Reasons To Stop Flat-Rate Utility Billing Now

Well, 2020 has certainly been a wild ride so far. We started the year with significant utility rate increases in almost every state. I monitor these for our customers and some days could barely keep up with all of the water, sewer, gas, and electric rate hikes.

As if rate increases were not enough to keep multifamily owners and managers busy looking at their budgets, our lives are forever changed by a global pandemic. On top of increased utilities, you can add increased maintenance and safety costs to your budget. Most operating budgets were not prepared for such increases in variable costs.

As the pandemic drags on, unemployment rises, and residents face long wait times for government assistance programs. 

We’re not even halfway through 2020 and we’ve already had a lifetime of surprises. 

If you operate your community on a flat-rate utility billing plan, we are truly worried about your income this year. You likely predicted the highest probable utility cost for the year, but that was pre-pandemic and before most of your residents are home 7/24.

We don’t know what the rest of the year will bring, but we do know utilities will be higher than ever before this year as more people spend more time at home. 

Additionally, the longer the pandemic continues, the harder it will be for residents to pay rent. Less rent combined with higher expenses will be painful. 

If you have a flat-rate utility billing program, there is no mathematical path to recover 100% of your utility expenses. It is simply not possible to make that accurate of a guess with increasing usage and rates, and uncertainty about periods of home isolation. You can’t change the formula month over month, so now you could be stuck. You also can’t overbill and risk an audit.

And finally, when residents aren’t responsible for the bills, they don’t worry about their usage. We’re expecting May bills to come in 25% higher year-over-year. Is your budget ready for a 25% increase?

It’s time to regain some control over your budget and do what you can to get through this period as best as possible. 

In most jurisdictions, you can put a ratio utility billing system (RUBS) in place for some or all of your utilities. We do this every day for owners just like you. We help you with regulations and lease language, and most importantly with how to successfully communicate with your residents. There is no up-front cost and your NOI will begin improving in as little as thirty days. 

In a RUBS program, we use an algorithm to fairly allocate utility usage to the residents who consume them. The calculation is based on several factors, including the number of water sources (for water bills), the number of residents, square footage, etc. Our experts help craft a program that recovers as much of your master utility bill as your regulations allow. 

The big win for you is that the utilities are now the responsibility of the residents, and the second big win is residents will actively try to conserve utilities. It is not uncommon for master utility bills to drop as much as 20%.

Income from a billing program makes your property asset more valuable and increases your NOI. It can also offset rent reductions or losses you take during the pandemic. 

Finally, a RUBS program solves for the problem of unexpected variable utility costs. You will no longer have to cover rate hikes and excess consumption. 

Banyan designs programs for owners with 20+ units. We’re here to help, please click below to ask for a free consultation.