November 24, 2017
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Submeters: A New Incentive for California Tenants to Save Water

A new California law requires water meters to be installed at individual apartments starting with new developments in 2018. Debra Carlton with the California Apartment Association explains how this will work.

By Matt Weiser


IF YOU LIVE in an apartment in California, you don’t pay for the water you use – not directly, anyway.

Apartments in California, with few exceptions, don’t have individual water meters, known as submeters. Instead, water usage is wrapped up in the rent payment, which means tenants have no idea how much water they’re using, and no direct financial incentive to conserve.

This also means millions of Californians aren’t helping the state survive its ongoing drought. A survey of Los Angeles apartment owners in 2015 revealed that total water use remained unchanged – and even increased, in some cases – despite the governor’s 25 percent conservation order.

A 2004 study, funded by the U.S. Environmental Protection Agency, found submetering cut water use by 15 percent on average — simply by giving tenants information about their water consumption.

Nine states have allowed submetering for years, including Arizona and Texas. Now, California will be joining them. On September 26, Gov. Jerry Brown signed Senate Bill 7, a law drafted by Sen. Lois Wolk, D-Davis. It requires new apartment buildings constructed after January 1, 2018, to include submeters for every rental unit and to bill of tenants accordingly.

Although such laws have been proposed repeatedly over the years without results, this one saw no organized opposition and received broad support from the Sierra Club, Friends of the River, California Rural Legal Assistance Foundation and others.

To better understand how this new law will work, Water Deeply recently spoke with Debra Carlton, senior vice president of public affairs at the California Apartment Association, a group that represents thousands of landlords and also supported the bill.

Water Deeply: Why did your group support this law?

Debra Carlton: It’s kind of fascinating. We’ve been working on this topic for over 10 years, trying to get some clarity in the law, because many property owners already do this.

Back in the 1970s, we created a law saying an owner could install a submeter and they would not be considered a utility. Then came all these questions about billing and disclosure. There were some legal questions that were raised about making sure tenants had appropriate notice and weren’t misled. That’s really why we came to the table, to clear up those questions. And also to clarify some inconsistencies in the law.

There were some inconsistencies about whether you could bill a tenant and charge a tenant [the] cost to send them a bill, just like a utility company does today. You’ll see in this new legislation there are allowable administration fees and late fees, things like that.

Water Deeply: Why were those things important to apartment owners?

Carlton: I think to limit liability. To make it clear to both sides – landlords and tenants – and to lessen any disputes that might arise in the future.

The biggest deal, of course, is to make sure we conserve water in the larger California picture. Studies have shown us that, really, the most appropriate way to do it is through water submeters or meters directly.

Water Deeply: This new law doesn’t apply to all apartments, correct?

Carlton: It only applies to new apartments built after January 1, 2018. That’s the mandate to install submeters. But if you have an existing property and you’ve installed submeters or you’re planning to, you would have to follow the requirements of this law, like the disclosures and the way in which you bill.

Water Deeply: Are there many landlords in that situation?

Carlton: Yes. Certainly a lot of our larger owners do. Now that we’ve clarified how it works and you can impose administrative fees, etc. I think that makes them feel much more comfortable that they won’t face any sort of liability on how it’s implemented.

Water Deeply: How will this new law change the development cost of multifamily projects?

Carlton: The estimates for new construction, for buying meters and having them installed, is approximately $150 per meter, per unit. This law does prohibit a local municipality from charging you extra fees to hook up these submeters when it has nothing to do with the local municipality – which has happened.

Tenants will pay their (submetered) water bill to the landlord. Then the landlord turns around and pays the “master” water bill for the total property to the municipality or the water agency, which has no direct role in billing the tenants. Everything has to be justified through the master bill. That’s why there are all these disclosure requirements in the statute.

Water Deeply: Did any of your landlord members oppose this bill?

Carlton: We had no opposition from our group or any other non-affiliated groups. Obviously, it took us a long time to get here. But we finally found the right direction, the right avenue to go. So by now we had no interest groups that were landlord-related that opposed the bill.

We’ve had quite a number of bills that we’ve attempted along the way. For various reasons, we couldn’t come to agreement with either the tenant community or the local municipalities. There was just all sorts of things in our way. Finally, there was a window of opportunity and we were able to come to an agreement.

Water Deeply: Did the drought have a role in getting this law adopted?

Carlton: Absolutely. There’s no question about that. We saw studies over last decade, too, that said the only way to get individuals to conserve is if they receive a bill for their actual water use. Some property owners have tried doing it via estimates – dividing up the master bill by the number of units. But the most effective and efficient way was through actual reading of the submeters.

Water Deeply: Will this law change how multifamily properties are designed?

Carlton: I don’t think it’s going to necessarily change their design, because they have been anticipating this law is coming. I think most of them will design their properties in a way so this works.

That’s, of course, why we moved the effective date of the law so far out to 2018. It gives them to time to make any adjustments they may have to make.

Water Deeply: Will submetering actually save landlords money in the long run?

Carlton: If an owner was previously including water in the rent and tenants weren’t doing anything to conserve, they’re certainly going to see a savings.

I think what we we’re finding, also, in some cities where you have some pretty huge penalties for overconsumption, there was no way to really encourage a tenant to conserve. And it’s hard to adjust rent to compensate for that. But water is one of the most unknown bills or uses. So I think it’s going to make things a little more fixed and understood.

Water Deeply: How will it affect costs for tenants – both rent and water bills?

Carlton: It really depends. It could change for a tenant who has never received a bill before. I think that’s what probably has held us back for so long in getting a law passed – the fear of a tenant now paying for something that they maybe thought they had not been paying for.

If tenants were receiving a bill that wasn’t really tied at all to a meter – some received a divided bill that related back to a master meter – they’re going to see a new bill that’s very specific.

But the overriding issue was conservation. That became the priority policy here, and I think that’s why we were able to move the legislation this year. I think that’s a valuable component even if tenants were, in the past, concerned about getting a bill. It wasn’t working when it came to conservation. So we finally were able to pass the bill.

Water Deeply: How much water will submetering save?

Carlton: There’s a lot of estimates out there. One study estimated anywhere from a 20 to 25 percent water savings – maybe even as high as 30 percent a month. It just depends on the people and how much they care.

Water Deeply: What about retrofitting existing multifamily buildings. Why wasn’t that part of this bill?

Carlton: It was discussed. I think the concern was the potential for dramatic costs if you’re having to cut into walls and pipes and make those changes. That’s not to say it’s not being done. It’s just that we couldn’t really estimate because of the diversity in types of buildings and age of buildings.

Certainly in your low-level, smaller properties, it’s much easier to do. I would say high rises are very different to do. One of the points in the legislation was asking the state building commission to look at the cost of installing submeters in new high-rise construction. That will be work that is forthcoming. I think they’re finding, with the new types of submeters, that it’s positive and not as cost-prohibitive as they thought.