Understanding RUBS System for Multifamily Properties

Residents are unavoidably responsible for paying household utilities. However, determining how much each tenant pays for utilities can get complicated in multifamily settings. While electricity is usually submetered, with each tenant paying for their own electricity usage directly to the local utility, other services such as water, wastewater, gas, and trash removal are typically charged at the aggregated multifamily property level. 

The property owner/manager then has to decide how best to spread the cost of these services to the tenant community over and above the monthly rent. In the absence of accurate measurements of usage levels by each tenant, Ratio Utility Billing System, whenever allowed, is often the method for allocating these service costs to each apartment.

What is RUBS, and How is it Calculated?

A Ratio Utility Billing System (RUBS) is a formula-driven cost allocation method that allows property owners to recapture some of a property’s utility expenses from the tenants. RUBS can be administered as a fixed monthly per-door expense or vary each month based on the varying aggregated monthly utility expenses for the property.

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Per apartment, RUBS expense may be based on one or more of the following parameters:

• · Number of bedrooms in each apartment
• · Number of occupants in each apartment
• · Square footage of each apartment
• · Other factors that could be reasonable proxies for tenant consumption levels

RUBS Regulations in States and Accuracy of Ratio Utility Billing System

RUBS is designed to align with local and state regulations, ensuring that utility billing is legally compliant while distributing costs based on standardized factors. This alignment helps enhance billing accuracy as the system adapts to the legal frameworks of different locales, thus maintaining fairness in utility cost distribution among tenants.

One overarching regulation is that cost recovery through RUBS cannot exceed the total utility expenses born by the property owners, plus the administrative expenses of managing the cost allocation system.

Benefits of using Ratio Utility Billing System for Multifamily Properties

The Ratio Utility Billing System (RUBS) provides significant advantages for multifamily utility billing, especially in environments where installing individual meters is not feasible. This billing approach offers a streamlined way to distribute utility costs fairly among tenants, ensuring property owners can recoup expenses efficiently. Here, we explore the key benefits that make RUBS a preferred choice for many properties.

RUBS as an Efficient Alternative in the Absence of Submeters

By spreading a property’s utility service expenses to the tenant community, RUBS allows the property owner to recapture some of these expenses and increase cash flow and Net Operating Income (NOI).

Additionally, implementing RUBS supports a more equitable distribution of utility costs, ensuring each tenant pays a fair share based on standardized factors like unit size or occupancy levels. This fairness can lead to higher tenant satisfaction and lower turnover rates, further stabilizing the property’s income stream and enhancing its overall value.

Simple to administer

The simplicity of administering RUBS is a key advantage for property managers. The system can be set up to function on a predictable, fixed monthly fee basis, which simplifies budgeting and financial management. Furthermore, by delegating the billing responsibilities to specialized third-party providers, property managers can reduce administrative overhead and focus more on tenant relations and property upkeep. 

This ease of management often makes RUBS an attractive option for multifamily properties looking to streamline operations and reduce complexities associated with utility billing.

Automation of Utility Billing Expenses

Implementing RUBS within existing property management systems can streamline operations by automating utility billing processes, increasing efficiency and accuracy. This integration allows for seamless management of tenant billing, ensuring that utility costs are allocated in a timely and precise manner, which can lead to improved operational efficiencies and tenant relations.

Challenges of Using RUBS in Multifamily Properties

While the Ratio Utility Billing System (RUBS) offers many advantages for multifamily property management, it also presents several challenges that need careful consideration.

Limitations in Utility Cost Recovery with RUBS

RUBS often falls well short of 100% recovery

Since property owners are not allowed to recover more than 100% of their actual utility expenses, the RUBS rate is often set well below 100%. Furthermore, with seasonal variances, cost increases, and unusual events such as leaks, RUBS recovery rates often trend downwards with time. 

Without the active monitoring and periodic adjustment of RUBS rates over time, the RUBS recovery can easily fall below 60% of utility expenses.

Ratio Utility Billing System is unfair to tenants

RUBS spreads the cost formulaically across the tenant community, irrespective of each tenant’s actual consumption level. With RUBS, most tenants essentially subsidize the few taking hour-long showers or letting leaky toilets go without service. Tenants are charged for utility recovery even when traveling for extended periods. Property managers often receive tenant complaints about the unfairness of the RUBS setup, and some states/municipalities outright disallow RUBS recovery schemes.

RUBS does not incentivize responsible consumption

As tenants do not directly bear the cost of their utility consumption decisions, they have no incentive to save water or adopt eco-friendly habits. 

Data shows that properties with water submetering produce over 20% reductions in tenant water consumption.

Did you know that RUBS is prohibited in North Carolina? Discover alternative solutions that comply with state regulations while ensuring fair utility management in our latest article.

Tenant Perspectives on Fair Utility Billing

Understanding tenant perspectives on RUBS is crucial as it directly affects their satisfaction and perception of fairness in utility costs. Discussing the challenges and feedback from tenants can guide improvements in the system, ensuring it meets fairness standards and encourages responsible utility usage, linking it to broader multifamily utility submetering solutions.

Further exploring tenant perspectives reveals that consistent communication and transparency in billing calculations are key to accepting the RUBS system. Providing clear, detailed explanations of how bills are calculated and offering periodic reviews can help alleviate concerns and build trust. This approach not only smooths the transition to RUBS but also reinforces its fairness, ensuring tenants feel their billing reflects actual utility usage, thereby strengthening RUBS’s overall acceptance and effectiveness in multifamily settings.

Why are Water Submeters a  Better Solution?

Water submeters are increasingly recognized as a superior solution for utility management in multifamily properties, especially compared to the Ratio Utility Billing System (RUBS). 

Submeters provide actual usage data, allowing for more precise billing and directly linking a tenant’s utility costs to their personal consumption. This method encourages conservation and ensures fairness and transparency in billing, which can significantly improve tenant satisfaction and trust in management.

Water submetering plus a facilities fee can deliver 100% cost recovery.

Water and wastewater typically constitute the bulk of a property’s utility expenses, as electricity is generally submetered and already paid by tenants. An ideal solution is to have tenants pay for their own water usage through submetering and then add a fixed monthly facilities/amenities fee to cover other ancillary costs such as trash collection, pool, and common area expenses. 

Historically, water submetering for existing properties has been unfeasible without major replumbing or cost-prohibitive renovations. With advances in technologies such as ultrasonic metering and the IoT (Internet of Things), new solutions are now available to help optimize operating expenses and NOI fairly and sustainably.

Dune’s smart water submetering provides a hassle-free, no-plumbing, no-pipe-cutting solution seamlessly integrating with leading property management software platforms. For more information, contact Dune today!

FAQS

What is the Ratio Utility Billing System (RUBS)?

RUBS is a method for allocating utility costs among tenants in multifamily properties based on factors like apartment size, occupancy, or other proxies rather than individual usage.

What are the main advantages of using RUBS?

The main advantages include cost-efficiency in billing, fair utility cost distribution without needing individual meters, and ease of administration.

What are the common challenges associated with RUBS?

Challenges include the potential for perceived unfairness, as costs are not based on actual usage and difficulties in achieving full cost recovery due to regulatory caps and variances in utility usage.

Why are water submeters considered a better solution than RUBS?

Water submeters offer a more precise billing system by measuring actual water usage per unit. This promotes fairness and conservation and can potentially lead to higher tenant satisfaction by aligning costs directly with individual consumption.