Utility billing can make or break your property's budget. Rising utility costs are eating into profits, making it essential to recover these expenses efficiently. Two popular methods - RUBS (Ratio Utility Billing System) and submetering - offer distinct approaches to billing tenants for utilities.
Here’s the bottom line:
- RUBS is cost-effective upfront and easy to implement, dividing utility costs based on unit size, occupancy, or similar factors. It works well for older properties where retrofitting meters is too expensive but may lead to tenant dissatisfaction due to less accurate billing.
- Submetering involves installing individual meters to track actual usage, offering precise billing and encouraging conservation. It requires a higher initial investment but can significantly reduce utility consumption and improve tenant satisfaction.
Key differences:
- RUBS is cheaper to set up but less accurate.
- Submetering costs more upfront but provides precise billing and conservation benefits.
Quick Comparison:
| Factor | RUBS | Submetering |
|---|---|---|
| Initial Cost | Low | High ($750+ per unit) |
| Billing Accuracy | Estimate-based | Usage-based |
| Conservation Impact | Limited | Strong (10–20% reduction) |
| Tenant Satisfaction | Mixed (perceived inequity) | Higher (transparent billing) |
| Ideal For | Older buildings, tight budgets | Newer properties, long-term focus |
The best choice depends on your property's setup, tenant needs, and budget. Read on to weigh the pros and cons of each system.
Sub-metering and RUBS for Multifamily Real Estate: How to Decrease Expenses & Increase NOI
How RUBS and Submetering Work
Understanding how RUBS and submetering allocate utility costs can help you make a more informed decision. Both methods assign utility expenses to residents, but they do so in fundamentally different ways. Let's break down how each system works.
RUBS Basics
RUBS, or the Ratio Utility Billing System, is a method that splits the total utility costs for a multifamily property among all residents based on a predetermined formula[5]. Instead of using individual meters, RUBS calculates each unit's share using factors like square footage, number of occupants, bedrooms and bathrooms, or water fixtures[5].
Here’s an example: Imagine a property with 40 units and a total area of 40,000 square feet. If Unit Type A is 2,000 square feet and Unit Type B is 1,000 square feet, and the total monthly electricity bill is $2,000, the cost per square foot would be $0.05. Using this, Unit Type A would pay $100 (2,000 sq. ft. × $0.05), while Unit Type B would pay $50 (1,000 sq. ft. × $0.05). A similar method can be applied for water bills, calculated based on occupancy[5].
RUBS can be used for various utilities, including water, gas, electricity, and even trash removal[5].
Submetering Basics
Submetering, on the other hand, involves installing individual meters in each unit to measure actual utility usage[7]. These meters can track consumption of water, electricity, or gas, and the data is often transmitted wirelessly for convenience and accuracy[6].
There are different types of submetering systems. Manual-read meters are the most affordable but require staff to collect readings. Automated systems, like Automated Meter Reading (AMR) and Advanced Metering Infrastructure (AMI), offer real-time data and greater accuracy but come with higher upfront costs[6][7].
Submetering often encourages residents to conserve resources. It’s been shown to reduce energy and water consumption by 10–20% because people become more conscious of their usage[6]. For example, a property in Gardner, MA, using DrizzleX's submetering system, saved 49% on water costs over nine months, amounting to $91,434 in savings[8].
Where Each System Is Used
Choosing between RUBS and submetering often comes down to the property’s infrastructure and budget. RUBS is a popular choice for older buildings that were originally designed with a single utility meter. It’s a cost-effective solution when retrofitting for individual meters would be too expensive[9]. For example, during ownership transitions or after value-add upgrades, RUBS can be implemented without the high costs of submeter installation, which can exceed $750 per unit. However, the savings can be substantial, with a 300-unit building potentially saving over $70,000 annually on water and sewer costs[9].
Submetering, by contrast, is more common in newer properties or those where individual metering is feasible. While it requires a larger upfront investment, it offers the most accurate billing, as residents are charged based on their actual usage. However, existing utility infrastructure can sometimes limit the ability to install submeters[9][10].
The main difference between the two methods is accuracy versus cost. RUBS is a more affordable option for properties where retrofitting is impractical, while submetering provides detailed, usage-based billing and promotes resource conservation in properties that can support the required technology.
