Hegseth pledges housing fix after $2.6 billion used for warrior bonuses

By Brett Rowland
The Center Square

Defense Secretary Pete Hegseth pledged Wednesday to work with Congress to fix a shortfall in military housing allowances, but the Pentagon’s own budget documents show no plan to restore $2.6 billion that was redirected from a housing fund to pay Christmas bonuses to service members.

Rep. Don Bacon, R-Neb., had telegraphed the challenge ahead of the hearing. The retiring Air Force brigadier general and longtime advocate for military quality of life pressed Hegseth directly on what happened to the money Congress appropriated to help troops living off base.

“We brought in $2.5 billion to increase housing allowances for people living off base in the reconciliation bill,” Bacon said. “The [Department of Defense] took that money and paid the entire force $1,776 in bonuses.”

Hegseth acknowledged the problem.

“I think that is precisely the kind of quality of life issue that’s been ignored time and time again, oftentimes with good intentions of trying to do some trade-off with something else,” he said. “I’m committed to working with you on that to close that gap and ensure that folks can live where they are asked to serve because they can afford housing.”

The Pentagon’s fiscal year 2027 budget overview – a $1.5 trillion request, a 42% increase over last year – contains no line item to replenish the Basic Allowance for Housing fund. The $21.5 billion housing investment in the budget is targeted entirely at repairing and constructing physical barracks, not the cash entitlement that helps troops living off base pay their rent.

Congress appropriated $2.9 billion for BAH in the One Big Beautiful Bill. A Pentagon official previously confirmed to The Center Square that about $2.6 billion of those funds were used for the one-time “Warrior Dividend” payments – $1,776 checks delivered before Christmas – leaving about $300 million for actual housing allowance needs.

President Donald Trump announced the payments during a Dec. 18 address to the nation, saying they were funded by tariff revenue and the One Big Beautiful Bill. “In honor of our nation’s founding in 1776, we are sending every soldier $1,776,” Trump said.

The IRS subsequently confirmed the payments were tax-free, classifying them in a Jan. 16 news release as “supplemental basic allowance for housing payments” – the same fund Congress had appropriated the money from. The IRS release made no mention of tariff revenue.

Bacon, who previously chaired the HASC Military Quality-of-Life Panel and led a year-long inquiry into military pay, housing, childcare and healthcare, has called on Hegseth to restore the funds.

He announced last year that he would not seek reelection in 2026, making Wednesday’s hearing among his final opportunities to press the issue before the full committee.

“This money should be restored,” Bacon told The Center Square ahead of the hearing.

The Pentagon did not immediately respond to questions about whether Hegseth’s commitment on Wednesday extended to restoring the redirected funds.