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Increase Your Net Operating Income (NOI)

Submetering makes sense for many reasons, not the least of which is a significant increase in cash flow and NOI for submetered properties. With utility costs rising, water and energy conservation and cost recovery is imperative for properties that wish to control their operating budget and base rents. For example, a typical 200-unit complex can expect to decrease their overall water usage from 18% to 39%1. This conservation, plus recovery of utility costs from residents, can add $68,000 or more to the annual NOI of a 200-unit property.

Make Your Base Rent More Competitive

Ultimately in business, increased costs must be passed through to the consumer. Over the last eight years the average cost of water and sewer utilities increased 45% (almost double the CPI), and this trend is continuing2. Dramatically increasing utility costs will force owners to increase base rents without any benefit to their bottom line. However, owners that submeter do not bear the burden of water and sewer utility expense. Therefore, they have a significant competitive advantage because studies have shown that the single biggest factor in a person's decision about where to rent is the base rent charge. Getting utility costs under control will have a major impact on your ability to maintain lower base rents, which in turn will allow you to attract and retain more residents and maintain or improve your profit margins.

Conserve Natural Resources

Utility submetering is the single most effective way for multifamily owners to effect real conservation. Recent studies show that making residents responsible for their own utilities– if done fairly through submetering– reduces water and sewer usage by up to 39%. Residents of submetered apartments are much more conscious of water usage and report leaks more promptly than residents of properties where utilities are included in the base rent. Properties that employ Ratio Utility Billing System (RUBS), a method of estimating water and sewer consumption, do not enjoy these same savings.

Submetering recovers utility costs and increases conservation

Allocate Costs Fairly To Your Residents

When utility costs were relatively low, residents did not spend much time thinking about whether they were subsidizing their neighbor's water usage. But times have changed. As rents go up with ever increasing utility costs, residents simply do not want to be penalized by their neighbor's mismanagement of utilities. When utilities are included in the base rent, a single person that spends a lot of time traveling pays the same for utilities as the family of five next door.

With submetering, each resident will pay for only what they use. They are empowered to keep their expenses in line with their lifestyle. There is no evidence that properties that implement submetering have any decline in occupancy. In fact, many properties report that a well-run submetering program has given them an effective selling tool in a highly competitive rental market.

  1. Submetering, RUBS, and Water Conservation, prepared for the National Apartment Association and the National Multi Housing Council. By Industrial Economics Incorporated, June 1999.
  2. Water Conservation From User Charges in Multifamily Rental Housing, National Multi Housing Council