RUBS vs. Submetering: Side-by-Side Comparison
When deciding between RUBS (Ratio Utility Billing System) and submetering for your multifamily property, it’s helpful to compare how these two systems perform across key factors. Each approach has its strengths and weaknesses, which can significantly influence your property's operations and overall profitability.
Key Comparison Points
This breakdown highlights the operational and financial differences between RUBS and submetering:
| Factor | RUBS | Submetering |
|---|---|---|
| Initial Investment | Lower upfront costs, no installation required [3] | Higher upfront costs, with installation costs often exceeding $750 per unit [9] |
| Installation Complexity | Quick and straightforward implementation [2] | May require plumbing or wiring updates, especially in older buildings [1][2] |
| Billing Accuracy | Estimated billing based on predetermined ratios [12] | Precise billing based on actual usage [12] |
| Cost Recovery Potential | Spreads costs but may not fully recover expenses [3] | Direct recovery of utility costs from tenants [3] |
| Conservation Incentive | Limited motivation for tenants to conserve [12] | Strong incentive for tenants to reduce usage [12] |
| Maintenance Requirements | Minimal ongoing upkeep [3] | Requires regular maintenance and meter calibration [3] |
| Resident Satisfaction | May lead to dissatisfaction due to perceived inequity [12] | Higher satisfaction thanks to transparent billing [12] |
| Legal Compliance | Restricted in some jurisdictions [12] | Generally supported by municipalities for conservation efforts [12] |
| Administrative Effort | Simple calculation and allocation process | Requires individual meter readings and unit-specific billing [3] |
Real-World Example
A property in Peoria, IL, provides a compelling example of submetering's impact. After installing a submetering system, the property reduced daily water usage from 20,487 gallons to 6,852 gallons. Monthly costs per unit dropped from $81.30 to $27.19 - a 67% reduction in both water consumption and costs within just one year [1].
Choosing the Right System
Submetering stands out for its precise, usage-based billing, which appeals to tenants seeking fairness and transparency. On the other hand, RUBS is a budget-friendly option for properties with limited resources or infrastructure challenges, as it often requires little to no upfront investment [11].
Tenant satisfaction is another critical factor. As utility costs rise, tenants increasingly expect clear and accurate billing. Submetering not only promotes conservation but also aligns with these expectations, making it a strong choice in areas where water and energy costs are climbing. However, for properties where retrofitting isn’t feasible, RUBS remains a practical alternative.
Finally, local regulations can heavily influence your decision. Many municipalities favor submetering due to its alignment with conservation initiatives, while others impose restrictions on RUBS [12]. Property managers should thoroughly research local laws to ensure compliance with their chosen billing method [3].
Installation Costs and Setup Requirements
The financial investment and infrastructure needs for RUBS and submetering vary greatly, making this an essential aspect to consider when choosing the right system for your property. By understanding the upfront costs and ongoing requirements, you can better align your decision with your budget and long-term goals. These differences also highlight the operational contrasts between RUBS and submetering discussed earlier.
RUBS: Low Cost, Simple Setup
RUBS is appealing for its low-cost, no-hassle setup. It requires no installation expenses or changes to your property's infrastructure [9]. This makes RUBS an excellent choice for property managers working with tight budgets or overseeing older buildings where retrofitting might be impractical.
Since RUBS doesn’t involve modifying plumbing or electrical systems, you avoid contractor fees and disruptions for tenants. Additionally, ongoing maintenance costs are negligible because there’s no physical equipment to upkeep, calibrate, or repair [3]. For example, a 300-unit apartment building using RUBS can save over $70,000 annually on water and sewer expenses [9].
Submetering: Higher Upfront Investment
Submetering, on the other hand, requires a significant upfront financial and installation commitment. Each submeter costs approximately $750, meaning a 100-unit building could face installation expenses of around $75,000 [9]. The complexity of installation depends on your property’s infrastructure. Newer buildings with updated plumbing and electrical systems often have a smoother installation process, while older properties may require extensive retrofitting, such as modifications to plumbing or wiring [1].
