Water Submetering vs. RUBS: Pros and Cons

There are two ways multifamily property owners can bill back tenants for water usage: submetering or ratio utility billing (RUBS). So, which one should you choose? In this blog, we give an overview of each system by sharing the pros and cons of each.

Water utility costs vary each month, depending on usage. When property owners include water utilities in rent or charge a flat fee, they are left with the responsibility of making up the difference if water usage spikes. This extra, unpredictable cost can wreak havoc on the bottom line.

That’s why many multifamily property owners implement a water utility billing system (submetering or RUBS) to better recover those cost each month. Allocating water costs to tenants can help property owners make monthly costs more predictable, while improving NOI and profitability.

The Pros and Cons of Water Submetering

In a water submetering set-up, individual water meters (known as submeters) are installed in each unit to measure and monitor water usage for that unit alone. This allows property owners and their staff to accurately track usage and bill tenants accordingly.

The Pros of Water Submetering

• Accurate & Fair Billing: With submeters, water costs are allocated based on actual usage. This ensures that individuals only pay for what they use, meaning more tenants will view the bill as fair.
• Encourages Water Conservation: Water submetering enables tenants to track their usage, incentivizing them to use water more responsibly because they are directly accountable for their consumption.
• Rapid Lead Detection: Submeters provide data down to the unit. That means property owners can pinpoint unusual water usage, helping to detect leaks early and reduce wasted water and repair costs.
• Supports Sustainable Practices: Water submetering encourages awareness and adoption of eco-friendly habits. This helps save costs and aligns with broader environmental goals should your property have them.
• Increases Property Value: Water submeters are a valuable infrastructure investment. They help reduce costs and ensure utility cost recovery is predictable. Those are all attractive value propositions to potential property investors should you look to sell.

The Cons of Water Submetering

• High Initial Installation Costs: Installing water submeters can be expensive, especially in older buildings that may require significant retrofitting. It’s important to note, that submetering systems last for years, and in that time, they will more than pay for themselves by recovering previously unrecovered water costs.
• Maintenance and Repairs: Submeter systems require regular maintenance and occasional repairs, adding ongoing operational costs that property owners must manage.
• Resistance from Tenants: Transitioning to submetering can meet resistance from tenants accustomed to flat-rate billing. It’s possible they may perceive it as an added financial burden or unfair practice. Additionally, residents may dispute the accuracy of the bills they receive. It’s important to have the proper customer service channels in place as well as a communication plan to head off resistance before implementation.
• Complexity in Billing Management: Managing individual bills for tenants adds administrative overhead, especially for property managers who may need additional resources or third-party services to handle billing.

The Pros and Cons of Water RUBS

Water RUBS proportionally allocates costs for water to tenants based on an industry-accepted formula that takes into account factors like unit size, layout, occupancy and more.

The RUBS method can be managed in many ways — from tools as simple as a pen-and-paper mathematical formula to property management software — making it an attractive water billing option for many multifamily property owners.

The Pros of Water RUBS

• Lower Upfront Costs: Unlike submeters, RUBS does not require installation of any new hardware, making it a cost-effective option for property owners to allocate water usage costs.
• Simple Implementation: Because RUBS doesn’t require any special hardware or installation, it can be implemented quickly without significant disruption.
• Reduced Utility Expenses: RUBS shifts the financial burden from property owners by passing water costs to tenants, improving cash flow and reducing operating expenses.
• Flexible Allocation Methods: RUBS allows for multiple allocation formulas (e.g., by occupancy, square footage), offering property owners the flexibility to choose the method that best suits their property type and tenant mix.

The Cons of Water RUBS

• Perceived Unfairness: Tenants may feel the system is unfair since charges are based on estimates or formulas rather than actual usage, which could lead to dissatisfaction or disputes without a proper communication plan in place.
• No Direct Accountability: Unlike submetering, RUBS does not track individual usage, which may reduce incentives for tenants to conserve water.
• No Leak Detection Capability: Because RUBS does not use submeters, it can’t help with identify leaks or excessive water usage in specific units. This can lead to higher overall water costs and wasted resources.

How to Choose the Right Water Billing System for Your Multifamily Property

Ultimately, there is no one-size-fits-all water utility billing solution. The choice between submetering and RUBS comes down to many different factors including:

• Property infrastructure: Installing submeters may not be possible or cost-effective depending on the age and layout of your property.
• Tenant preferences: Some tenants may value accurate water billing and having the power to reduce their monthly costs by reducing their usage. Others may see water billing as an inconvenience.
• Legal and regulatory considerations: There are many local and state laws around utility billing. It’s important to review all regulations before making a decision to move forward with a water billing system.
• Time and resources: Managing a utility billing system can add a lot of extra work for your team. Before choosing it’s important to consider the costs in terms of time and resources, or you may want to consider working with a utility billing services firm.

Water Submetering vs. RUBS: The Verdict

Water submetering offers the most accurate and reliable way for multifamily property owners to recover water costs, while RUBS is a cost-effective way to better allocate costs and improve cost recovery. Both water billing systems come with their pros and cons, so it’s important to weigh your options.

Working with a utility billing expert can help make the decision smoother. Plus, they can provide valuable information and services at every step of the process from implementation to monthly billing and collections.

Want to learn more about billing back water usage using submetering or RUBS? Get in touch with the water billing experts at Synergy.