Have you started charging for water and sewer?
Every property owner hopes to see increasing NOI – not decreasing profits. However, if you’re currently billing residents a flat fee for their utilities, you could be simply flushing profits down the drain. Learn why now is the right time to shift the water and sewer costs to residents and how that affects both utility usage as well as your bottom line.
In some communities, small commercial properties, often multifamily rental units, are hit hard by CSO regulations because they may be scheduled for the largest percentage increases in fees. These major increases, divided by the fewer number of rental units, will leave those residents with the most significant cost escalation. Resident understanding that rising water and sewer costs are attributable to sewer reconstruction, CSO, and the political process will be far more clear if conversion is not delayed. Delaying the conversion to resident-paid water and sewer usage means renters will ultimately only see monthly bills rise from $50 to perhaps $80 and miss the connection between the long term CSO costs and their billings.
When you do start charging for water and sewer, you’ll typically find two key benefits (among others):
- It promotes conservation: When people pay for their own water usage, they become more responsible consumers. Studies have shown that when apartment residents pay for their water consumption, they use significantly less water. There are multiple ways to bill for water usage, such as submetering, inferential metering, or RUBS. These methods all prove to promote conservation, based on the perception that the renter has an impact on their bill by conserving.
- It helps you stay competitive. Competitive rent prices can be easily maintained, without cutting into profits, by excluding the cost of water and sewer. While choosing to charge a flat fee for utility costs, is an option, trouble arrises when the flat fee becomes $60, $70, or more just to cover the cost of rising water and sewer charges and the renter perceives such fees as nothing more than additional rent.
When should you begin this process?
While you can start anytime, typically it’s well received when the bills are low, such as in the winter time for electricity and water, and in the summertime for gas. Renters are more willing to accept the charges for water and sewer usage if the conversion is made while bills are not sky high – and before any changing legislation that impacts the fees as well. If done in this manner, the landlord will not be perceived as the “money-hungry” bad guy for raising rents year after year (just to cover rising water and sewer costs, which in NO way aid rental income).