Utility Expense Recovery: How Water Billing Raises NOI and Property Value

Why water and sewer are the costs to recover first

Utilities are a real share of what it costs to run an apartment community. The National Apartment Association's Income/Expense IQ report for 2024 (opens in a new tab) put total utilities at $1,304 per unit, about 15% of the $8,657 in operating expenses per unit. Water and sewer was the utility line that grew, up 5.1% for the year while total utilities fell.

That growth is not a one-year blip. Bluefield Research's rate index (opens in a new tab) of 50 US cities found household water and sewer bills rose 5.1% in 2025 to a five-year high, a 24.2% increase over five years. The Bureau of Labor Statistics consumer price index for water and sewerage maintenance (opens in a new tab) was up 4.7% in the 12 months to September 2026. Utilities are replacing old pipes and treatment plants, and that work is paid for through rates.

On a master-metered property every one of those increases lands on the owner. On a property that bills residents, most of it passes through, and the gap between the two grows every year. A property absorbing $180,000 a year in water and sewer today is looking at roughly $220,000 in four years at 5% a year, with no change in how much water anyone uses.

How utility recovery raises NOI and property value: the math

Recovered utility cost reduces net operating expense, which raises NOI by the same amount. Property value at a given cap rate is NOI divided by that cap rate. So the value a recovery program supports is the yearly NOI gain divided by the cap rate.

Northmarq's 2026 midyear report (opens in a new tab) put multifamily cap rates at an average of 5.75% in the first half of 2026. At that rate, each dollar of yearly recovery supports about $17.39 of value. Your own underwriting rate is the one to use, and the lower it is, the more each dollar is worth.

The submeter scenario does better for two reasons. It collects a higher share of the bill, and the bill itself gets smaller because residents use less water once they see their own usage. The 80% and 90% recovery figures are assumptions, and cautious ones. At the Texas and New Mexico properties further down, the owner's own cost fell 95% and 99%. NES builds the real numbers from each property's own bills before anything is installed.

Utility recovery calculator: NOI and property value

Enter your unit count and what you pay for water and sewer per unit each month. If a property already bills residents some of it, set how much it recovers today. Use the cap rate your team underwrites at.

RUBS vs submetering: which recovers more

Both methods move the bill to residents. They do not recover the same amount, and they do not have the same effect on how much water the property buys.

Many portfolios use both. RUBS starts recovery right away at properties where meters do not fit the plumbing or the budget this year, and those properties move to submeters in a later capital cycle. See submetering vs RUBS for the full comparison, or model one against the other with the RUBS vs submetering calculator.

Utility recovery results at three NES properties

These come from NES property records. Client names are withheld. Your results depend on local rates, unit mix and how much water the property was losing before.

More detail on each one is on the results and case studies page.

How utility recovery shows up in underwriting and valuation

Recovered utility cost only adds value if the next lender or buyer gives you credit for it. A few things decide whether they do.

Why recovery rates slip after launch

A program that recovered 90% in its first year can drift to 75% without anyone noticing, because the property still sends bills every month. These are the usual causes. Each one is fixable once someone is watching the recovery rate.

• Vacant units. Water used in a vacant unit, or a vacant unit's share of a RUBS split, stays with the owner. Track it separately so it can be managed instead of absorbed.
• Leaks. The EPA estimates 9% of homes have leaks that waste 50 gallons or more a day (opens in a new tab), and the average household loses more than 9,300 gallons a year to leaks. Every gallon lost in a vacant unit or a common line is a gallon nobody pays for. Daily reads catch continuous flow. See MyReads leak detection.
• Missing reads. When a transmitter stops reporting and nobody fixes it, that unit is either billed on an estimate or not billed at all. Both cost money.
• Rate changes not passed through. When the city raises rates, resident billing has to change with it. A lag of a few months is lost recovery.
• Unpaid final bills. Residents who move out owing a utility balance. Without collections, that becomes bad debt.
• Common areas. Pools, irrigation, clubhouses and laundry stay with the owner. They should, but they should also be measured, because a broken irrigation line looks like normal usage on a master bill.

The single most useful number to watch is the recovery rate by property each month: billed and collected from residents, divided by the utility invoice. If it moves, something changed.

Rolling out utility recovery across a portfolio

Asset managers usually ask where to start. This order works for most regional portfolios.

1. 1Rank properties by water and sewer cost per unit. The highest cost per unit pays back fastest. High-rate cities and properties with irrigation tend to top the list.
2. 2Check the rules for each address. Some states and cities limit or ban RUBS, cap fees, or require registration before billing. Texas requires registration with the Public Utility Commission. North Carolina requires a certificate from its Utilities Commission first. This decides which method each property can use.
3. 3Survey the plumbing. One water line per unit in an accessible closet means a quick meter install. Several risers per unit can make RUBS the better answer for that building.
4. 4Time it with lease renewals. New billing terms usually start at renewal, which is how the 337-unit community above ran its rollout. Plan for recovery to ramp up over a lease cycle, not all at once.
5. 5Tell residents early. A clear notice, a sample bill and a phone number that a real person answers in English and Spanish cut down on disputes in the first few months.
6. 6Watch the recovery rate monthly. By property, from the first bill. That is what will end up on the trailing 12.

NES phases portfolio rollouts property by property on the schedule your asset team sets, so recovery turns on at each property as it finishes. Installations average $150 to $300 per unit, and most properties earn back the install cost in 12 to 18 months. Part of that is the ramp: billing starts at each lease renewal, so it takes most of a year before every unit is paying. Properties with high water and sewer bills get there faster. NES also offers financing so the meters do not have to be paid for up front. See submetering for large portfolios for how the account side works.

Utility billing compliance: check before you count the income

What an owner can bill back depends on the state, the city and sometimes the utility, and the answer is often different for water, gas and electric. Some states allow submetering but restrict RUBS. Some cap or ban admin and late fees. A few cities do not allow billing back at all. NES never bills residents more than the property pays the utility, and common-area use stays with the owner.

NES's in-house compliance team checks the rules for each address before quoting and keeps a seven-year bill archive on every account. For the details by state, see is submetering legal and RUBS for multifamily real estate. If you are putting recovery out to bid across a portfolio, the free utility billing RFP template has the compliance questions to ask every provider. This guide is general information, not legal, tax or investment advice.