Rent Competitiveness &
AMR Submetering

It is difficult for property owners to continue absorbing the rising costs of water, electricity, and gas and passing these costs through higher rents to tenants. Utility rates have been rising between 8% and 10% per year. As most good property owners know, sustainable rent increases are 3% to 5% in a good market. Not only do rising utility rates force rent to increase to levels that may not be competitive, but this is also a cost factor that is outside of the control of the property owner.

AMR submetering is the best solution to accurately measure tenants’ consumption, recover the cost of service from tenants, and maintain competitive rents.

Tenants accept AMR submetering. Tenants understand that their rent payment covers operating expenses incurred in running a property including utility services. Without AMR submetering, the increased costs created by wasteful tenants are borne equally by those that conserve and those that waste. With AMR submetering, tenants who conserve benefit by having lower costs reflective of their usage.

  For example, consider two neighbors renting a $500 per month
  apartment in a residential complex and their water consumption. Ethyl is
  a spendthrift and conserves water to lower her utility bill. Lucy is wasteful
  and likes to take long hot showers. Ethyl shouldn’t have to pay for Lucy’s
  showers. With submetering, Ethyl doesn’t.

  The submeter measured that Ethyl used only $11 of water while Lucy
  used $45 of water in the same period. When the monthly rent is due, the
  apartment owner or a re-bill and collect company presents Ethyl with an
  $11 water bill and Lucy with a $45 water bill. Ethyl pays $511 in total rent
  and water while Lucy pays $545 in total rent and water.

  Without submetering, the apartment owner would have had to raise
  both Ethyl’s and Lucy’s rent by $28 to achieve the same financial
  outcome. This would have made Ethyl pay for Lucy’s waste, raising
  Ethyl’s total monthly bill higher than it should be to $528, and driving a
  good, conservative tenant like Ethyl out of the complex to a lower rent and
  water bill solution.

For the landlord, submetering consumption and recovering costs directly from tenants is more effective at improving profits than raising rents. Expanding on the above example of Ethyl & Lucy's small residential complex and its water bill: A small apartment complex or mobile home complex with 100 units has a total annual water bill of $35 thousand. While 20% of the water consumed is through common property maintenance, 80% is directly attributable to tenant consumption. Recovering the cost of water consumed by tenants from the tenants themselves improved profitability by $28 thousand.

In this hypothetical example, the landlord would have to increase rent by 5% or $28 to achieve the same effect and also raise rents again the next year to keep pace with the rate increases of water. By passing the direct cost of water to tenants, the property owner is able to leave rents unchanged for a year, making the rental property more desirable and rent competitive.