For properties with multiple individual supply lines, retrofitting can become even more complex and costly [9]. Beyond installation, submetering systems demand ongoing maintenance to ensure accurate readings. This includes periodic inspections, calibration, and repairs when meters malfunction [3].
Although submetering involves higher initial costs, its precise usage tracking offers long-term financial advantages. Property owners can recover utility costs more effectively compared to estimation-based systems like RUBS. While RUBS offers a quicker and cheaper setup, submetering’s accuracy can lead to considerable savings over time. However, the added hardware and installation challenges mean submetering projects may take longer to implement compared to the near-instant deployment of RUBS. These upfront expenses set the stage for more precise billing and better cost recovery in the future.
Billing Accuracy and Cost Recovery
How you bill tenants for utilities plays a key role in shaping your financial outcomes and tenant relationships. Both RUBS and submetering can improve cost recovery compared to bundling utilities into rent, but their approaches differ significantly in terms of precision and impact. Understanding these differences helps you decide which method aligns best with your goals for cost recovery and tenant satisfaction.
Submetering: Billing Based on Actual Usage
Submetering enables billing that reflects each tenant's exact utility usage. This direct link between consumption and cost encourages tenants to be more mindful of their utility habits, which benefits both them and property owners.
The financial impact of submetering can be substantial. Tenants often save up to 40% on utilities monthly because they have greater control over their usage and associated costs [4]. For example, properties that adopt submetering consistently report similar savings.
Submetering also offers other advantages, like early leak detection, which can prevent expensive repairs and unexpected utility spikes. Properties equipped with water submeters have seen over a 20% reduction in tenant water consumption [13]. This reinforces how accurate billing not only promotes responsible usage but also delivers long-term savings.
On the other hand, RUBS takes a different approach, relying on estimates rather than precise measurements.
RUBS: Billing Through Estimates
RUBS (Ratio Utility Billing System) allocates utility costs among tenants using estimates based on factors like unit size or occupancy. While this method improves cost recovery compared to flat-rate billing, it lacks the precision of submetering, which can lead to perceived unfairness. Tenants may feel they’re paying for others’ excessive usage, potentially causing disputes and dissatisfaction [2].
Without regular monitoring and adjustments, RUBS can recover less than 60% of utility expenses [13]. Even so, properties using RUBS have reported approximately a 27% reduction in water usage [14]. However, because tenants can’t directly connect their actions to their bills, RUBS doesn’t encourage conservation as effectively as submetering.
| Billing Aspect | Submetering | RUBS |
|---|---|---|
| Accuracy | Exact usage billing | Formula-based estimates |
| Cost Recovery | Up to 100% with proper implementation | Often below 60% without active management |
| Conservation Impact | 20%+ reduction in consumption | ~27% reduction in usage |
| Tenant Disputes | Minimal due to fair billing | Potential disputes over fairness |
| Leak Detection | Rapid identification possible | No direct detection capability |
Submetering generally stands out for its accuracy and ability to maximize both cost recovery and tenant satisfaction. However, RUBS can be a practical alternative for properties where installing submeters isn’t feasible due to cost or infrastructure constraints. The best choice ultimately depends on your property's unique needs and long-term financial objectives. This comparison lays the groundwork for exploring legal and tenant-related factors in the next section.
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Legal Requirements and Compliance
Navigating the legal landscape of utility billing involves understanding a mix of federal, state, and local laws. Both Ratio Utility Billing Systems (RUBS) and submetering come with their own set of rules, which can differ significantly depending on the jurisdiction. Non-compliance isn’t just a minor issue - it can lead to hefty fines, legal disputes, and other penalties. Let’s break down the key regulations governing RUBS and submetering.
RUBS Legal Requirements
The rules around RUBS are anything but straightforward. Some states and municipalities permit it, while others impose strict limits or outright bans.
State-Level Restrictions and Prohibitions
Take North Carolina, for example. The state has banned RUBS entirely, meaning landlords there must either include utilities in the rent or adopt submetering to recover utility costs [19].
Minnesota, on the other hand, has taken a more regulated approach. Starting January 1, 2025, landlords must follow specific billing formulas, with caps on fees: $8 for administrative charges, $5 for late fees, and $15 for utility recovery fees if the tenant’s name isn’t on the utility account [18]. Legal experts have advised caution due to the risk of errors, which could complicate eviction cases.
