 of 370 military housing areas won't see a BAH increase next month.

BAH rates have no direct affect on members living off base overseas. Instead they receive an Overseas Housing Allowance.