| Reducing Utility Costs
This Is A Member-Only Page Introduction
For many areas of the country, utility costs have increased at a much faster rate than rents and, for those landlords paying for water, electricity, and gas, the costs of utilities represent the largest non-mortgage expense.
Predictions are for higher even rates and for limits on consumption because of limited supplies and increased production costs. These expectations should be of concern to income property owners, managers, and those considering the purchase of rental property.. What To Do?
There are basically two things that the owner, manager, and buyer can do to solve the problem. They are: Conservation
Conservation has long been an important concern and this will only increase as resources are strained due to population growth, more stringent water quality standards, a decrease in power source development.
Cost Transfer
Because of rising energy costs and the recent attention to existing and potential energy shortages around the country, transfer of costs to the tenants is an increasingly attractive practice at many types of residential, commercial and industrial buildings.
Government Involvement
Various levels of government are also doing things to encourage conservation. This includes offering tax benefits to encourage sub-metering or a change in building codes to require sub-metering in new construction as a means of encouraging conservation.
New York City
In July 2001, Mayor Giuliani signed a bill granting J-51 tax exemption to co-ops, condominiums, and Housing Development Fund companies that convert electricity metering systems. In signing the bill into law, the Mayor said
"Currently, many co-ops and condos in the City use master metering systems to measure the usage of electricity. With master metering, the utility sends one master bill to the co-op or condo board. The board then divides the bill equally among the tenants. Since an individual tenant is not billed strictly according to his or her individual electrical use, there is no direct incentive for a tenant to restrict his or her use in order to save money and energy.
On the other hand, with master/sub-metering, each individual tenant is billed according to how much electricity he or she uses. In addition, the master/sub-metering system allows the utility to bill at a slightly higher rate in the summer, when people use more power, and at a slightly lower rate in the winter, when power consumption tends to decrease. This system gives tenants far more of an economic incentive to reduce their electricity usage, especially in the summertime when power can sometimes be scarce."
San Antonio, TX
A water shortage in San Antonio this past summer had city officials discussing the idea of mandating water sub-meter installation for all new multi-family housing.
Tax Deductible
It should be remembered that the cost of retrofitting for sub-metering and the costs of other conservation efforts will be tax deductible.
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