Local Variations and Controls
Local governments add another layer of complexity. In areas without statewide RUBS definitions, landlords must carefully review local rent control laws and ordinances before implementing the system.
John List, a landlord-tenant attorney at Pahl & McCay, clarifies the role of utilities regulation in RUBS:
"The use of RUBS does not cause a property owner to be regulated by the Public Utilities Commission (PUC). As long as a property owner is not making a profit from the pass-through of costs, the PUC has ruled that the pass through does not make the property owner a utility provider." [17]
These legal nuances make RUBS a tricky option, especially when compared to the more structured regulatory environment surrounding submetering.
Submetering Legal Requirements
Submetering, unlike RUBS, is often encouraged due to its focus on accurate billing and conservation. Many states have even made it mandatory for new construction projects.
Mandatory Submetering Requirements
In California, SB-7 requires submeters in new multifamily buildings to track individual utility usage, promoting both accountability and conservation [15]. Similarly, Georgia’s 2010 Water Stewardship Act mandates water submetering for new multi-unit residential buildings and certain commercial properties constructed after July 1, 2012 [16].
Municipal Mandates
Cities like New York and Seattle have added their own rules. For instance, New York City’s Local Law 88 mandates submetering in buildings over 50,000 square feet and tenant spaces exceeding 10,000 square feet by January 1, 2025 [15]. Seattle requires submetering for residential and commercial spaces over 20,000 square feet, as well as tenant areas larger than 2,500 square feet [15].
Regulatory Approval Requirements
Many states require regulatory approval before submetering can be put into practice. For example:
- In North Carolina, landlords need approval from the North Carolina Utilities Commission (NCUC).
- Maryland mandates approval through its Public Service Commission (PSC).
- Connecticut requires landlords to work with the Public Utilities Regulatory Authority (PURA) for submetering implementation [15].
Consumer Protection Standards
Submetering regulations also prioritize tenant rights. Tenants can request submeter testing and review billing records, while landlords must maintain detailed records of installations, tests, and readings to ensure transparency [15].
| Compliance Aspect | RUBS | Submetering |
|---|---|---|
| State Restrictions | Prohibited in some states (e.g., North Carolina) | Often mandated or encouraged |
| Regulatory Approval | Generally not required | Approval needed from bodies like PSC or PUC |
| Fee Limitations | Fee caps in certain states (e.g., Minnesota) | Governed by regulated billing practices |
| Consumer Protection | Limited tenant protections | Strong tenant rights and transparency |
| Record Keeping | Basic documentation | Detailed records of installation and testing |
Submetering stands out for its precision and emphasis on conservation, while RUBS faces growing restrictions. Before choosing a billing system, property owners should consult legal experts to ensure compliance with all relevant laws and regulations.
Resident Satisfaction and Conservation Results
When it comes to property management, how residents perceive their utility bills can make or break long-term success. While billing accuracy and legal compliance are essential, the impact on residents goes deeper. The billing system you choose not only affects your financial outcomes but also influences how tenants view fairness and conservation efforts. The differences between submetering and RUBS (Ratio Utility Billing System) can shape tenant trust, lease renewals, and overall satisfaction.
Submetering: Usage-Based Billing That Builds Trust
Submetering stands out as a fair approach because it charges residents based on their actual utility usage. This transparency fosters trust between tenants and property management, as residents can clearly see how their habits affect their bills.
On top of that, submetering encourages conservation. Studies reveal that properties with submetering can achieve water savings of 15% or more, with some reporting reductions as high as 39% [21]. Submetering also helps detect leaks early by pinpointing issues to specific units, which can prevent costly repairs down the line [12].
While submetering aligns well with tenant expectations, RUBS presents a different set of challenges.
RUBS: Concerns Over Fairness and Motivation
RUBS simplifies billing by allocating utility costs based on factors like unit size or the number of occupants rather than actual usage. However, this method often raises concerns about fairness and transparency, leaving some residents feeling frustrated.
