Water Submetering in Multifamily Buildings: Pros, Cons, and Considerations
Over the last few years, energy and utility costs have increased rapidly. That cost increase directly impacts property owners, whether residential or commercial. In rental properties, those cost increases affect your property’s net operating income substantially, especially if you can’t allocate those costs to the residents using the utilities, and even more so in apartment buildings.
One solution to this issue is water submetering in multifamily buildings. Adding a water submetering system to your mechanical, electrical, and plumbing systems lets you move utility responsibilities from the owner to the residents. Here’s what you need to know about submetering.
What Is Water Submetering in Multifamily Buildings?
Water submetering in multi-unit buildings involves integrating a system of several separate water meters that record the water usage for individual units within the building. It more accurately calculates the unit’s usage, allowing building owners to charge residents for the water they use each month rather than including it in monthly lease costs or using a rate calculator based on occupancy and other factors.
All buildings require a water metering system where the main line enters the home. That water meter records how much water is used by the building and its residents. In single-family homes and standalone commercial buildings, that single meter is used for municipal water cost calculations. But in multi-lease buildings, you can’t allocate water costs equitably with just that one meter. Instead, the owner pays for the water usage in whole, or that usage is divided between the residents.
In one case, the owner loses profit and NOI. In the other, residents aren’t charged equitably for their actual usage. And while there are some ways to get closer to 100 percent equitable cost recovery without changing your building’s metering, your most accurate solution is water submetering in multifamily buildings.
For example, Ratio Utility Billing System (RUBS) uses factors like apartment size, occupancy, and the number of bathrooms in a unit to determine costs based on its ratio against a building complex’s overall size and occupancy.
The RUBS method can allocate much of the costs with a fair amount of accuracy when water usage is consistent from resident to resident. But it won’t account for excessive usage by one resident compared to another. For buildings that can’t retrofit due to structural or financial reasons, RUBS could still serve as a reasonable alternative to full water submetering for multifamily buildings.
Pros and Cons of Water Submetering for Multi-Lease Buildings
Water submetering provides several benefits, specifically with monthly operating costs and conservation efforts. But it can also pose some challenges, especially when retrofitting an existing system with submetering equipment. Here’s a rundown of the most common benefits and drawbacks of multifamily water submetering.
Pros
- More accurate use allocation for residents
- Lower operating costs for owners
- Encourages better habits for energy consumption
- More precise maintenance troubleshooting
- Increased NOI and property value
- More agile cost recovery than rent increases
- It can be integrated into smart technology and automation systems
Cons
- Higher initial costs for building owners
- Errors can occur in submeter readings
- Requires physical equipment and installation
- Disruptions to service for tenants
What You Should Consider Before Installing Submeters in Apartment Buildings
Despite its many advantages, multifamily water submetering isn’t the right solution for every apartment complex or multifamily project. When you’re planning your building’s MEP design, consider the following questions.
Is Water Submetering Cost Effective for Your Project?
The initial investment in water submetering for multifamily buildings increases your project cost. But submetering is, in many cases, the most effective and accurate way to recover utility costs. Rate hikes for utilities over the last ten years have been substantial, so keeping up with these increases in lease costs is not always possible. Submetering allows you to balance those rate increases against lease costs without constantly bumping up the rent.
Are You Building New or Retrofitting?
Retrofitting older apartment buildings with water submetering equipment is possible, but you’ll have to consider some of the inconveniences involved. Loss of service could be long for tenants, especially in large complexes. And in some cases, demolition is necessary to access the water lines required.
For new construction, planning out water submetering in the MEP design stages is much simpler. There’s no loss of service, no inconvenience to residents, and no need for demolition to access pipes. It’s also the perfect opportunity to plan out an easily accessible space for reading submeters and performing regular maintenance.
Do You Plan On Integrating Smart Tech or Automation?
Water submetering for apartment buildings allows you to connect some great technology. The submeters can reduce repair troubleshooting time and effort by narrowing water loss caused by the unit. And with integrated smart meters, you can offer your residents additional information about their specific water usage and habits. This is a great way to provide an additional amenity while simultaneously reducing the environmental impact of your building.
Are There Any Legal Issues to Consider?
Multifamily water submetering can recover nearly 100 percent of the cost of this utility, but it’s not always possible to implement in all locations. Some cities and states limit water charges for rental properties, so water submetering for your property could be legally impossible. Check your city ordinances, municipal laws, and state legislation to see if there are any limitations in your area or if there are other processes you must perform to charge residents for water usage.
Planning for the Best NOI with Water Submetering
Water submetering may not be possible for your building or project. But in many cases, you’ll see an immediate return on your initial investment. Instead of waiting for lease renewals to adjust for utility cost increases, water submetering transfers that increase directly to residents on a monthly basis. It’s the most effective way to increase net operating income while maintaining an equitable billing system for your residents.
If you’re starting a new project and want to know more about water submetering for your multifamily or commercial property, our experts can help you find out whether or not a system like this is right for you. Contact us today to learn how water submetering raises property values while also adding value for your tenants.