How a Ratio Utility Billing System (RUBS) Reduces Expenses
Let’s start with an undeniable premise. Property investors invest to make money. They also want to provide their residents with a comfortable place to live. But they face a significant challenge managing expenses so they can competitively set their rents, reinvest in their properties, make needed repairs, or invest in other developments.
In California, particularly Los Angeles and San Francisco, occupancy rates are exceptionally high and there is a serious housing shortage. The passage of Assembly Bill 1482 in January 2020 prevents landlords and property owners from raising rents more than 7 percent, plus the Consumer Price Index, in one year. AB 1482 applies to units built in Los Angeles between 1978 and 2009 which are currently not under rent control. However, this does not apply to properties built after 2009. Single-family homes constructed after 2010 are exempt, and the law will expire in 2023.
What Does AB 1482 Have to Do with RUBS?
While AB 1482 caps rent increases, it places no limits on the landlord’s ability to change the terms of a month-to-month lease in cities without rent control. The bill also does not put a cap on utility rates. Should utility rates increase, property investors will have to absorb the costs. This is where RUBS comes into play.
RUBS is a system that helps property investors proportionately share utility costs with residents in a fair and equitable way. RUBS typically factors in the number of occupants and size of each unit to determine the distribution of utilities such as water, sewer/wastewater, trash, electricity, gas, and pest control bills. For common areas, property owners generally pay 20 percent of the utility bill and residents cover the remaining 80 percent.
How RUBS Reduces Expenses
When residents must foot most of the utility costs, they are more likely to conserve energy, lowering expenses across the board. RUBS also empowers residents to have more control over their cost of living. RUBS enables residents to monitor their usage, inform management of faucet and toilet leaks without delay, and report neighbors who overuse utilities, which contributes to everyone’s bottom line.
For property investors, proportionately sharing utility bills with residents means a significant reduction in expenses. This gives them more flexibility to maintain the value of their properties and better absorb the impact of AB 1482.
Unlike submeters which, according to Commercial Property Executive, can cost $1,500 to $2,000 per apartment to purchase and install. RUBS does not require equipment, thus requiring less initial investment from the start.
RUBS is a valuable formula both for property investors, residents, and fellow Californians. RUBS requires zero capital investments, reduced operating costs, increased conservation of natural resources, and lower utility costs, which equates to a victory for all.