Perceived Unfairness and Tenant Complaints
Many tenants voice dissatisfaction with RUBS, particularly when their efforts to conserve utilities don't seem to impact their bills. For instance:
"How are we using the same water and trash as the five guys upstairs? This is theft." – Mrs. Johnson, Tenant [1]
"Why am I paying for someone hosing down the courtyard or a leak in a hallway pipe? That's not my water use, it's just lazy billing." – Marcus, Tenant [1]
These examples highlight a common issue: residents with lower consumption often feel they are subsidizing higher-usage neighbors, leading to disputes and dissatisfaction.
Limited Impact on Conservation
RUBS does reduce overall utility use by 5% to 27% [20]. However, since tenants can't directly connect their actions to their bills, the motivation to conserve is minimal. As the Environmental Protection Agency points out:
"RUBS or other allocation billing systems … do not encourage water conservation." [21]
Hidden Costs and Billing Disputes
Additional fees and unclear billing practices can also lead to frequent disputes between tenants and property managers, further eroding trust.
Improving RUBS Communication
Property managers using RUBS can ease some concerns by clearly explaining how costs are allocated. While conservation incentives at the property level might help, they generally fail to provide the individual accountability that submetering offers.
| Satisfaction Factor | Submetering | RUBS |
|---|---|---|
| Billing Transparency | High – bills reflect actual usage | Low – allocation methods are unclear |
| Perceived Fairness | High – pay only for what you use | Mixed – depends on allocation system |
| Conservation Motivation | Strong – direct cost control | Weak – no direct link to usage |
| Dispute Frequency | Low – clear and precise billing | Higher – frequent disagreements |
| Leak Detection | Immediate, unit-specific alerts [12] | Delayed, property-wide detection |
Ultimately, your choice between RUBS and submetering depends on what matters most to your property. While RUBS offers simplicity, submetering delivers greater transparency, stronger conservation incentives, and higher tenant satisfaction.
When to Use RUBS vs. Submetering: Real Examples
Selecting the right system depends on your property's setup, financial considerations, and long-term objectives. Below are real-world examples that showcase how RUBS and submetering perform in different property scenarios.
Best Cases for RUBS
RUBS shines in certain situations, especially when cost and infrastructure challenges come into play:
Older Properties with Complex Plumbing
For buildings constructed before the 1980s, RUBS is often the go-to solution. These older properties frequently have shared plumbing systems, making it prohibitively expensive - or downright impossible - to install individual meters. For instance, a 300-unit apartment complex built in 1975 faced this exact issue. The outdated plumbing system required extensive retrofitting for submetering, so the owners opted for RUBS instead. This decision led to notable annual savings on water and sewer expenses [9].
Quick Cost Recovery Needs
RUBS is an excellent choice for properties that need to see immediate financial improvements. Since it doesn’t require upfront investment in metering equipment, it can be implemented almost instantly. This makes it particularly appealing to property owners dealing with cash flow issues or those who want to boost net operating income quickly. By passing utility costs - such as water, gas, electricity, and even trash - back to tenants, RUBS significantly lowers operating expenses [22].
Best Cases for Submetering
When long-term savings, precision, and conservation are the priorities, submetering stands out as the better option:
Modern Properties and New Construction
Submetering is ideal for properties built within the last 20 years or new developments. Modern infrastructure is usually designed to accommodate individual meters, eliminating the need for costly modifications.
High-Consumption Properties
For properties with high utility usage, submetering can lead to dramatic reductions in consumption. Research indicates that submetering can cut usage by 20–40% [24]. A great example comes from a former high school in Sioux Falls, South Dakota, where precise energy monitoring revealed excessive HVAC energy use in the auditorium. Adjusting the system’s operations based on this data led to a nearly 50% drop in energy costs, along with a rebate from the utility provider [25].
Long-Term Value Focus
Submetering offers strong returns over time. With a typical lifespan of 10 years, submeters can recoup their costs within 6–12 months, or up to 18 months for more expensive installations [23]. Additionally, properties equipped with submetering often attract higher interest from potential buyers [23].
Multifamily Properties with Varied Usage
Diverse residential properties benefit significantly from submetering. Take, for example, a 57-unit property in Peoria, Illinois, that implemented DrizzleX submetering. The results were striking: water usage dropped from 20,487 gallons to 6,852 gallons per day, and monthly water costs fell from $81.30 to $27.19 per unit. This translated into an annual savings of $37,525 [1].
