The multi-family industry is once again discovering the most reliable way to stabilize property profits and HOA fees is by providing the resident a vehicle to pay for utilities they actually use instead of a rationed portion or share of the total property utility. Submetering for electric and gas utilities pays for itself in short order. The results are threefold.
1. RECOVER UTIILITY EXPENSES
Utility cost recovery programs allow for billing actual utility costs that residents have consumed rather than apportion, a share, or having utility cost built into the rent or HOA fees.
Typically the investment return on the initial cost of equipment and installation is realized within the first 12 months. It is common for management to experience an 80% cost recovery on their electric and gas utilities.
2. LOWER UTILITY COSTS
A utility cost recovery program reduces consumption which lowers utility costs and operating expenses immediately. Sub-metering allows for resident accountability. Lower utility costs equal a reduction in expenses, which equals a stable property utility expense or HOA fee. It can also have a favorable affect on the property's capitalization rate.
Utility cost recovery programs make the end user responsible for their usage, and this behavioral shift has a measurable effect on consumer’s use of utilities. Many solutions are available to choose from: 1. sub-meters which measure actual consumption of a given utility, or 2. energy allocation equipment which measures time, or 3. time/temperature for relative BTU use. All promote conservation.
Studies show that converting multi-family dwellings from management paid utilities to resident paid utilities typically reduces consumption by about 20%.
Well-developed utility cost recovery programs today are state of the art technical systems that offer long lifetimes and accuracy. One certifiable way to stabilize the situation and yield profits instead of diminishing returns is to distribute utility costs as they are genuinely consumed. Sub-metering provides the tool to do it accurately and fairly.