The Safe Drinking Water Act, passed in 1974, stated that anyone selling water was subject to the Act's water quality requirements. Until December 2003, the Environmental Protection Agency (EPA) interpreted that law to say that residential property owners who billed residents individually for water usage were considered to be “selling” the water, and therefore subject to the law.

Based on this interpretation, properties that submetered were directed to meet the same performance requirements as water utilities. These requirements — including periodic testing of water quality and supervision by a “certified water operator” — deterred many property owners from issuing individual water bills.

In 1996, when Congress amended the Act, it included language stating that submetering encouraged water conservation. Further, it directed the EPA to provide guidance to the states on how to minimize the compliance burdens of submetering in order to promote conservation. While this resulted in some states relaxing their requirements, the EPA's general submetering policy remained unchanged.

Environmental Benefits

Indeed, water submetering has been shown to strongly promote water conservation. In properties that are submetered or otherwise billed, residents generally consume 18% to 39% less water than properties that include one shared water meter. Simply put, just as billing tenants individually for the amount of electricity they use significantly reduces energy usage, submetering reduces water usage.

Reducing water usage clearly is good for properties, residents and the environment. When water usage is included as part of the rent, that utility cost can be a significant percentage of operating costs. In contrast, water submetering can control costs and lead to lower rents for multifamily, office and industrial space. So can the Ratio Utility Billing System (RUBS), which bases its billing on the size of a unit or the number of residents occupying it and does not require additional equipment or metering services.

IREM, NAR Join Forces

In August 2003, the EPA sought comment on a proposed rule exempting residential submetering from the Act's compliance. The Institute of Real Estate Management (IREM) and the National Association of Realtors (NAR) submitted joint comments applauding the proposed change. In a formal comment letter, IREM and NAR pointed to numerous studies demonstrating the conservation benefits of submetering and direct billing, and encouraged that the use of RUBS and other billing methods also be permitted under the new policy.

Additionally, the letter suggested that the EPA extend permission to submeter or apply RUBS not only to residential properties, but also to office and industrial facilities. The letter emphasized that since the act of placing a meter or other device on the water pipes does not affect water quality, there is no reason to restrict the policy change to one property type over another.

In its August 2003 proposal, the EPA questioned whether submetering created a disincentive to other conservation efforts. IREM and NAR responded in writing by citing a lack of evidence in this regard not just for submetering, but also for RUBS. Also, the groups emphasized that both systems have been shown to encourage water conservation and expressed support for the EPA's efforts to promote water conservation methods not included in its proposal.

A Partial Victory

In December 2003, the EPA published a final ruling on submetering. The ruling called for a reversal of its long-held policy on submeters, stating that properties that use a billing process “by which a property owner (or association of property owners, in the case of co-ops or condominiums) bills tenants based on metered total water use” are not subject to the Act's regulations.

However, the notice stopped short of exempting properties that use RUBS or other alternative billing methods from the Act's requirement, suggesting that because these methods do not charge for actual water use they do not encourage water conservation. The notice also fails to exempt property that has a “large distribution system, serves a large population or serves a mixed (commercial/residential) population.” No definitions or parameters for such property is included in the notice, except to specifically include mobile home parks and military installations.

The EPA's policy change is a victory for property managers because it will allow property owners to reduce water usage by submetering. However, the fight is not over. For many properties — particularly older ones where modifying any aspect of the physical plant can be costly — submetering is not feasible. In these instances, alternative billing measures such as RUBS can have a positive impact on operating costs and water conservation efforts.

Looking ahead, the property management and realtor industries will continue to lobby the EPA to exempt all properties that use submetering or alternative billing methods from the Safe Drinking Water Act requirements.

Charles Achilles is vice president of legislation for IREM and Megan Booth is senior policy representative for NAR and IREM.