Increasing Revenue, Not Rents, With Utility Billing Systems

Setting up a utility billing system can lower costs for property managers without raising rents for residents.

New York—Residents will fight tooth and nail over a raised rent. And, even in the current environment where there’s not a huge vacancy rate, residents might refuse to renew their leases if the rent gets raised too much. However, there is a way to increase revenue while keeping rents stagnant. And—bonus!—it’s also good news for the environment.

In a recent report from the American Conservation & Billing Solutions Inc. (AmCoBi), titled “The Multifamily Owners Complete Guide to Resident Utility Billing,” if property managers and owners set up a utility billing system—charging residences for their utility consumption—it will lower costs overall.

“We encourage owners to transfer the utilities,” Todd Brehe, director, AmCoBi, tells MHN. “There’s a tremendous opportunity for them, because without affecting the rental rates, they can split off utilities.”

One example of this is installing a sub-metering system to monitor individual usage. However, Brehe warns that this is not always possible for multifamily units.

“If the owner invests in sub-metering, residents are paying exactly what they use,” Brehe says. “But the problem with the way a lot of these multifamily complexes are configured is in some cases it doesn’t support implementing a sub-metering system. For example you may have multiple pipes leading to a single unit.”

Another way is to implement a ratio utility billing system (RUBS). This would divide a building’s utility bill among its residents based on a quantitative measure such as the number of residents.

In addition to aiding with property managers’ ROI, a utility billing system usually leads to less energy consumption—which is good news for the environment. Typically this happens because when people become aware of their usage (and are responsible for paying for it), they use less.

“[The system] can reduce consumption anywhere from 5 and 12 percent for the entire community,” Brehe says.

After the change is implemented, Brehe says the property managers “can leave their rents where they are or they can implement a lease that says they’re going to bill residents for their utilities and on new leases or lease renewals, implement that lease and effectively transition over.”

But would residents get incensed with their additional cost? Not necessarily, says Brehe. He proposes, if converting to a RUBS, to offer a slight discount on the rent based on the predicted energy bills. Say, for example, that the energy bill would be an extra $50 a month, then owners could offer a $25 monthly discount on the rent, which would still save the owner money.

“Now the owner is disconnected from anything that might happen to the utility prices,” Brehe says. “If for some reason the community uses an excess of water that they didn’t budget for, that’s completely separated, and [the owner is] completely protected from that situation financially.”