May 11, 2020
4 Ways Submetering Helps HOAs Spend Less Money on Water
Many HOAs struggle to charge homeowners fairly for their water consumption. As a result, rising utility expenses can quickly cause financial issues. In this post, we’ll review how submeters can help HOA boards cut expenses and balance the budget.
Homeowner’s association (HOA) boards have a tough job when it comes to managing rising and unpredictable water expenses.
Many HOA boards deal with this by bundling utilities in HOA fees. But this approach, called “free water,” has a number of pitfalls.
Homeowners typically consume more utilities when they only pay a flat rate. There’s no incentive for them to keep consumption down.
Also, the free water approach entails covering a non-fixed expense (the utility), with a fixed expense (the membership fee). Which means you’re covering a highly variable cost with a fixed one.
This causes two problems.
First, utility rates go up. But unlike the utility provider, you probably can’t raise HOA fees too frequently without getting complaints from homeowners.
Second, utilities are affected by seasonality. Some months are lower, others are astronomical. If you’re including utilities within association fees, you’re using a fixed sum that won’t always be enough. As the year progresses, you’d have to compare these surpluses and deficits to see if your budget is actually sufficient.
For most HOA boards trying to balance the budget, this arrangement results in the association bleeding money every month.
Fortunately, there is a way around this. By installing submeters and using third party utility billing, HOAs can make homeowners directly responsible for their utility consumption. This benefits HOAs in a number of ways.
Makes Budgeting Easier
When you remove water expenses from HOA fees, it becomes much easier to manage the budget properly. You know exactly what your costs will be and can account for these costs accurately with the membership fee.
By eliminating utilities from the budget you can reduce the chances of a budget deficit, so the association doesn’t bleed cash. It also means you won’t have to recalculate the fee each year to account for variable expenses.
Bills Members Fairly for Utilities
An HOA’s goal in managing utility expenses is for everyone to be responsible for their own water expenses. The problem is, flat-rate fees often don’t accomplish this.
Even if you charge all of the homeowners one rate, each homeowner’s consumption is going to vary. The result is some homeowners paying more than their fair share and some paying less.
When HOAs implement submeters, homeowners pay for the water they consume. This means everyone pays their fair share.
Reduces Utility Consumption
When homeowners have direct responsibility over their utility consumption, it gives them the opportunity to reduce their expenses. On average, homeowners with submeters tend to cut consumption by 35%. This reduces your overall monthly liabilities if homeowners don’t pay their bills. It’s also better for the environment.
In addition to cutting homeowner consumption of utilities, there’s one other way submeters reduce consumption of water: detecting leaks.
Anytime there’s a leak, the HOA is responsible. When leaks go unreported, it costs the HOA thousands in wasted water expenses. A submeter lets you catch leaks in real time.
For example, you might notice that you’re not billing some portion of your water bill. This could indicate you have leaks occurring between the master meter and the submeters. This is common in properties with underground pipes. You’d then have the opportunity to reduce the money you’re losing on utilities by repairing your water lines.
Access Better Resources
Implementing submetering for HOAs can be complex. You have to convince owners to spend money to buy a submeter to pay for their water. Sometimes high water users don’t want to pay for it and push back.
Because of this, education is critical when rolling out submeters. A utility billing company can help homeowners understand the validity of the program and how bills are calculated. This is very important to getting the resident to understand they’re being billed accurately.
Utility billing companies have the resources to provide more detailed invoices and meter information than most HOA boards have in-house. They’ll have software that can automate the billing process. And they’ll have the experience to address any homeowner concerns.
With the right partner, you can communicate to homeowners that the program will benefit them in the long run. Most homeowners are excited by the opportunity to cut their monthly expenses and increase their property value. But for that to happen, you have to explain it properly. Knowledgeable utility billing companies will have experience doing this for thousands of homeowners and tenants.
Many HOAs struggle to charge homeowners fairly for their water consumption. If you’re looking for a way to cut expenses and balance the budget, submetering is an effective way to do so.