The Drought: What Apartment Owners Need to Know

LOS ANGELES—The drought is having a major impact on both the tenants and owners of multifamily properties, according to Jim Clarke, EVP of the Apartment Association of Greater Los Angeles. Considering the recent water restrictions implemented by Governor Jerry Brown, Clarke says that it is imperative the property owners understand the issue and educate themselves on their options. To learn about those options and what AAGLA is doing to help, we sat down with Clarke. In this exclusive interview, he explains metering options for multifamily owners, requirements for multifamily developments and how the issue is affecting large and small property owners differently.

GlobeSt.com: How is the drought affecting multifamily landlords and owners in Los Angeles?

Jim Clarke: The drought is affecting everyone, including the owners of multifamily buildings and their residents. The situation is of deep concern to rental property owners and managers who comprise the membership of the Apartment Association of Greater Los Angeles and whose livelihood depends on the quality of life in the region. As a result, our membership is deeply committed to doing our part to help conserve water.

But, if the drought gets worse and fines or penalties are implemented for over usage of water, the vast majority of residential rental property operators will be affected in a very unique fashion due to the fact that they have no control over the consumption of the water in their own buildings.

Currently, owners who are conscious about conservation methods are reducing the use of water in the common areas—including landscape—of their buildings. While they are doing the right thing with regard to fighting the drought, their properties may aesthetically become less desirable to potential renters. In the meantime, we are working to educate AAGLA members about the issue of water conservation and striving to find solutions that are fair for both them and their renters.

GlobeSt.com: What do multifamily owners need to know about current mandatory water conservation issues?

Clarke: At this time, there are two points that we at AAGLA want owners understand—the reduction requirements not only set forth by the Governor's office, but, also the requirements set by local municipalities and the solutions to achieve the reduction goal. The Governor's reduction mandate is 25% and will require local water districts and utilities to reduce consumption by 20% to 35% depending on where the water district or utility is located and its past history with regard to consumption.

There are two popular solutions that property owners are presented with: sub-metering and a Ratio Utility Billing System (RUBS). Sub-metering is a system that allows the local water utility to monitor water in each unit and allows them to bill the renter(s) individually. Although seemingly effective in theory, sub-metering is cost prohibitive since many existing apartment buildings have a plumbing or piping configuration that does not support the installation of sub-metering equipment without the major expense of renovation by the owner and installation of meters by the local utility.

The second option, a RUBS, can be implemented quickly and provide a fast and affordable solution for property owners and managers to fairly monitor water usage.  RUBS uses a neutral third-party firm to measure water usage an entire apartment building. A formula is implemented to assess the water usage in each apartment unit and the common area. Each is assigned a percentage of water use based on such things as the number of occupants in the unit, number of plumbing fixtures and water-using amenities such as dishwashers, and other factors. Each apartment unit directly receives a monthly water bill—in hopes that renters will use less water to avoid paying a higher monthly cost. The common area usage is paid for by the building owner.

Unless preempted by local rent laws and agency regulations, AAGLA helps its members explore opportunities to sub-meter master metered buildings and/or use a ratio utility billing system.  If those options are too expensive or not feasible to implement, owners should swap out any fixtures such as showerheads, bathroom faucets, kitchen faucets, toilets, etc. with water conserving plumbing fixtures and fittings.

GlobeSt.com: How are these issues affecting the development of multifamily projects?

Clarke: Taking into consideration the move by local municipalities and the California state legislature to mandate that new projects be sub-metered for water, it is plain to see that multifamily developments will become more expensive to build.  I also see a new trend in which amenities like landscaping and pools will become more drought-tolerant—or even be eliminated altogether.

GlobeSt.com: Have these issues affected small and large property owners differently?

Clarke: Potentially it has. Duplexes, triplexes and fourplexes are going to be easier to sub-meter if an owner chooses that option. On the other hand, larger buildings may have to be re-plumbed completely in order to accommodate sub-meters. It's a much more expensive process.

With regard to water conservation, smaller operators may have better control over their residents because they have more contact with them. It makes it easier to express the urgency of conserving water and also makes it easier to educate them about conservation methods.

Lastly, larger properties tend to use more water with regard to the common area.  Frequently, you find vast areas of landscape and more commonly pools, laundry rooms, and/or water features.  Providing water for these amenities without implementing conservation policies could result in fines or penalties for the owner.

GlobeSt.com: The Governor only recently implemented water usage restrictions. How should property owners prepare for tightening regulations should the drought worsen?

Clarke: Owners of multifamily buildings—large and small—should research and educate themselves on every possible option with regard to water conservation. This is our main focus with AAGLA members—education is crucial to help property owners learn about the process for sub-metering, the use of a ratio utility billing system and installing water-conserving plumbing fixtures.