Liquid Assets – conserving water in apartments yields lower expenses, more rent
2019 MFE Concept Community
Conserving water in apartments yields lower expenses, more rent.
By Joe Bousquin
Richard Lamondin wants apartment operators to stop flushing money down the toilet.
As CEO and co-founder of Miami-based EcoSystems, which focuses on water saving strategies in the multifamily industry, he’s had a hand in replacing 70,000 toilets in apartment buildings across the country to save his clients a cumulative $15 million in water fees.
“For multifamily owners and operators, their highest utility expense is often the water bill,” Lamondin says. “Even if they pass that on to residents, there’s still a lot of economic benefit, in addition to the environmental impact, of focusing on water conservation.”
While multifamily has had a laser focus on increasing and promoting energy efficiency at apartment buildings in recent years, observers say water conservation hasn’t gotten the same attention. That’s starting to change as multifamily pros set water squarely in their sites by installing leak detectors and low-flow faucets, toilets, and showerheads to save residents money on monthly water bills, while also parlaying those savings into increased rents.
Take Miami-based Pensam Residential, which has invested in 37,000 units in its portfolio and has developed a dedicated program toward water conservation. After seeing its water rates increase 10% year over year, the firm decided to partner with EcoSystems and focus in on water efficiency at TAVA Waters, a 1,523-unit community in Denver, by installing low-flow faucets, showerheads, and toilets. The result was not only a 30% savings on water bills, but the firm then was able to transform those expense savings into income by educating residents about the total cost of renting their apartments at lease renewal.
“Money talks,” says Eddie Reiner, director of asset management at Pensam. “When we rolled out our program, we told residents their water bill would go down by 30%. That made it a much easier conversation in terms of a rent increase at renewal time, because they could appreciate that their total monthly bill was still going to be lower than it otherwise would have been.”
Rising pressure from water bills
The reason why is because water now accounts for more and more of residents’ and owners’ bills. “Water costs are skyrocketing, as municipalities struggle to keep up with the repair and maintenance of their own infrastructure,” says Amy Groff, senior vice president of industry operations for the National Apartment Association. “Owners are really having to look at ways to reduce this expense.”
According to the Atlanta-based sustainability advocate Southface Institute, water and sewer prices have been rising faster than any other utility, nearly doubling about every 12 years. The organization says water and sewer rates were $11.27 per thousand gallons in 2016 and will rise to $25 by 2030, an increase of 122%. Given that trend, apartment operators who have focused on water conservation at their properties have seen big savings.
Saving energy by saving water
At New York-based Jonathan Rose Cos., which owns 15,000 units, director of design and construction Christopher Edwards says the firm has netted a 26% reduction in water use by installing low-flow toilets, faucets, and showerheads. But because water heating can account for as much as 40% of energy use at a property, the firm has also saved on energy costs and estimates its return on investment, which included rebates from participating water utilities for installing low-flow fixtures, at 14% on those improvements. Indeed, the firm has even explored installing smaller diameter pipes in new builds, to reduce the amount of water needed to charge the overall plumbing system in its buildings.
“It’s a kind of a circular loop,” Edwards says. “Anything you can do to reduce that water usage helps with the overall energy usage, and obviously has other effects on savings.”
The firm has been installing water and leak sensors in its buildings, too, in order to establish a baseline of use. Doing so helps detect leaks faster, which not only saves water, but also prevents more damage when a leak isn’t noticed until a spike hits a property’s water bill a month or two later.
“If there are leaks within your building, it’s going to drain down your cash flow and the overall value of the building,” Edwards says. “It obviously could get much worse than that if it goes undetected. It’s critical that we, as an industry, pay attention to this and really monitor it proactively.”
Getting smart about irrigation
Smart irrigation system timers, which automatically cut off sprinklers when it rains and have gotten widespread adoption among single-family homeowners, are now also becoming an option for apartment operators to target common area water usage.
“For common areas, which owners pay for, the biggest offender in terms of water use is irrigation,” says Lucas Haldeman, CEO of Scottsdale, Ariz.-based apartment smart home tech provider SmartRent, which is currently rolling out smart sprinkler systems to clients. “So far, hardly anyone in multifamily has installed them. But it’s a no-brainer.”
Beyond putting in tech, operators can also incentivize and educate residents on their own water use, while promoting awareness of how much it costs. Haldeman says he’s also talking to owners about programs to reward residents who use less water with savings or gift certificates.
“Not only does doing something like that educate them about how much water they’re using in the first place, it’s also the gamification of conservation for renters,” says Haldeman, who envisions an app similar to a fitness tracker that would show residents how they compare with their neighbors, anonymously, in resource use. “We’re discussing a competition among properties nationally to get residents to participate, which we think will really resonate with millennials who have grown up with conservation beat into them.”
That’s exactly the kind of program today’s environmentally conscious renters are looking for, says Holly McQueen, vice president and regional property manager in Jacksonville, Fla., for Newtown Square, Pa.-based GMH Capital Partners, which operates 6,000 student and conventional units.
“Today’s residents are concerned about the environment and will seek out an apartment community that has an active green initiative,” McQueen says. “By conserving water, you are not just reducing your expenses and negative impact on the environment, but increasing your NOI by being occupied, too.”
Beyond the dollars and cents, though, industry pros who have picked up on water savings in multifamily say it’s also simply the right thing to do. “With the amount of resource consumption apartments represent, we have a duty to promote conservation as stewards of the planet,” Haldeman says. “This is an issue that hasn’t been explored as much as it should be. We need to change that.”
ABOUT THE AUTHOR
Joe Bousquin has been covering construction since 2004. A former reporter for the Wall Street Journal and TheStreet.com, Bousquin focuses on the technology and trends shaping the future of construction, development, and real estate. An honors graduate of Columbia University’s Graduate School of Journalism, he resides in a highly efficient, new construction home designed for multigenerational living with his wife, mother-in-law, and dog in Chico, California.