Sustainability Goals
For properties aiming to meet higher environmental standards, submetering is a practical solution. It not only supports conservation but also makes properties eligible for regulatory incentives and improves their market appeal [25]. Real-time energy data allows property managers to quickly identify and address inefficiencies, further enhancing sustainability efforts [25].
| Property Characteristic | RUBS | Submetering |
|---|---|---|
| Building Age | Older properties (pre-1980s) with shared plumbing | Newer properties or newly constructed buildings |
| Implementation Timeline | Rapid deployment | Requires more time for installation |
| Primary Goal | Immediate financial improvement | Precision and long-term savings |
| Infrastructure Requirements | Shared utilities with retrofit challenges | Individual unit access available |
Conclusion
Our analysis highlights clear differences in cost, billing accuracy, and the impact on tenants when comparing RUBS and submetering. The choice between the two largely depends on the specific needs and characteristics of your property.
RUBS is a practical option for older properties with shared plumbing systems, especially when budgets are tight and upfront costs need to be minimized. It offers fast implementation and can lead to utility usage reductions of 5% to 40% [11]. However, because it estimates usage rather than measuring it directly, it may raise concerns about fairness among tenants.
On the other hand, submetering is ideal for newer buildings or properties with high utility consumption, where accuracy and long-term savings are the main focus. It provides precise billing based on actual usage and can lead to significant cost savings, as demonstrated by the example in Peoria [1]. The downside is the higher initial investment, which typically ranges from $1,500 to $2,000 per apartment [20].
Before making a decision, it’s essential to review local regulations, as some states have restrictions on RUBS or specific requirements for submetering. Tenant demographics also play a role - residents who value fairness and conservation may prefer submetering.
Ultimately, weigh your property’s infrastructure, tenant preferences, regulatory compliance, and administrative demands to determine which method aligns best with your goals for profitability and tenant satisfaction.
FAQs
What are the long-term financial advantages of using submetering instead of RUBS for utility billing in multifamily properties?
Choosing submetering instead of RUBS can bring substantial financial advantages for multifamily properties. Submetering allows property owners to charge tenants based on their actual utility usage. This approach ensures more precise cost recovery compared to RUBS, which distributes utility costs based on factors like unit size or the number of occupants. The result? Reduced revenue loss and a boost to your net operating income (NOI).
Beyond financial accuracy, submetering encourages tenants to be more mindful of their utility consumption. When people see a direct link between their usage and their bills, they often make efforts to conserve. This increased awareness can lead to lower operating expenses over time, enhancing profitability while creating a more efficient and sustainable approach to utility management for your property.
How do local laws affect the choice between RUBS and submetering for my property?
Local regulations play a big role in deciding whether RUBS (Ratio Utility Billing System) or submetering works better for your property. In some states or cities, RUBS might be limited or outright banned because of concerns about fairness or transparency. Meanwhile, submetering is often favored for its precision and ability to encourage conservation.
To make the right choice, it’s crucial to check your local rules, as requirements can differ significantly from one area to another. Reviewing these regulations helps ensure you stay within legal boundaries and avoid any fines. If you're uncertain, consulting with a legal or utility expert can provide clarity on the best path forward for your property.
What should property managers weigh when choosing between RUBS and submetering for older buildings with shared plumbing?
When weighing the options between RUBS (Ratio Utility Billing System) and submetering for older buildings with shared plumbing, property managers need to evaluate several important factors.
Submetering involves installing individual water meters for each unit, offering precise billing and the ability to detect leaks. However, in older buildings with outdated or complex plumbing, this can become a costly and challenging endeavor. In some cases, the building's infrastructure might make installation entirely impractical.
On the other hand, RUBS provides a more straightforward and budget-friendly alternative. Instead of requiring extensive plumbing changes, RUBS allocates utility costs based on factors like unit size or the number of occupants. This makes it a practical choice for properties where plumbing configurations pose significant challenges.
Other key considerations include local regulations, resident preferences, and the level of administrative effort required. Submetering might appeal to residents who prioritize billing accuracy, while RUBS can simplify operations and minimize upfront costs for property owners. The best option ultimately depends on the specific needs of your building and your financial constraints.
